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decided: June 13, 1977.


Appeal from Order of the Board of Finance and Revenue in case of In Re: Atlantic & Gulf Stevedores, Inc., Docket No. R22232.


Richard J. Raab, for appellant.

R. Scott Shearer, Deputy Attorney General, with him Donald J. Murphy, Deputy Attorney General, for appellee.

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

Author: Bowman

[ 30 Pa. Commw. Page 514]

This is an appeal from an order of the Board of Finance and Revenue (Board) refusing the petition for review of Atlantic & Gulf Stevedores, Inc. (appellant) with respect to the resettlement by the Department of Revenue (Department) of appellant's 1964 Corporate Income Tax (CIT) return.*fn1 The facts have been stipulated and are essentially as follows.

Appellant is a Pennsylvania corporation organized and chartered in 1933 for the purpose of conducting a general stevedoring business. Appellant owns no real property in Pennsylvania or elsewhere but leases two piers and office space in Philadelphia and occupies an office in New York, New York. Appellant's tangible personal property in Pennsylvania consists of office furniture and equipment, four trucks and certain stevedoring gear. Appellant employs approximately fifteen office personnel in Philadelphia, including a port manager, and approximately five mechanics. Ship

[ 30 Pa. Commw. Page 515]

    bosses and longeshoremen are hired on a day-to-day basis according to need. Appellant does not have any employees working in the New York office other than its officers, although it does pay a proportionate part of the salaries of personnel in departments of its parent corporation who spend part of their time on appellant's work.

During 1964, appellant was engaged in a general stevedoring business which consists of loading and unloading ships carrying waterborne cargo in foreign and interstate commerce exclusively.*fn2 Appellant is not engaged in any intrastate commerce in Pennsylvania. All contracts are negotiated and executed, and all executive functions are performed in New York. The Philadelphia office bills for services and monies are received at both the New York and Philadelphia offices. The stipulation recites that appellant is not subject to and does not pay any corporate taxes in any state other than Pennsylvania.

For the year 1964, appellant timely filed a CIT return reporting net income of $351,476.67 and tax due of "none", being of the view that it was not subject to CIT. The Department settled tax against the appellant in the amount of $21,088.60 (6% of $351,476.67). Appellant's petition for resettlement and petition for review were refused; however, appellant agrees that if it is subject to the tax, the amount settled by the Department is correct.

Appellant advances a number of arguments in support of its view that it is not subject to CIT. First relying on language in Commonwealth v. Eastern Motor Express, Inc., 398 Pa. 279, 287-88, 157 A.2d

[ 30 Pa. Commw. Page 51679]

, 84 (1959), appellant argues that only foreign corporations engaged exclusively in interstate and foreign commerce are subject to CIT and that it, being a domestic corporation so engaged, cannot be taxed thereunder. Further, it argues that subjecting it to CIT while domestic corporations generally (those not engaged exclusively in interstate and foreign commerce) pay the Corporate Net Income Tax (CNIT)*fn3 instead, violates the uniformity provisions of the Pennsylvania Constitution.*fn4

We note first that, by its terms, the CIT clearly applies to the appellant. Section 3 of the CIT imposes what is characterized as a property tax on "[e]very corporation carrying on activities in this Commonwealth or owning property in this Commonwealth . . . on net income derived from sources within this Commonwealth . . . ." Section 2 then defines "Corporation" as "[a] corporation . . . either organized under the laws of this Commonwealth, the United States, or any other state . . ." and defines "Sources within this Commonwealth" as including "any activities carried on in this Commonwealth, regardless of whether carried on in intrastate, interstate or foreign commerce." (Emphasis added.) Moreover, appellant's reliance on Eastern Motor Express, supra, is based on language taken out of context in that ...

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