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TAX REVIEW BOARD v. BRINE CORPORATION (05/27/64)

May 27, 1964

TAX REVIEW BOARD
v.
BRINE CORPORATION, APPELLANT.



Appeal, No. 197, Jan. T., 1964, from order of Court of Common Pleas No. 2 of Philadelphia County, March T., 1961, No. 478, in case of Tax Review Board of City of Philadelphia v. Brine Corporation. Order affirmed.

COUNSEL

Roger G. White, with him Smyth, Straub & Thistle, for appellant.

Levy Anderson, First Deputy City Solicitor, with him James L. Stern, Second Deputy City Solicitor, Matthew W. Bullock, Jr., Deputy City Solicitor, and Edward G. Bauer, Jr., City Solicitor, for tax review board, appellee.

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

Author: Cohen

[ 414 Pa. Page 490]

OPINION BY MR. JUSTICE COHEN

Appellant, Brine Corporation (Brine) was organized January 17, 1944, under the Pennsylvania Business Corporation Law. Its stated purposes are: "Parking, storing, servicing and repairing automobiles and motor vehicles, and the sale of gasoline, oils, tires, automobile accessories, etc.; and the buying, leasing, acquiring, holding and selling buildings and real estate for such purposes, and the transaction of all and any other business that may be necessary or incidental thereto."

Between 1944 and 1956 Brine acquired eleven properties: seven parking lots, two closed parking garages and two commercial buildings. The seven parking lots and one of the two parking garages were leased to two affiliated corporations which, apparently, operated them. The other parking garage was leased to an unaffiliated corporation, and the two commercial buildings were leased through a rental agent to various tenants not connected with Brine. Brine rendered no services to any of the tenants, nor did it manage any of the properties. It had no employees, but two officers each received $1500 for their services in providing corporate management.

All of Brine's income was derived from the rents on the properties mentioned and from dividends from 1,800 shares of Atlantic Refining Company stock. It filed and paid mercantile license tax to the City of Philadelphia on its gross receipts for the years 1953 through 1956, inclusive; but in 1958 it filed petitions for refund covering most*fn1 of the tax paid, alleging that the receipts constituted "passive income" from investments and as such were not subject to tax. After the Revenue Commissioner of the City denied the petitions, Brine appealed to the City's Tax Review Board

[ 414 Pa. Page 491]

    which affirmed the Commissioner on the ground that Brine's receipts were derived "from precisely the activities for which the corporations were organized under the Business Corporation Law," and that the situation was governed by Bankers Securities Corporation v. Philadelphia School District, 16 Pa.D. & C.2d 248 (1958), aff'd per curiam, 188 Pa. Superior Ct. 463, 149 A.2d 545 (1959), aff'd per curiam, 397 Pa. 413, 155 A.2d 835 (1959).

Brine thereupon appealed to the court of common pleas which dismissed the appeal and affirmed the decision of the Tax Review Board reasoning that since Brine "was incorporated for the purpose of owning and leasing certain real estate holdings and deriving income therefrom" and did in fact so derive its income, these receipts were taxable. This appeal followed.

Pursuant to power granted it by State statute*fn2 the City of Philadelphia in 1952 enacted an ordinance imposing a mercantile license tax.*fn3 In ยง 19-1003(e) the ordinance imposes on "persons engaged in business" a tax at the rate of 3 mills on each dollar of the annual gross volume of business transacted. The phrase "gross volume of business" is defined as the "gross receipts of a business;" and "gross receipts" is defined as "cash, credits and property of any kind or nature ... from any business." Obviously, the key word is "business", and this word is defined in relevant part, as follows: "The carrying on or exercising for gain or profit within the City ...


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