Appeal from order of Court of Common Pleas No. 6 of Philadelphia County, Dec. T., 1962, No. 3950, in case of Kungsgaten, Inc. v. City of Philadelphia.
Levy Anderson, First Deputy City Solicitor, with him Matthew W. Bullock, Jr., Deputy City Solicitor, and Edward G. Bauer, Jr., City Solicitor, for City of Philadelphia, appellant.
Joseph H. Lieberman, for appellee.
Ervin, P. J., Wright, Watkins, Montgomery, and Jacobs, JJ. (Flood and Hoffman, JJ., absent). Opinion by Montgomery, J. Wright, J., concurs in the result. Concurring Opinion by Jacobs, J.
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The City of Philadelphia has taken this appeal from an order of the Court of Common Pleas No. 6 of Philadelphia County reversing the decision of the Philadelphia Tax Review Board which had held the appellee liable for the Philadelphia Mercantile License Tax on its gross receipts for the years 1957 to 1959, inclusive.*fn1
The facts of the case are not in serious dispute. Kungsgaten, Inc. was organized May 9, 1957, under the Pennsylvania Business Corporation Law with broad powers to transact business, including the right to buy and lease real estate.*fn2 Thereafter it took title to a certain piece of real estate, being a high-rise apartment house located at 400 South Fifteenth Street in the City of Philadelphia, Pennsylvania, which is its only holding. Immediately after acquiring title it leased the property to Barrington, Inc., which entered into separate leases with the individual tenants. The rental paid by Barrington to Kungsgaten varied each year but was a sum equal to the amount paid by Kungsgaten for taxes, insurance premiums, water and sewer charges and mortgage interest.*fn3 Mr. Samuel Elgart and Mr. Jules Goldberg own all of the stock of the two
[ 206 Pa. Super. Page 346]
corporations. Mr. Elgart is president and treasurer of Kungsgaten and Mr. Goldberg is secretary. Mr. Goldberg is president of Barrington and Mr. Elgart is secretary-treasurer. Barrington paid the Philadelphia Mercantile License Tax on the gross income it received from the tenants.
The Revenue Commissioner of Philadelphia assessed Kungsgaten for a Mercantile License Tax for the years 1957 to 1959 inclusive, upon the total sum received by it from Barrington, and the Tax Review Board sustained the assessment solely because ". . . Petitioner is a business entity, it being found by the Board that this activity would not be taxable if the property were owned by an individual." Common Pleas Court No. 6 concluded that Kungsgaten was not engaged in business and hence was not subject to the tax.
The reason given by the board falls short of being sufficient for holding Kungsgaten taxable. The corporate activities determine such questions, not the mere possession of a corporate charter. Ed. McKean Oldsmobile Co. v. Pittsburgh, 407 Pa. 106, 180 A.2d 46 (1962); Philadelphia School District v. Frankford Grocery Company, 376 Pa. 542, 103 A.2d 738 (1954).
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Whether the activities sought to be taxed are those of a corporation or an individual or group of individuals, they must meet the definition of doing business as intended by the ordinance. This has been held to mean engaging in an activity for "gain or profit", that is, for profit motive. Philadelphia School District v. Frankford Grocery Company, supra. The following cases held that proceeds from activities of corporations organized for business purposes were not for a profit motive and for that reason not taxable: Ed. McKean Oldsmobile Co. v. Pittsburgh, supra, exchange of automobiles between dealers, to insure availability of desired models; Jefferson Grocery Company of Pittsburgh Page 347} v. Pittsburgh School District, 394 Pa. 110, 145 A.2d 720 (1958), in which the corporation acted as a purchasing agent for a chain of markets without being motivated to make a ...