Appeal from order and judgment of Commonwealth Court, No. 349 T.D. 1970, in case of Commonwealth of Pennsylvania v. Olan Mills Inc. of Ohio.
Arthur Berman, with him Berman and Boswell, for appellant.
Edward T. Baker, Deputy Attorney General, for Commonwealth, appellee.
Jones, C. J., Eagen, O'Brien, Roberts, Pomeroy and Nix, JJ. Opinion by Mr. Justice Pomeroy. Mr. Justice Manderino took no part in the consideration or decision of this case. Dissenting Opinion by Mr. Justice Roberts.
This is an appeal from an order of the Commonwealth Court dismissing appellant's appeal from the decision of the Board of Finance and Revenue refusing to strike off a use tax assessment, and entering judgment in favor of the Commonwealth and against appellant in the amount of $871.00, with interest. The appeal was heard by the Commonwealth Court on a stipulation of facts, which is accurately summarized in the majority opinion:
"Olan Mills, Inc. of Ohio, appellant, a Tennessee corporation, is engaged in making and selling portraits in 21 states. It solicits business by telephone and personal contacts made by travelling sales personnel. Appellant has one permanent studio in Harrisburg, Pennsylvania, but in all other locations in Pennsylvania the customers go to hotels and other similar places for picture sittings. Business is solicited on the representation that appellant's photographs are custom-made. Following the taking of pictures in Pennsylvania with a special portrait camera and unexposed film, the then exposed film is sent by mail to appellant's plant in Springfield, Ohio. The film is placed in a chemical developing solution, resulting in the formation of negatives.
Light is then transmitted through each negative onto sensitized sheets of paper, resulting in what are commonly known as proofs. The proofs are then sent to appellant's sales personnel whereupon the customer selects the desired proof which in turn is then returned to appellant's Ohio plant and matched with the negative from which the proof was made. Light is again transmitted through the negative and the image is transmitted onto a sensitized sheet of paper which is then immerced [sic] in a developing solution, resulting in a permanent print which is then washed and dried. Appellant employs 75 to 85 artists to retouch the negatives and prints and utilizes a permanent finishing technique of placing oil and water colors on the individual portraits followed by baking them in an oven. After the portrait is custom-made, it is sent to the sales representative who completes the sale by delivering it to the customer at which time final payment is made.
"Here the alleged deficiency in use tax, for the period from November 1, 1965, to October 1, 1966, amounts to $871.58 which is assessed in the amount of $49.22 on camera equipment and $822.36 on film purchased and used in Pennsylvania."
The Tax Act of 1963 for Education*fn1 [the Act] imposes a tax "upon the use . . . within this Commonwealth of tangible personal property purchased at retail . . . which tax shall be paid to the Commonwealth by the person who makes such use."*fn2 In defining the "use" of tangible personal property, the Act specifically excludes the "use . . . of tangible personal property including . . . equipment . . . and supplies in any of the operations of -- (i) The manufacture of personal property."*fn3
"Manufacture" is, in turn, defined as: "The performance of manufacturing, fabricating, compounding, processing or other operations, engaged in as a business, which place any personal property in a form, composition or character different from that in which it ...