Appeal from the Order of the Court of Common Pleas of Philadelphia County in case of Tax Review Board of Philadelphia v. Heintz Investment Company, No. 923 February Term, 1971.
Park B. Dilks, Jr., with him, of counsel, Morgan, Lewis & Bockius, for appellant.
Leonard Rosenthal, Assistant City Solicitor, with him James M. Penny, Jr., Assistant City Solicitor, John Mattioni, Deputy City Solicitor, and Martin Weinberg, City Solicitor, for appellee.
President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Wilkinson. Dissenting Opinion by President Judge Bowman. Judge Crumlish, Jr. joins in this dissent.
[ 11 Pa. Commw. Page 148]
The issue in this case is whether the activities of the appellant constitute being "engaged in business" in the City of Philadelphia within the meaning of Section 19-1001 et seq., of the Code of General Ordinances of the City of Philadelphia, which requires the payment of a mercantile license tax on the annual gross volume of business transacted. "Business" is defined in Section 19-1001(1) of the Code as: "The carrying on or exercising for gain or profit within the City any trade, business, profession, vocation, or making sales to persons within the City, or any manufacturing, commercial or financial activity, service or business, including but not limited to manufacturers, brokers, wholesale dealers or wholesale vendors, retail dealers or retail vendors."
Prior to 1957, appellant was engaged in the manufacturing business in Philadelphia and paid this tax. On September 30, 1957, appellant sold its inventory and certain other assets, receiving cash and shares in the purchasing company. As part of the entire agreement, appellant leased the plant and plant site to the purchaser for a ten-year period with an option to renew for five years and an option to purchase on specified date. All expenses of the property, including maintenance, taxes, and insurance, were to be paid by lessee, and lessor did not supply any services. The option to purchase was exercised in September of 1967.
Immediately following the original sale in 1957, appellant decided not to distribute the proceeds of the sale to the stockholders, but rather to hold and invest them and distribute the income from the investments and
[ 11 Pa. Commw. Page 149]
from the rental to the shareholders. Prior to locating its office in Philadelphia, appellant asked for and received an opinion from the Department of Collections that under the circumstances, it would not be subject to the mercantile license tax.
Appellant secured the services of a nationally-known investment counseling firm to advise it on the investments of the proceeds of the sale and the rental received. Appellant also secured the services of a bank to execute orders to buy and sell securities, hold the securities, collect dividends and interest, hold funds so received in a custodial account, and from time to time transfer accumulated interest and dividends to appellant's account.
Shortly after the original sale, the appellant amended its corporate charter in April of 1958 to include specific authority ". . . to invest in, own, hold, use, develop, improve, manage, operate and control real and personal property of any nature whatsoever, as principal only and not as agent or broker. . . ."
After the second sale, i.e., the sale of the plant and plant site in 1967, the appellant changed its name from Heintz Manufacturing Company to Heintz Investment Company. The evidence is quite clear that appellant did not change its method of operation either as a result of the change in its charter or the change in its name. It is equally clear that all of ...