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PHILADELPHIA v. SMITH. (10/09/63)

October 9, 1963

PHILADELPHIA, APPELLANT,
v.
SMITH.



Appeals, Nos. 3 and 8, May T., 1963, from decree of Court of Common Pleas of Dauphin County, No. 555 Commonwealth Docket, 1959, No. 2390, Equity Docket, in case of City of Philadelphia and The United Gas Improvement Company v. Theodore B. Smith, Jr., successor to Charles M. Dougherty, Secretary of Revenue. Decree vacated.

COUNSEL

Matthew W. Bullock, Jr., Assistant City Solicitor, with him Pace Reich, Assistant City Solicitor, James L. Stern, Deputy City Solicitor, and Edward G. Bauer, Jr., City Solicitor, for City of Philadelphia, appellant.

Harold E. Kohn, with him William T. Coleman, Jr., John W. Frommer, Jr., Bruce W. Kauffman, and Dilworth, Paxson, Kalish, Kohn & Dilks, for appellant.

Edward Friedman, Deputy Attorney General, with him Walter E. Alessandroni, Attorney General, for Secretary of Revenue, appellee.

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

Author: Cohen

[ 412 Pa. Page 264]

OPINION BY MR. JUSTICE COHEN

Appellants here seek an injunction restraining the Pennsylvania Secretary of Revenue from collecting or attempting to collect the gross receipts tax imposed on the receipts of the Philadelphia Gas Works by the Act of June 1, 1889, P.L. 420, § 23, as amended by the Act of November 21, 1959, P.L. 1553 (72 P.S. § 2181). The Philadelphia Gas Works (Gas Works) is owned by the City of Philadelphia (City) and operated by the United Gas Improvement Company (Company) under an agreement whereby Company receives all revenues from Gas Works, pays all operating expenses and receives a fixed management fee therefrom and turns over the balance of the net revenue to City.

The Act of 1889, as originally enacted and as amended prior to 1959, imposed a tax upon the gross receipts of certain specified types of companies (transportation companies, telephone or telegraph companies, electric light companies, power companies) generally referred to as public utility companies. The tax rate has varied from time to time, being originally eight mills and now fourteen mills.

An amendment of May 13, 1925, P.L. 702, stated that the tax should not apply to the gross receipts of a municipally owned and operated public utility. By an amendment of May 16, 1935, P.L. 200, however, this

[ 412 Pa. Page 265]

    provision was changed to impose tax on the gross receipts of a municipally owned and operated public utility to the extent of gross receipts derived from business done outside the limits of the municipality. Prior to the amending Act of 1959 the situation was as follows: all utilities of the specified types were taxable on total gross receipts except municipally owned and operated utilities of the specified types were taxable only on gross receipts from business done outside the municipal boundaries. Gas companies were not one of the specified types.

The Act of 1959 amended the statute in two important respects. First, it extended the list of specified taxable companies to include gas companies. Second, it amended the provision concerning municipal utilities to read as follows: "This act shall be construed to apply to municipalities, and to impose a tax upon the gross receipts derived from any municipality owned or operated public utility or from any public utility service furnished by any municipality, except that gross receipts from other than sales of gas shall be exempt from the tax, to the extent that such gross receipts ...


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