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HELLERTOWN MANUFACTURING COMPANY v. COMMONWEALTH PENNSYLVANIA (06/08/76)

decided: June 8, 1976.

HELLERTOWN MANUFACTURING COMPANY, APPELLANT,
v.
COMMONWEALTH OF PENNSYLVANIA, APPELLEE



Appeal from the Order of the Board of Finance and Revenue in case of Commonwealth of Pennsylvania v. Hellertown Manufacturing Co., No. R-50 (1973).

COUNSEL

Donald LaBarre, Jr., with him Robert Margolis and Herbert L. Levy, for appellant.

Eugene J. Anastasio, Deputy Attorney General, for appellee.

Harry J. Rubin, with him Krekstein, Rubin and Lasday, for amicus curiae, Paris Manufacturing Company, Inc.

President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Kramer. Judge Rogers dissents.

Author: Kramer

[ 25 Pa. Commw. Page 91]

This is an appeal by the Hellertown Manufacturing Company from a resettlement order of the Board of Finance and Revenue dated November 30, 1973, which

[ 25 Pa. Commw. Page 92]

    determined Hellertown's corporate net income taxes for the tax year 1971. This case presents a narrow, but important question of first impression under the Tax Reform Code of 1971, Act of March 4, 1971, P.L. 6, as amended, 72 P.S. 7101 et seq. The question presented is whether the taxing authorities have abused their discretion by eliminating in the apportionment of Pennsylvania business income, sales of a foreign corporation made in states where the taxpayer is not subject to corporation taxes.*fn1 We hold that there was no abuse of discretion under the facts of this case.

To understand the significance of the issue presented, and our holding, we will adopt the following stipulated facts.*fn2 Because of the importance of the case, we will set them forth verbatim:

"1. Hellertown Manufacturing Co., Appellant herein, is a Delaware corporation registered to do business in Pennsylvania, engaged in the manufacture and sale of spark plugs and allied products. Its manufacturing plant is located in Hellertown, Pennsylvania and its administrative office is located in Toledo, Ohio.

"2. Within the time provided by law, Appellant filed its Pennsylvania Corporate Net Income Tax Report for the year 1971 which showed inter alia :

Income to be Apportioned $854,074.12

Apportioned Percentage .667545

Income Apportioned to

Pennsylvania $570,132.91

Pa. Corporate Net Income Tax

(Add Back) $77,745.40

Pa. Taxable Income $647,878.31

Tax at the Rate of Twelve Percent $77,745.40

[ 25 Pa. Commw. Page 93]

The apportionment percentage as reported by Appellant was .667545. Attached hereto, made a part hereof and marked Exhibit "A" is a copy of said Corporate Net Income Tax Report.

"3. Corporate Net Income Tax was timely settled against Appellant as follows:

Income to be Apportioned $854,074.12

Apportioned Percentage 100%

Income Apportioned to

Pennsylvania $854,074.12

Pa. Corporate Net Income Tax

(Add Back) $77,745.40

Pa. Taxable Income $931,819.52

Tax at the Rate of Twelve Percent $111,818.34

This settlement did not reflect the use of any apportionment fraction; i.e., Appellant's income was all (100%) allocated to Pennsylvania. Attached hereto, made a part hereof and marked Exhibit "B" is a copy of said settlement.

"4. The Appellant, on April 27, 1973, timely filed with the Secretary of Revenue and the Auditor General of the Commonwealth of Pennsylvania a Petition for Resettlement of its 1971 Corporate Net Income Tax objecting to the settlement hereinabove mentioned in paragraph 3. The Appellant received a notice dated May 31, 1973 from the Resettlement Board that its Petition for Resettlement was refused. Attached hereto, and made a part hereof and labeled Exhibit "C" is a copy of said notice.

"5. On July 18, 1973, Appellant timely filed a Petition for Review with the Board of Finance and Revenue. The Board of Finance and Revenue, on

[ 25 Pa. Commw. Page 94]

November 30, 1973, resettled and taxed Appellant as follows:

Property = $4,220,763

     fraction $4,220,763

Wage = $3,036,614

     fraction $3,036,614

Sales = $34,661 x$854,074.12 plus

     fraction ...


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