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decided: October 12, 1971.


Appeal from order of Court of Common Pleas of Dauphin County, No. 367 Commonwealth Docket, 1969, in case of Commonwealth of Pennsylvania v. Erie Metropolitan Transit Authority.


Walter K. Swartzkopf, Jr., with him Frank A. Sinon, and Rhoads, Sinon & Reader, for appellant.

Edward T. Baker, Deputy Attorney General, with him Fred Speaker, Attorney General, for Commonwealth, appellee.

Jones, Eagen, O'Brien, Roberts, Pomeroy and Barbieri, JJ. Opinion by Mr. Justice Pomeroy. Mr. Justice Roberts would affirm on the opinion of Judge Lipsitt in the court below. Mr. Chief Justice Bell took no part in the consideration or decision of this case.

Author: Pomeroy

[ 444 Pa. Page 346]

The question presented by this appeal is whether or not a municipal transportation authority organized and existing under the Municipality Authorities Act of 1945*fn1 (the Authorities Act) is subject to tax liability

[ 444 Pa. Page 347]

    under The Liquid Fuels Tax Act (the Fuels Tax Act).*fn2 Appellant, the Erie Metropolitan Transit Authority (ETA), formed by the City of Erie and Erie County under the Authorities Act, asserts that it is not so subject; the Commonwealth, appellee, claims that it is, and the court below, after a non-jury trial, agreed.*fn3

The corporate purposes of ETA as set forth in its Articles of Incorporation are as follows: "To acquire, hold, construct, improve, maintain, and operate, own lease, either in the capacity of lessor or lessee, all facilities necessary or incidental thereto for the operation of a mass transportation system including motor buses for public use, in the metropolitan area consisting of the City of Erie and its surrounding environs within the County of Erie, Pennsylvania."

In the course of performance of its mass public transportation functions, appellant operates a fleet of 50 buses powered with diesel engines for the transportation of passengers. During the tax period involved, over 180,000 gallons of diesel fuel were consumed by appellant in its operations, giving rise to the tax claim in issue.

The Fuels Tax Act, Section 4, imposes "[a] permanent excise tax at the rate of seven cents ($.07) a gallon . . . on all dealer-users upon the use of fuel within this Commonwealth." (72 P.S. 2614.4) The same section carves out an exemption from the tax in the following

[ 444 Pa. Page 348]

    language: "No tax is hereby imposed . . . (4) upon any fuel used by or sold or delivered to the Commonwealth of Pennsylvania and its political subdivisions. . . ."

ETA contends, in the first place, that it is a political subdivision within the meaning of the quoted section, and thus exempt. Alternatively, it claims exemption because it is an agent of the Commonwealth, and therefore embraced within the word "Commonwealth". Finally, even if not within the exemptions of the Fuels Tax Act, appellant contends that the Act under which it was created, the Authorities Act, shields it from the operation of the Fuels Tax Act.

We have concluded that the Fuels Tax Act, in exempting the Commonwealth itself from the tax, likewise exempted authorities formed under enabling legislation such as the Authorities Act.*fn4 We therefore need not consider whether ETA might also be exempt under the provisions of the Authorities Act.

This Court has consistently held that municipal authorities are not the creatures, agents or representatives of the municipalities which organize them, but rather are "independent agencies of the Commonwealth and part of its sovereignty." Whitemarsh Township Authority v. Elwert, 413 Pa. 329, at 332, 196 A.2d 843 (1964); see also Simon Appeal, 408 Pa. 464, 184 A.2d 695 (1962); Tranter v. Allegheny County Authority,

[ 444 Pa. Page 349316]

Pa. 65, 173 Atl. 289 (1934); Commonwealth ex rel. McCreary v. Major, 343 Pa. 355, 22 A.2d 686 (1941); M. G. Mosites Co. v. Southwestern Penna. Water Authority, 40 Pa. D. & C. 2d 251 (Fayette Cty. 1966). We are mindful of the general proposition that claims for exemption from taxation are to be strictly construed. Wanamaker v. Phila. School District, 441 Pa. 567, 571, 274 A.2d 524 (1971); Fischer v. Pittsburgh, 383 Pa. 138, 118 A.2d 157 (1955). But in this situation, where a public instrumentality is involved, another equally important rule is controlling, viz., "that in the absence of a statute to the contrary, public property used for public purposes is exempt from taxation . . . and no express exemption law is needed." Southwest Delaware County Municipal Authority v. Aston Twp., 413 Pa. 526, 198 A.2d 867 (1964). In so declaring, the Court was echoing the holding in Commonwealth v. Pure Oil Co., 303 Pa. 112, 154 Atl. 307 (1931) construing The Liquid Fuels Tax Act of 1929, Act of May 1, 1929, P. L. 1037, as amended. In that case the question, as framed by the Court, was whether the City of Philadelphia was liable for a tax "on all gasoline purchased and consumed by it in the performance of its governmental functions as an agent of the Commonwealth." The statute there involved imposed a tax "upon all liquid fuels sold by dealers . . . and upon all liquid fuels used within this Commonwealth by consumers when no such tax has been collected thereon by a dealer. . . ." While containing some exemptions, there was no express exemption of municipalities when acting in their governmental capacities. In holding the city exempt, the Court said: "We have many times said that while the State may, by a general statute, tax subordinate governmental agencies in matters affecting the performance of their governmental duties, the presumption is that this was not intended, and nothing

[ 444 Pa. Page 350]

    short of an expressed or necessarily implied purpose to tax them will suffice to make them liable therefor." 303 Pa. at 117.*fn5 It is true that these pronouncements were made with specific reference to property taxes and not to excise taxes, but we perceive no difference in principle as far as the presumption favoring exemption is concerned.*fn6

Appellant was created to operate a mass transportation system in metropolitan Erie. It was organized under an act of the legislature which declared that authorities created under it will be "for the benefit of the people of the Commonwealth of Pennsylvania, for the increase of their commerce and prosperity, and for the improvement of their health and living conditions." Moreover, authorities so organized, declared the legislature, "will be performing essential governmental functions." There is no contention that ETA in the case at bar is not performing such a function. It makes little sense to say that the legislature intended that a municipal corporation so engaged should be taxed on an indispensable aspect of that very function, namely, its use of liquid fuel. This is all the more true when it is realized that the legislature has recognized the need and made provision for subsidizing mass transportation

[ 444 Pa. Page 351]

    under certain circumstances. Pennsylvania Urban Mass Transportation Assistance Law of 1967, Act of January 22, 1968, P. L. [ILLEGIBLE WORD], § 1 et seq., 66 P.S. § 1951 et seq.

We do not go so far as to suggest that whenever a legislative enactment refers to the "Commonwealth" it means to embrace in that word all authorities created by virtue of enabling acts. All we hold in this case is that ETA as a mass transportation authority is exempt from the operation of the Fuels Tax Act both because of the exemption in favor of the Commonwealth provided for in that Act and because of the rule of construction of tax statutes where a public interest is involved, as enunciated in Commonwealth v. Pure Oil, supra, and Southwest Delaware County Municipal Authority v. Aston Twp., supra.

The order of the Common Pleas Court is reversed and judgment is here entered for appellant.


Order reversed and judgment entered for defendant.

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