Appeal from judgment of Court of Common Pleas of Philadelphia County, Feb. T., 1968, No. 1637, in case of Tax Review Board of City of Philadelphia v. Smith, Kline & French Laboratories.
Leonard B. Rosenthal, Assistant City Solicitor, with him Louis E. Vignola, Assistant City Solicitor, Matthew W. Bullock, Jr., Second Deputy City Solicitor, and Edward G. Bauer, Jr., City Solicitor, for Tax Review Board, appellant.
Robert R. Batt, with him Ballard, Spahr, Andrews & Ingersoll, for appellee.
Bell, C. J., Jones, Cohen, Eagen, O'Brien, Roberts and Pomeroy, JJ. Opinion by Mr. Justice Cohen. Opinion by Mr. Justice Roberts. Mr. Justice Eagen joins in this opinion. Dissenting Opinion by Mr. Chief Justice Bell. Dissenting Opinion by Mr. Justice Jones and Mr. Justice Pomeroy.
Smith, Kline and French Laboratories manufactures and sells drugs, as defined by The Drug, Device and Cosmetic Act of September 26, 1961, P. L. 1664, § 2(b), 35 P.S. § 780-2(b) (Act) at two facilities located in Pennsylvania, including one within the limits of the City of Philadelphia. As required by Section 11 of the Act, Smith, Kline and French registered its manufacturing establishments in Pennsylvania in 1962 with the Secretary of Health of the Commonwealth and paid to
the Commonwealth the statutory registration fees dictated by § 11(c) of the Act, viz., $100.00 for each manufacturing plant or a total of $200.00. Smith, Kline and French has continued to pay these registration fees annually thereafter.
For the years 1962 through 1965, inclusive, Smith, Kline and French filed Mercantile License Tax returns with the City of Philadelphia (City) and paid Mercantile License Taxes and fees to the City as follows:
On January 5, 1966, Smith, Kline and French filed with the City Revenue Commissioner a refund claim for $127,450.39, being the total amount of Mercantile License Taxes and fees paid for the period 1962 to 1965. The basis of the refund claim was that the registration fees paid to the Commonwealth under the Act constituted true license fees, and consequently the City was prohibited from imposing its Mercantile License Tax under the Act of August 5, 1932, P. L. 45, as amended, § 1, 53 P.S. § 15971(a), popularly known as the "Sterling Act." This section, while granting first class cities broad authority to levy, assess and collect taxes, contains the following explicit exception: ". . . except that such council shall not have authority to levy, assess and collect . . . any tax on a privilege, transaction, subject or occupation, or on personal property, which is now or may hereafter become subject to a State tax or license fee."
By letter dated March 23, 1966, the Revenue Commissioner denied the refund on the ground that the registration fees paid by Smith, Kline and French under the Act did not represent true license fees within the meaning of the Sterling Act. The Tax Review Board denied the appeal petition without opinion.*fn1
On appeal to the Court of Common Pleas of Philadelphia County, the decision of the Tax Review Board was reversed. The lower court held that the registration fees paid by the drug manufacturer to the Commonwealth met all the criteria of true license fees and precluded the City from levying its Mercantile License Tax under the Sterling Act. Instead of ordering a refund, however, the lower court remanded the case to the Tax Review Board for the purpose of determining which of the activities, if any, of Smith, Kline and French fall outside the sphere of regulation under the Act and consequently became subject to the City's Mercantile License Tax. The City of Philadelphia then brought this appeal under the Act of June 16, 1836, P. L. 784, § 1, 17 P.S. § 41.
In deciding this case, the answers to two questions must be found. First, what did the legislature mean when it (in an attempt to eliminate double taxation) exempted from local taxation activities "subject to a State . . . license fee?" Secondly, does The Drug, Device and Cosmetic Act ...