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SUN OIL COMPANY v. TAX REVIEW BOARD. SUN OIL COMPANY (03/16/65)

decided: March 16, 1965.

SUN OIL COMPANY, APPELLANT,
v.
TAX REVIEW BOARD. SUN OIL COMPANY, APPELLANT, V. PHILADELPHIA SCHOOL DISTRICT



Appeals from judgments of Court of Common Pleas No. 7 of Philadelphia County, June T., 1960, No. 2032, and judgment of Court of Common Pleas No. 2 of Philadelphia County, March T., 1962, No. 3758, in cases of Sun Oil Company v. School District of Philadelphia; and Same v. Tax Review Board.

COUNSEL

James A. Moore, with him Milton P. King, Carter Bledsoe, and Mancill, Sterling, Magaziner, Seamans & Hedges, and Pepper, Hamilton & Scheetz, for appellant.

Joseph W. Marshall, for School District of Philadelphia, appellee.

Levy Anderson, First Deputy City Solicitor, with him Louis Kattelman, Assistant City Solicitor, Matthew W. Bullock, Jr., Deputy City Solicitor, and Edward G. Bauer, Jr., City Solicitor, for Tax Review Board, appellee.

Bell, C. J., Musmanno, Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice O'Brien. Mr. Chief Justice Bell dissents.

Author: O'brien

[ 417 Pa. Page 444]

Sun Oil Company appeals from holdings below, ruling as taxable Sun's receipts of dividend income derived from its ownership of certain common stocks, as well as a substantial capital gain realized from the sale of one of these stock holdings.

Two separate taxes are involved, the first being the General Business Tax Act, Act of May 23, 1949, P. L. 1669, as amended, 24 P.S. § 584.1 et seq., imposing a tax on the privilege of engaging in business within the School District of Philadelphia; and the second being the Philadelphia Mercantile License Tax imposed on the privilege of engaging in business in Philadelphia by § 19-1001 et seq. of the Philadelphia Code, under authority granted by the Sterling Act, Act of August 5, 1932, P. L. 45, 53 P.S. § 15971.

The taxes levied in the two cases are, to all practical intents and purposes, the same, and if the disputed items of income are taxable, they are taxable in both cases. Sun's position, simply stated, is that the income sought to be taxed was derived from "passive investments" and therefore not taxable.

[ 417 Pa. Page 445]

In Tax Review Bd. v. Brine Corp., 414 Pa. 488, 200 A.2d 883 (1964), we held that the test in determining the taxability of income under the Mercantile Tax "is neither the characterization of the receipt nor the size of the business; rather, it is the nature of the activity producing the receipt." In that case, arguments very similar to those here made by Sun were rejected by us and we held Brine subject to tax on what Brine called "passive income", including an item of dividends earned on shares of stock. In Bankers Securities Corp. v. Philadelphia School District, 16 Pa. D. & C. 2d 248 (1958), affirmed, 188 Pa. Superior Ct. 463, 149 A.2d 545 (1959), affirmed, 397 Pa. 413, 155 A.2d 835 (1959), a case which arose under the General Business Tax Act, we also held that income of the type here sought to be excluded from the tax base of the taxpayer was taxable. The same result must be reached in the case at bar.

While we reiterate what we stated in Brine, namely, that all income of a business corporation need not necessarily be business income, a study of the instant record indicates that the items of income here disputed were derived, in fact, from business activities and, thus, are taxable.

The court below, in its opinion at No. 285, carefully details each of the items of income in dispute as follows: "The five corporations here involved are: Halliburton Oil Well Cementing Co. (hereafter referred to as 'Halliburton'), East Texas Salt Water Disposal Company (hereafter referred to as 'East Texas'), Seatrain Lines, Inc., (hereafter referred to as 'Seatrain'), Compagnie Francaise Houdry (hereafter ...


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