Appeals, Nos. 20 and 21, May T., 1958, from judgment of Court of Common Pleas of Dauphin County, No. 242 Commonwealth Docket, 1954, and No. 133 Commonwealth Docket, 1955, in cases of Commonwealth of Pennsylvania v. Eastern Motor Express, Inc., and Same v. Riss & Company, Inc. Judgment reversed in each case. Proceedings on appeal from decision of Board of Finance and Revenue refusing to review tax settlement. Adjudication entered against Commonwealth and in favor of taxpayers; exceptions to adjudication dismissed and judgment entered for taxpayers, opinion by NEELY, J. Commonwealth appealed.
Edward Friedman, Deputy Attorney General, with him Anne X. Alpern, Attorney General, for appellant.
Frank A. Sinon, with him F. Eugene Reader, and Rhoads, Sinon & Reader, for appellees.
Sanford D. Beecher, and Duane, Morris & Heckscher, for amicus curiae.
James M. Marsh and J. Harry LaBrum, and LaBrum and Doak, for amici curiae.
Before Jones, C.j., Bell, Musmanno, Jones, Cohen and Bok, JJ.
OPINION BY MR. JUSTICE BELL
These appeals were heard and will be considered together. The question involved may be thus stated: Is the tax imposed on each of these defendants by the Corporation Income Tax Law of 1951*fn1 valid and Constitutional. The lower Court held the Act to be unconstitutional.
The facts must necessarily be stated at length. We quote with approval the following excerpts from the able comprehensive opinion of President Judge NEELY:
"1. Eastern Motor Express, Inc. is an Indiana corporation having its principal office at Terre Haute, Indiana.
"2. Defendant is engaged in transporting property by motor vehicle as a common carrier, and is so engaged exclusively in interstate commerce,*fn2 pursuant to Certificates of Public Convenience and Necessity issued by the Interstate Commerce Commission. ...
"3. Said defendant does not hold a certificate of authority to do business in the Commonwealth of Pennsylvania, nor does it employ or use capital or property in Pennsylvania in connection with any intrastate business.
"4. The defendant is not engaged in any intrastate commerce in the Commonwealth and it has no authority whatsoever to operate as a common carrier in intrastate
commerce from the Pennsylvania Public Utility Commission.
"5. In 1951, the defendant handled interstate freight from points in Pennsylvania to points outside of the Commonwealth of Pennsylvania, interstate freight from points outside of the Commonwealth of Pennsylvania to points within the Commonwealth of Pennsylvania, and interstate freight by hauling the same through Pennsylvania from points in other states to points in still other states. All of said operations were conducted under Certificate of Public Convenience and Necessity issued by the Interstate Commerce Commission, as aforesaid.
"7. Defendant owns no real property which is located in or has a situs in the Commonwealth of Pennsylvania. The only tangible personal property that is ever present in Pennsylvania is that which is there in connection with the conduct of defendant's interstate transportation business.
"8. In 1951, the defendant owned 13 tractors, 3 straight trucks, 2 trailers, and 5 service cars, all located regularly and continuously in Pennsylvania. All these vehicles were used in the solicitation of business, and the pick-up or delivery of interstate freight in Pennsylvania to or from the defendant's terminals in Pennsylvania. Said vehicles are operated only in Pennsylvania and registered in Pennsylvania.
"9. The defendant has four [substantial] terminals in Pennsylvania located in Allentown, Harrisburg, Philadelphia and Pittsburgh. All of said terminals were leased from others and used by the defendant.
"11. The following employees of defendant performed all their duties at defendant's terminals in Pennsylvania, except as noted: Three Terminal Managers: ... One Control Station Manager: ... Two Office Managers: ... Four Salesmen: These employees solicit freight from customers in Pennsylvania for points outside
Pennsylvania. They also solicit freight from shippers outside Pennsylvania to customers inside Pennsylvania.
"Forty-three Office Clerks: These employees prepare and keep the records necessary in the movement of freight in Interstate Commerce. ...
"Fifty-seven Dockmen: ... Seventy-six City Pickup and Delivery Drivers: ... Three Safety Control: ... One Mechanic: ...
"12. Defendant does not maintain any corporate meeting place within the Commonwealth of Pennsylvania, and its terminals in the Commonwealth of Pennsylvania are those inseparably related to its interstate transportation business, as aforesaid.
"13. Defendant has no employees in the Commonwealth of Pennsylvania other than those engaged in operations strictly connected with its interstate transportation business, as aforesaid.
"14. Defendant's gross receipts, in the sum of $2,348,430, in the Commonwealth of Pennsylvania are those from operations strictly connected with its interstate transportation business, as aforesaid.
"15. Defendant, being a foreign corporation engaged solely in interstate commerce in the Commonwealth of Pennsylvania does not pay the capital stock tax or franchise tax [or the Corporate Net Income tax].
The defendant's tax return ... disclosed that the application of the formula provided in Section 2 of the Corporation Income Tax Law determined a tangible property allocating percentage of 2.3324 percent; determined a wages and salaries allocating percentage of 20.2107 percent; and a gross receipts allocating percentage of 16.4300 percent, all for the purpose of allocating an average of 12.9910 percent of
defendant's net income to Pennsylvania for taxation. ..."
The lower Court held that the Corporation Income Tax Law, as amended, in its application to each of these defendants was "invalid as being imposed on the defendants' privilege of engaging in interstate commerce ... [and] is in violation of the Commerce Clause, Article I, Section 8, of the Federal Constitution, and therefore unconstitutional." Because of its aforesaid conclusion the lower Court ...