Appeal from the Order of the Court of Common Pleas of Philadelphia County in case of Tax Review Board, City of Philadelphia v. Keystone Dyeing Co., Inc., No. 3430 September Term, 1972.
Paul W. Lunkenheimer, with him Schumacker & Lunkenheimer, for appellant.
Stewart M. Weintraub, Assistant City Solicitor, with him Albert J. Persichetti, Deputy in Charge of Enforcement, Stephen Arinson, Chief Deputy City Solicitor, and Sheldon L. Albert, City Solicitor, for appellee.
President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Blatt.
[ 26 Pa. Commw. Page 526]
In this tax appeal from the Court of Common Pleas of Philadelphia County, the Keystone Dyeing Co., Inc. (Keystone), appellant, asserts that it is entitled to a partial exclusion from the Philadelphia Mercantile License Tax (Tax) pursuant to Chapter 19-1000 of the Philadelphia Code (Code). This chapter of the Code excludes from taxation those "receipts or the portion thereof attributable to any item of sale or lease involving the bona fide delivery of goods, commodities, wares, or merchandise to a location regularly maintained by the other party to the transaction outside the limits of the City and not for the purpose of evading payment of the tax or any portion thereof; . . ." § 19-1001(6)(c) of the Code. (Emphasis added.)
Keystone is engaged in dyeing and finishing textile garments and fabrics which are owned by its customers and delivered by them to Keystone's plant in Philadelphia. Keystone buys, blends, and compounds dyestuffs, applies the dyestuffs to the goods of its customers, and then delivers the finished dye-coated goods to various locations as the customers specify. Keystone had paid the tax on its entire gross receipts for the business for the years 1961 through 1966 inclusive, but, deciding that it had been entitled to a tax exclusion for a portion of its receipts, it petitioned the Tax Review Board of the City of Philadelphia (Board) for a refund in the amount of $25,141.76. The Board held that Keystone's receipts from its business are entirely attributable to the performing of a service upon the goods of another within
[ 26 Pa. Commw. Page 527]
the city limits and consequently refused to grant the refund. Keystone argued in its appeal to the court below and argues again here that the portion of its receipts attributable to the sale of dye coating applied to the goods owned and supplied by its customers from outside of the city and delivered to locations outside of the city should be excluded from the tax in accordance with the above cited Code provisions.
It would appear, and it is not otherwise contested by the parties here involved, that the Code draws a fundamental distinction between performing a service on goods and making a sale of goods. See Philadelphia Tax Review Board v. Manheim Laundry Company, 398 Pa. 265, 157 A.2d 372 (1960). Moreover, Section 19-1001(6)(d) of the Code also excludes from the tax "receipts or that portion thereof attributable to any services performed outside the limits of the City." (Emphasis added.)
As prior decisions of the Board involving other taxpayers would suggest, where the activity involves delivery of a defineable item of sale to localities outside the city limits, that portion of the business should be characterized as one involving sales. Receipts derived from such sales, therefore, are excluded from taxation in accordance with Section 19-1001(6)(c) of the Code. The characteristics of many business activities, of course, may make it difficult to distinguish between those companies which are making sales of items and those which are providing services. In this case, however, making the distinction is not difficult, and we believe that both the Board and the court below properly concluded that Keystone is here performing a service.
In its brief, Keystone describes its activities in citing the following ...