Appeals, Nos. 1 and 2, May T., 1963, from judgments of Court of Common Pleas of Dauphin County, Nos. 32 and 34 Commonwealth Docket, 1959, in case of Commonwealth of Pennsylvania v. Sitkin's Junk Co., Inc. and Sitkin's Metal Trading, Inc. Judgments reversed.
Howard Gould, with him Lewis H. Markowitz, W. William Anderson, and Markowitz, Kagen & Griffith, and Gould & Reichert, for appellants.
Edward T. Baker, Deputy Attorney General, with him Walter E. Alessandroni, Attorney General, for Commonwealth, appellee.
Before Bell, C.j., Musmanno, Jones, Cohen, Eagen, O'brien and Roberts, JJ.
OPINION BY MR. JUSTICE BENJAMIN R. JONES
These appeals present one issue: the taxability, under the "Selective Sales and Use Tax Act" of 1956 (Act),*fn1 of machinery sold to, or used by, persons who purchase mixed unsorted scrap and, by the use of such machinery, sort, cut, bale and compress such scrap into forms suitable for sale to various steel mills.
Sitkin's Junk Co., Inc., and Sitkin's Metal Trading, Inc. (taxpayers) are engaged in the scrap business in the course of which they purchase from homes, farms, industries and other sources scrap which is mixed and unsorted. Upon receipt of such scrap, the taxpayers remove therefrom the unusable and unsalable portions and the "metallic scrap remaining is sorted, sometimes cut into convenient lengths, sometimes baled, and in any event then sold to various steel mills."*fn2 As purchased, the mixed unsorted scrap has little, if any, commercial value; after handling and preparation by the taxpayers, such scrap becomes an article highly useful in the production of steel. In the handling and preparation of such scrap, the taxpayers employ certain machinery - alligator shears, hydraulic presses, acetylene torches, etc. - and the Commonwealth herein seeks to sustain the validity of taxes levied under the Act upon the sale to, or the use by, the taxpayers of such machinery. The taxpayers claim that, by reason of the nature of their business, they are within the so-called manufacturing exclusions of the Act.
After the Commonwealth had assessed taxes against the taxpayers for the period from March 7 to November 30, 1956 and after the taxpayers had unsuccessfully
exhausted their administrative remedies under the Act, appeals were taken to the Court of Common Pleas of Dauphin County. After a hearing at which certain facts were stipulated and oral testimony received, that court directed the entry of judgments for the amount of the taxes against the taxpayers. From the entry of such judgments these appeals were taken.
Section 201(a) (72 PS § 3403-201) imposes a tax on "each separate sale at retail" of tangible personal property, the purchaser to pay the tax to the vendor for transmission to the Commonwealth. Section 201(b) (72 PS § 3403-201) of the Act imposes, inter alia, a tax "upon the use ... of tangible personal property purchased at retail", the tax to be paid to the Commonwealth by the persons who make such use.*fn3
The Act (Section 2(j), 72 PS § 3403-2), in defining a "Sale at Retail" of tangible personal property upon which the tax is imposed under Section 201(a), specifically excludes a transfer of tangible personal property either for the purpose of resale or of "machinery and equipment ... to be used ... in any of the operations of - (a) The manufacture of personal property ..." and the Act (Section 2(n), 72 PS § 3403-2), in defining "Use" of tangible personal property, specifically excludes the ...