Robert Engel, Asst. City Sol., J. Frank McKenna, City Sol., Pittsburgh, for appellants.
Wallace E. Edgecombe, Pittsburgh, for appellee.
Before Hirt, Acting P. J., and Ross, Gunther, Wright, Woodside and Ervin, Jj.
[ 176 Pa. Super. Page 149]
This is an appeal by the City of Pittsburgh and David A. Smith, City Treasurer, from the judgment and order of the County Court of Allegheny County declaring null and void additional assessments for mercantile taxes levied by the City of Pittsburgh and the School District of Pittsburgh against C. E. Hughes and David M. Ogilvie, trading as Hughes-Ogilvie Company. The School District of Pittsburgh discontinued its appeal to this Court.
The City of Pittsburgh enacted its Mercantile Tax Ordinance No. 488, approved December 1, 1947, pursuant to the power given in the Act of June 25, 1947, P.L. 1145, 53 P.S. § 2015.1. The City ordinance provides that wholesale and retail vendors or dealers in goods, wares and merchandise shall be taxed at the rate of one mill on each dollar of the volume of the annual gross wholesale business, and two mills on each dollar of the volume of the annual gross retail business. The School District of Pittsburgh levied a similar tax in accordance with the Act of June 20, 1947, P.L. 745, 24 P.S. § 582.1, with rates fixed at one-half those provided for in the City ordinance. The Hughes-Ogilvie Company has its principal office in the City of Pittsburgh and has been continuously engaged since 1925, on both a wholesale and retail basis, in the sale of office furniture and equipment, laboratory, school, public auditorium, theater, and gymnasium equipment, including desks, chairs, filing cabinets and similar equipment. The Company filed combination mercantile
[ 176 Pa. Super. Page 150]
tax returns for the years 1948, 1949, 1950, 1951 and 1952 with the City of Pittsburgh and School District of Pittsburgh and paid the taxes shown to be due thereon on the basis of the Company's allocation of gross sales to wholesale business and to retail business. As a result of an examination of the records of the Company, made shortly before October 16, 1952, the City and the School District made assessments of additional taxes with penalties and interest for the years 1948 through 1952 based upon a reallocation of the Company's sales as between wholesale and retail business. Subsequently, on April 13, 1953, the City and School District issued a revised assessment which reflected an increase in the volume of sales classified as wholesale in each of the years 1948 through 1952 as compared to the volume so classified as a result of the first audit in October 1952. However, despite the adjustment in the volume of wholesale business with a consequent reduction in tax liability, the revised assessment of April 13, 1953 still reflected a balance due the City and School District for additional taxes, penalties and interest. It is admitted that in the revised assessment certain sales are properly classified as retail business and certain sales are properly classified as wholesale business. However, the disputed categories are the sales made by the Company in large quantities to local municipal authorities, the General State Authority, public schools, private schools, hospitals, charitable institutions and churches. All sales in this category had been reported by the Company as 'wholesale sales' on its tax return but in the reallocation made by the City and School District, as shown in the revised assessment, these sales had been classified as 'retail sales.' The lower court found the Company to be 'wholesale vendors or dealers under the provisions of the Act of Assembly and of the municipal
[ 176 Pa. Super. Page 151]
ordinance with respect to the challenged sales and gross volumes here in dispute' and entered judgment in favor of the Company. The City and School District flied exceptions which were dismissed by the court in banc. This appeal followed.
In support of the contention that sales of furniture and equipment to municipal authorities, the General State Authority, schools, hospitals and other institutions made by a wholesale and retail vendor are 'retail sales' within the meaning of the Mercantile Tax Ordinance of the City of Pittsburgh, the appellant relies principally on Brown & Zortman Machinery Co. v. School Dist. of Pittsburgh, 375 Pa. 250, 100 A.2d 98. In that case the taxpayer sold large machine tools to industrial concerns which used them in their manufacturing processes. In holding such sales to be retail sales the Supreme Court, speaking through Mr. Justice Musmanno, said, 375 Pa. at page 256, 100 A.2d at page 102: 'The plaintiff in effect argues that because of the hugeness of the articles it sells it cannot be regarded as a retail dealer. But the test of a wholesale dealer is whether its customer buys for the purpose of reselling. Whether one buys an elephant or a rabbit, the operation cannot be wholesale if the buyer does not intend to resell the beast.' Under the circumstances in the Brown case the Supreme Court properly concluded that the sales there involved were retail sales. However, on the basis of the test used in the Brown case the appellant contends that the true distinction between a wholesale dealer and a retail dealer is whether or ...