Appeal, No. 239, Jan. T., 1953, from judgment of Court of Common Pleas No. 6 of Philadelphia County, Sept. T., 1950, No. 3393, in case of School District of Philadelphia v. Frankford Grocery Company. Judgment affirmed.
C. Brewster Rhoads, with him Donald McDonald, Sidney L. Wickenhaver, Edward B. Soken and Montgomery, McCracken, Walker & Rhoads, for appellant.
Lloyd J. Schumaker, with him Gabriel D. Weiss, for appellee.
Before Stern, C.j., Stearne, Jones, Bell, Chidsey, Musmanno and Arnold, JJ.
OPINION BY MR. JUSTICE CHIDSEY
In this action of assumpsit the School District of Philadelphia sought to recover the sum of $29,056.03
as additional tax due under a levy made in 1950 upon the gross receipts of the defendant for the calendar year 1949. The tax was imposed under the provisions of the Act of May 23, 1949, P.L. 1669, 24 PS § 584.1 et seq., at the rate of 1 mill per dollar on gross receipts. The defendant's gross receipts in 1949 amounted to $29,358,488.33 and it paid tax on $302,464.06 thereof, claiming that the balance represented receipts from the distribution of commodities and services rendered as a purely cooperative association to its constituent members, and therefore not within the purview of the statute authorizing the tax. The case was heard by Judge LEVINTHAL of the Common Pleas Court of Philadelphia sitting without a jury, and after submission of briefs and oral argument to the court en banc, judgment was entered for defendant. The School District appeals therefrom.
The history, structure and operation of the defendant are well summarized from the evidence adduced in the following portion of the opinion of the learned trial judge: "... The company originated in 1905 as the Frankford Retail Grocer Association, which name was changed to the present one in 1909. T was formed by a small group of fourteen or fifteen retailers to purchase goods in large quantities and eliminate wholesalers' profits because of chain store competition. The articles of incorporation stated that the purpose of the organization was to act as a purely cooperative enterprise of retail grocers. Every member stockholder in the corporation is obligated to buy sufficient capital stock to cover his average weekly purchases, and to deposit the stock with the company in escrow, and then to pay his bills weekly. This system eliminates credit losses. A member is not obligated to obtain all his supplies from the company. But ordinarily merchandise is distributed only to retail grocer members. Occasionally
it is sold at cost to charities. In some instances a surplus of a commodity is sold on the open market in order to dispose of it. Each member receives only one weekly delivery. The company employs no salesmen and all orders are received by mail or in person on written order blanks. Delivery of merchandise is controlled so that a truck covers a territory without duplication. In making deliveries the drivers deposit the goods on the pavements and do not carry them into the members' stores. Recently the company built a large warehouse to store inventories. A subsidiary corporation was formed for the purpose of holding title to this warehouse. All the stock is owned by the parent company. Capital was acquired by floating bonds which were practically all purchased by the retail grocer members. The goods which the company purchases for distribution are insured by it and title taken in its name. The company provides advertising, accounting and promotion assistance to members. It operates schools to give instruction in the best methods of meat cutting and meat and produce merchandising. A construction department rebuilds stores for members, installs fixtures and display stands and equipment, and services refrigeration equipment. The company also purchases store equipment for members. It has established and promoted a 'Unity' brand name which it owns and which represents a valuable good will. The membership of the company averages 2,050 members whose total sales volume is approximately ...