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September 25, 1962


Appeals, Nos. 50, 56 and 58, March T., 1962, from judgments of County Court of Allegheny County Nos. A-1805 and A-1806 of 1957, in cases of Pillsbury Mills, Inc. v. City of Pittsburgh and David A. Smith, Treasurer, and Same v. School District of Pittsburgh and David A. Smith, Treasurer. Judgments reversed.


Fred C. Houston, Jr., with him Houston & Houston, for plaintiff.

Edmund W. Ridall, Jr., Assistant School Solicitor, with him Niles Anderson, School Solicitor, Regis C. Nairn, Assistant City Solicitor, and David W. Craig, City Solicitor, for defendants.

Norman J. Cowie, with him Pringle, Bredin & Martin, and Hall, Haywood, Patterson & Taylor, for amicus curiae.

Before Bell, C.j., Musmanno, Jones, Cohen, Eagen and O'brien, JJ.

Author: Cohen

[ 408 Pa. Page 370]


We are once again confronted with the question of what activities constitute manufacturing within the meaning of the Act of 1947, June 25, P.L. 1145, as amended, 53 P.S. § 6851,*fn1 and the Act of 1947, June 20,

[ 408 Pa. Page 371]

P.L. 745, as amended, 24 P.S. §§ 582.1 to 582.13.*fn2

Under the authority of the above acts, the City of Pittsburgh and the school district, appellees herein, imposed deficiency Mercantile Tax assessments for the years 1953-1956 against appellant, Pillsbury Mills, Inc., for sales of its various flour products. These assessments were levied by the proper taxing authorities. Appellant claimed exemption from the taxes on the basis that it is a vendor of products of its own manufacture within the purview of the exemption provisions of the respective tax enabling acts. The County Court of Allegheny County found in favor of appellee taxing authorities and entered judgments in their favor. The propriety of these adjudications is presently before us.

[ 408 Pa. Page 372]

According to the uncontroverted evidence of appellant, the milling operation involved in the present-day conversion of wheat germ to flour is an intricate technologically sophisticated process. It involves the transformation of literally hundreds of types of wheat into flours which are especially prepared for purchasers with greatly differing needs. The milling operation includes the grinding, blending and processing of the many types of wheat into flours of varying characteristics which will be used for countless purposes. Present day milling bears no relationship to the mortar and pestle operation of ancient times.

By the application of the principles enunciated in the Atlantic Refining Company Case, 398 Pa. 30, 156 A.2d 855 (1959), wherein we held that the refining of oil constituted manufacturing, we now determine that sales by appellant of its various flour products produced within its mills constitutes the vending of products of appellant's own manufacture within the meaning and scope of the exemption provisions contained in the above two acts.

As we stated in the Atlantic case, "Our only concern here is whether or not the legislature intended to exclude (a particular activity) from these taxes. The purpose of the exclusion is an economic one in that it provides that Pennsylvania manufacturers should not be burdened with an additional tax on their products since such products have to compete with products of other states in an open market."

Appellees cite Armour and Company v. Pittsburgh, 363 Pa. 109, 69 A.2d 405 (1949) as authority for the proposition that the milling of grain is not manufacturing but constitutes a mere processing operation not entitled to the exemptions under the acts. The reference to the "milling of grain" in the Armour case was pure dicta mentioned in a tangential manner and is in no way controlling upon us here. Once again, common

[ 408 Pa. Page 373]

    usage and custom plus the reason for the manufacturing exception leads us to the only logical conclusion that "manufacturing" includes the "milling of flour" as contemplated by the legislature in enacting the Acts of 1947.

Our determination above obviates the necessity of deciding the second question raised by these appeals: whether the School District of Pittsburgh is subject to a seven percent limitation in the collection of penalties on its Mercantile Tax. The holding of the lower court in this aspect of the litigation is vacated.

Mr. Justice EAGEN dissents.


Judgments reversed.

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