Harry J. Rubin, Krekstein, Rubin & Lasday, Harrisburg, for appellant.
Eugene J. Anastasio, Deputy Atty. Gen., Dept. of Revenue, Harrisburg, for appellee.
Jones, C. J., and Eagen, O'Brien, Roberts, Pomeroy and Nix, JJ. Manderino, J., did not participate in the consideration or decision of this case.
This is an appeal from the decision of the Commonwealth Court dismissing an appeal from the denial by the Board of Finance and Revenue of a petition for review of the settlement of appellant's 1962 franchise tax and entering a judgment in favor of the Commonwealth for $824. A portion of appellant's gross receipts is rent paid by tenants who lease manufacturing plants from appellant. The sole issue in this appeal is whether the manufacturer's exemption contained in the franchise tax entitles appellant to exclude those rents from the numerator of the gross receipts fraction used to compute the tax.
Pennsylvania imposes a franchise tax on foreign corporations doing business in Pennsylvania or having capital or property employed or used in this Commonwealth.*fn1
This tax is assessed upon the value to the taxpayer of the franchise to do business in this state. Commonwealth v. Monessen Amusement Co., 352 Pa. 120, 42 A.2d 158 (1945); Commonwealth v. Ford Motor Co., 350 Pa. 236, 38 A.2d 329, appeal dismissed, 324 U.S. 827, 65 S.Ct. 857, 89 L.Ed. 1394 (1944); Commonwealth v. Columbia Gas & Electric Corp., 336 Pa. 209, 8 A.2d 404 (1939).
The value of the franchise is computed by multiplying the value of the corporation's capital stock by the arithmetic mean of three fractions: the tangible property fraction, the compensation fraction, and the gross receipts fraction. These three fractions are calculated as follows:
(1) tangible property fraction = value of taxpayer's tangible property situated in Pennsylvania/value of all taxpayer's property wherever situated
(2) compensation fraction = taxpayer's compensation to employees assignable to Pennsylvania/taxpayer's total compensation to all its employees
(3) gross receipts fraction = taxpayer's gross receipts from business assignable to Pennsylvania/taxpayer's gross ...