Appeal from the Order of the Board of Finance and Revenue in case of In Re: Spang Stores, Inc., Docket No. R-25817.
William T. Marsh, with him Edward T. Baker, and Reed, Smith, Shaw & McClay, for appellant.
Eugene J. Anastasio, Deputy Attorney General, for appellee.
President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Mencer.
[ 17 Pa. Commw. Page 449]
Spang Stores, Inc. (Spang) is a Pennsylvania corporation and is engaged in the operation of retail drug and discount department stores. As of January 1971, Spang was operating 59 drug stores and 5 department stores in western Pennsylvania, with a major concentration of stores in the Pittsburgh metropolitan area.
Spang has appealed from the decision of the Board of Finance and Revenue which had resettled its capital stock tax for the fiscal year ended January 31, 1971 at $16,800. The appeal was taken pursuant to Section 1104 of The Fiscal Code, Act of April 9, 1929, P.L. 343, as amended, 72 P.S. § 1104 (Supp. 1974-1975). A jury trial was waived by the parties to this litigation, in accordance with the provisions of Section 1 of the Act of April 22, 1874, P.L. 109, as amended, 12 P.S. § 688. The parties have entered into a stipulation of facts. We adopt the stipulation as our findings of fact and incorporate the same herein by reference. In the course of this opinion we will discuss those facts which, in our judgment, are essential to the disposition of this case.
Here we are confronted with the question as to whether or not the valuation placed on the capital stock of Spang by the Commonwealth in connection with its capital stock tax for the year ended January 31, 1971 was correct. Spang reported the value of its capital stock at $1.7 million but on the resettlement the Board of Finance and Revenue valued the capital stock at $2.4 million.
Section 20 of the capital stock tax act, Act of June 1, 1889, P.L. 420, as amended, applicable here, provides in pertinent part that the capital stock shall be valued and appraised "at its actual value in cash as it existed at the close of the year for which report is made; taking into consideration, first, the average which said stock sold for during the year; and second, the price or value indicated or measured by net earnings or by the amount of profit made and either declared in dividends, expended in betterments,
[ 17 Pa. Commw. Page 450]
or carried into the surplus or sinking fund; and third, the actual value indicated or measured by consideration of the intrinsic value of its tangible property and assets, and of the value of its good will and franchises and privileges, as indicated by the material results of their exercise, taking also into consideration the amount of its indebtedness."
Spang's current assets on January 31, 1971 consisted of cash in the amount of $608,625, accounts receivable of $578,097, merchandise inventories of $6,102,294, and $116,801 of prepaid expenses. These items result in total current assets of $7,405,817. In addition, Spang's equipment and leasehold improvements on a cost basis with allowances for depreciation and amortization amounted to $1,801,563. The total assets were $9,212,982.
Spang's current liabilities totaled $2,919,195, and it was obligated on a demand loan with a remaining balance of $1,579,899. The book value of the shareholder's equity as of January 31, 1971 was $4,713,888. None of Spang's stock was issued or sold during the fiscal year ended January 31, 1971. Spang's earnings and dividend history for the 10 fiscal years ended January 31, 1971 was as follows: