The opinion of the court was delivered by: CLARY
This matter is before the Court upon defendant's motion to dismiss on the ground that the complaint fails to state a claim upon which relief can be granted.
The dispute arises out of a contract entered into by the parties on May 3, 1950. This agreement gave defendant the right to establish and operate the cafeteria and vending facilities at 5000 Wissahickon Avenue, Philadelphia, Pennsylvania, a government installation, for the purposes of selling food and nonalcoholic beverages. Defendant agreed to pay the Government 9.1% Of the gross revenue received from all operations under the contract in addition to 1% Of the gross revenue to be set aside as a Reserve for the replacement of Government-owned equipment. Gross Revenue was defined in the contract as the total receipts of any source received as a result of operations under the contract, 'but there shall be excluded therefrom all sales taxes collected from patrons of the operation conducted hereunder.' (Emphasis supplied).
During the four-year period the contract remained in effect (May, 1950 to May, 1954), the defendant, pursuant to the above underlined provision of the contract, deducted the Pennsylvania Cigarette Tax in the amount of $ 33,672.28 from gross revenue. The Government apparently did not contest the deduction during the contract period, but now contends that the Pennsylvania Cigarette Tax then in existence was not a sales tax collected from patrons of the operation so as to be excludable from gross revenue and demands judgment against the defendant in the amount of $ 3,400.90 with interest and costs of suit.
The Pennsylvania Cigarette Tax Act was originally enacted in 1935 for a period of two years and thereafter re-enacted in successive odd years. The Acts in effect during the contract period, in which there are no substantial variations, were those of 1949, 1951 and 1953, set out in 72 P.S. § 3154 et seq. The title of the Acts reads:
'An act to provide revenue by imposing a State tax upon sales or gifts of cigarettes by dealers as herein defined; requiring persons engaged in the sale of cigarettes at wholesale and retail to secure permits; prescribing the method and manner of collecting such tax; making it unlawful to possess cigarettes upon which the tax has not been paid; conferring powers and imposing duties on the Department of Revenue, and persons, as herein defined, engaged in the sale of cigarettes at retail or wholesale; and providing penalties.'
In Section 3155 Dealer is defined as 'Any wholesale dealer, and, in the cases hereinafter prescribed, retail dealers. The term 'wholesale dealer' shall include any person, who or which sells, within Pennsylvania, cigarettes to retail dealers, or for purposes of resale, or who or which purchases cigarettes directly from any manufacturer for purposes of resale. The term 'retail dealer' shall include every person, other than a wholesale dealer, who or which receives from any source whatsoever cigarettes for the purpose of sale to consumers in Pennsylvania, or for any other purposes than that of resale, whenever the packages of cigarettes, so received, do not have affixed to them the stamps evidencing the payment of the tax imposed by this act.'
Section 3156 provides that it is unlawful to sell cigarettes without a permit; sets out certain exceptions; provides that permits are not assignable; and, gives the Department of Revenue the power to suspend permits.
Section 3157 provides in part:
'A State excise tax is hereby imposed and assessed upon sale of cigarettes by dealers * * *. Provided, that only one sale of the same package of cigarettes shall be used in computing the amount of the tax due hereunder.'
'Except as hereinafter provided, dealers shall be liable to the Commonwealth as taxpayers for the payment of the tax imposed by this Act, and shall pay the tax into the State Treasury, through the department, by purchasing from the department adhesive stamps of such design and denominations as may be prescribed by the department.' (Emphasis supplied.)
Section 3158 provides, among other things, that each dealer shall affix, within 24 hours after receipt, stamps to each package of cigarettes evidencing the payment of the tax imposed and shall cancel such stamps before the cigarettes are offered for sale unless the stamps are affixed before such dealer receives them.
Finally, Section 3159 provides that the Department of Revenue shall appoint wholesale dealers in cigarettes, as well as others, as agents to affix the stamps to be used in paying the tax imposed upon the sale of cigarettes, and such agent shall retain out of the moneys to be paid by him for such stamps a commission of 4% If, and when he has purchased the stamps affixed by him directly from the department. The other sections are not relevant to the question involved here.
The Government contends that a reading of the foregoing sections makes it abundantly clear that the tax was imposed and assessed upon the sale of cigarettes by dealers who were liable as taxpayers and that the tax was not imposed upon the consumer as defendant contends. ...