Appeal from order and judgment of Commonwealth Court, No. 589 T.R. 1970, in case of Commonwealth of Pennsylvania v. Advance-Wilson Industries, Inc.
Edward T. Baker, Deputy Attorney General, for Commonwealth, appellant.
Bernard Eisen, with him Berkman, Ruslander, Pohl, Liber & Engel, for appellee.
Jones, C. J., Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Opinion by Mr. Justice Pomeroy. Dissenting Opinion by Mr. Justice Roberts. Mr. Justice Nix joins in this dissenting opinion.
This is an appeal by the Commonwealth from a decision of the court below that application of the Corporate Net Income Tax*fn1 to appellee, Advance-Wilson Industries, Inc., be on a multiform basis.
Appellee, a Delaware corporation authorized to do business in Pennsylvania, filed its Corporate Net Income Tax Report for the fiscal year ended December 31, 1966 showing tax due in the amount of $11,850.38. The Department of Revenue settled the tax at $24,400.43, and this determination was approved by the Department of the Auditor General. In arriving at this figure, the Commonwealth used the taxpayer's entire taxable income as reported for Federal income tax purposes, which, of course, included income from its operations conducted outside of Pennsylvania. Appellee filed a petition for resettlement and a subsequent petition for review with the Board of Finance and Revenue. Both of these petitions were refused and an appeal was taken to the Commonwealth Court. That court reversed, and this appeal followed.
From a partial stipulation entered into by the parties and the testimony received in the court below,
the following facts are established. Advance-Wilson Industries, Inc., the appellee, has its principal office in New York City. It conducts its business through two operating divisions, Keystone Ridgeway Company ["Keystone"] and Electrolyzing Company ["Electrolyzing"]. The Keystone division operates three plants in Pennsylvania which are engaged in the manufacture and sale of ceramic tiles used in building construction. The Certificate of Authority issued by the Commonwealth of Pennsylvania to appellee as a foreign corporation permits appellee "to purchase, lease, produce, manufacture, sell and deal in and with building materials of all kinds". The Electrolyzing division maintains places of business in Illinois and Rhode Island and conducts business throughout the United States. The business of this division is to receive machines or machine parts, equipment and tools which are subject to being abraded and, by an electrolyzing process, plate the worn parts of these items so as to increase their useful life. Between Keystone and Electrolyzing there is no money flow, no transfer of working capital, no sales or purchases nor any accounting transactions. There is no guarantee by either division of indebtedness of the other.
The development of the multiform concept in Pennsylvania and its application to corporate franchise and net income taxation were explored recently by this Court in Commonwealth v. ACF Industries, Inc., 441 Pa. 129, 271 A.2d 273 (1970) and need not be detailed again here. Suffice it to say that to sustain its claim to multiform tax treatment, and thereby exclude a portion of its income from the computation of the Pennsylvania Corporate Net Income Tax, a foreign corporation doing business in this Commonwealth must establish that it "is engaged in a separate business outside of Pennsylvania". Commonwealth v. ACF Industries, Inc., supra at 135. On the basis of the facts
recited above, the court below held that appellee had sustained its burden of proving that it is entitled to a multiform tax ...