William T. Marsh, Butler, for appellant.
Eugene J. Anastasio, Deputy Atty. Gen., R. Scott Shearer, Harrisburg, for appellee.
Jones, C. J., and Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Pomeroy, J., filed a concurring opinion in which Eagen, J., joins. Roberts and Nix, JJ., concur in the result.
Appellant, Spang Stores, Inc., appeals*fn1 the decision of the Commonwealth Court which appraised the actual value of the capital stock of the appellant for the year ended January 31, 1971, pursuant to the Capital Stock Tax,*fn2 at $2,000,000. 17 Pa. Commw. 448, 333 A.2d 493 (1975).
The taxpayer is a Pennsylvania Corporation engaged in the operation of fifty-nine retail drugstores under the name Sun Drug and five discount stores under the name of Eiben & Irr, all located in western Pennsylvania, with a major concentration of stores in the Pittsburgh metropolitan area.
Taxpayer timely filed its capital stock tax return for the fiscal year ended January 31, 1971, with a self-appraised actual value of its capital stock at $1,700,000, and a tax liability of $11,900. The Department of Revenue, pursuant to Section 801(d) of the Fiscal Code, reappraised the value of taxpayer's capital stock at $3,000,000, resulting in a tax liability of $21,000. Act of April 9, 1929, P.L. 343, Art. VIII, § 801, as amended, 72 P.S. 801 (1949). After this valuation was approved by the Auditor General, the taxpayer filed a petition for resettlement. As a result of that hearing, the Department resettled the taxpayer's capital stock tax liability to $19,600, based on a valuation of taxpayer's capital stock at $2,800,000. Taxpayer then filed with the Board of Finance and Revenue a petition for review of the action taken on its petition for resettlement. Following a hearing, the Board resettled the account and appraised the
value of taxpayer's capital stock at $2,400,000, with a resulting tax liability of $16,800. Taxpayer's appeal to the Commonwealth Court for a hearing de novo*fn3 under Section 1104 of the Fiscal Code followed. Act of April 9, 1929, P.L. 343, as amended, 72 P.S. § 1104 (Supp.1976-1977). The Commonwealth Court determined that the taxpayer's capital stock should be valued at $2,000,000. This appeal followed. Whether the Commonwealth Court properly valued the taxpayer's capital stock is the issue to which we now turn.
Under the Act of June 1, 1889, P.L. 420, § 21, as amended, 72 P.S. § 1871(a), appellant is required to make an annual payment to the Commonwealth of a tax at the rate of "five mills upon each dollar of the actual value of its whole capital stock." The tax is to be accompanied by a report setting forth information concerning the selling price of the taxpayer's stock during the year and the business operations and financial structure of the taxpayer. The report is also to include a valuation of the taxpayer's capital stock at its actual value in cash at the close of the tax year as made by the officers of the taxpayer. This valuation is to be made after considering (1) the average selling price of the taxpayer's stock during the year; (2) the value indicated or measured by the taxpayer's net earnings or by the amount of profit made and either declared in dividends, expended in improvements or carried into surplus or a sinking fund; and (3) the actual value indicated or measured by the intrinsic value of the taxpayer's tangible property and assets and by the value of its good will, franchises and privileges, as revealed by the material results of their exercise, considering also the amount of the taxpayer's indebtedness. Act of June 1, 1889, P.L. 420, § 20, as amended, 72 P.S. §§ 1901, 1902.
Appellant'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, appellant's equipment and leasehold improvements on a cost basis with allowances ...