Appeal, No. 142, Jan. T., 1958, from order of Court of Common Pleas No. 4 of Philadelphia County, June T., 1957, No. 4107, in case of Tax Review Board v. Belmont Laboratories Company. Judgment reversed.
Laurance H. Eldredge, with him Francis X. Diebold, for appellant.
Leonard B. Rosenthal, Assistant City Solicitor, with him David Berger, City Solicitor, for appellee.
Before Jones, C.j., Bell, Chidsey, Musmanno, Jones and Cohen, JJ.
OPINION BY MR. JUSTICE BELL
The question involved may be thus stated: Does the Philadelphia ordinance validly assess a net profits tax upon a partnership whose sole office is in Philadelphia upon profits earned in a foreign corporation on goods manufactured and sold in a foreign country, when the residence and domicile of all members of the partnership is outside of Philadelphia?
William H. Gross and his wife, Annie W. Gross, were residents of and domiciled in Delaware County, Pa. During the years 1950 to 1955 inclusive they conducted a partnership business known as Belmont Laboratories Company, hereinafter called Belmont. Belmont manufactured and sold in Philadelphia and distributed
throughout the United States Mazon Ointment and Mazon Soap. The partnership's sole office and place of business was and is at 4730 Market Street, Philadelphia. The partners paid the Philadelphia Net Profits Tax on all Mazon Ointment and Mazon Soap manufactured and sold in Philadelphia (and distributed throughout the United States).
The present case involves the City's attempt to tax the defendant partnership for net profits which it received under the following circumstances: Mazon Ointment and Mazon Soap are manufactured in Canada by Laurentian Laboratories, Ltd., with the aid of a secret solution sent them by Belmont, and sold and distributed in Canada and in some foreign countries by an affiliated organization. Laurentian, after deducting its costs and commissions, and all Canadian sales taxes and income taxes upon the above mentioned merchandise, deposits the balance to the credit of Belmont in the Royal Bank of Canada. From time to time these net profits, which are earned in a foreign country on goods made in a foreign country, are transferred by Belmont to its bank account in Philadelphia. The City seeks to tax these profits on the basis that Belmont is a partnership which is domiciled in Philadelphia. Belmont's principal contention is (1) that a partnership is not an entity which can be taxed by Philadelphia, and (2) that because the domicile of the individuals who comprise the partnership is outside of Philadelphia, and none of the business or activities in question are conducted in Philadelphia, the tax cannot be assessed on these profits.
The City of Philadelphia derives its taxing powers from the Act of August 5. 1932, P.L. 45, 53 PS § 15971, which is known as the Sterling Act. The Sterling Act empowers the City by ordinance to impose taxes "... on ...