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decided: September 12, 1977.


Appeal from the Order of the Court of Common Pleas of Allegheny County in case of Golden Triangle Broadcasting, Inc.; Westinghouse Broadcasting Company, Inc.; WIIC-TV Corporation; and WKJF FM, Inc. v. City of Pittsburgh, a municipal corporation; Joseph M. Barr, Mayor, City of Pittsburgh; David A. Smith, Treasurer, City of Pittsburgh; Donald J. Bucholtz, Superintendent, Business Privilege Tax, City of Pittsburgh, No. 456 January Term, 1970.


Grace S. Harris, Executive Assistant City Solicitor, with her Mead J. Mulvihill, Jr., City Solicitor, for appellants.

Frank L. Seamans, with him Dale E. Williams, and Eckert, Seamans, Cherin and Mellott, for appellees.

President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Judge Kramer did not participate in the decision. Opinion by President Judge Bowman. Judge Kramer did not participate in the decision in this case. Dissenting Opinion by Judge Rogers. Judge Crumlish, Jr. joins in this dissent.

Author: Bowman

[ 31 Pa. Commw. Page 549]

Plaintiffs, television and radio broadcasters, commenced this suit in equity*fn1 in the Allegheny County Court of Common Pleas, to enjoin the City of Pittsburgh (City) from collecting Business Privilege Tax*fn2 on their gross receipts alleging that the imposition of the tax violates their rights under the United States and Pennsylvania Constitutions and that they are not subject to the tax by reason of their being engaged in manufacturing.

After an extensive trial, including the presentation of detailed expert testimony on plaintiffs' broadcasting operations and a tour of the broadcasting facilities by the Chancellor, he concluded that the plaintiffs

[ 31 Pa. Commw. Page 550]

    are engaged in manufacturing and are not, therefore, subject to the tax; consequently, he did not reach the constitutional issues raised. The City has appealed this adjudication of the Chancellor which, after consideration of the City's exceptions, was adopted by the court below en banc.

The City's Business Privilege Tax was enacted pursuant to the authority granted by The Local Tax Enabling Act (Enabling Act), Act of December 31, 1965, P.L. 1257, as amended, 53 P.S. § 6901 et seq. Section 2 of the Enabling Act, 53 P.S. § 6902, provides in pertinent part:

The duly constituted authorities of . . . cities of the second class . . . may, in their discretion, by ordinance or resolution, for general revenue purposes, levy, assess and collect or provide for the levying assessment and collection of such taxes as they determine on persons, transactions, occupations, privileges, subjects and personal property within the limits of such political subdivisions. . . . Such local authorities shall not have authority by virtue of this act:

(4) To levy, assess and collect a tax on goods and articles manufactured in such political subdivision or on the by-products of manufacture . . ., or on any privilege, act or transaction related to the business of manufacturing . . ., by manufacturers . . . with respect to the goods, articles and products of their own manufacture. . . . (Emphasis added.)

The issue thus presented is whether the Business Privilege Tax, as applied to plaintiffs, is a tax on a "privilege . . . related to the business of manufacturing . . . with respect to the . . . products of their own manufacture . . ."; or put simply, does broadcasting constitute "manufacturing?" This is a matter of first

[ 31 Pa. Commw. Page 551]

    impression in Pennsylvania and we are aware of only one case directly on point from another jurisdiction.*fn3

We note at the outset that contrary to the impression left by the City in its citation of Commonwealth v. Philadelphia Gas Works, 25 Pa. Commonwealth Ct. 66, 358 A.2d 750 (1976), this case does not involve a tax exemption which would subject the critical statutory words to a strict construction test. See Statutory Construction Act, 1 Pa. C.S. § 1928(b)(5). Rather, as both the Chancellor and the plaintiffs point out, the words "shall not have authority" have been construed to be a limitation on the power to tax so that doubts relating to their construction are resolved in favor of the taxpayers. Directory Publishing Co. v. Pittsburgh, 205 Pa. Superior Ct. 423, 425-26, 211 A.2d 509, 511 (1965). However, we do not view this principle as of controlling significance in this case. For the issue here is whether broadcasting is "manufacturing," and, as we recently noted in Commonwealth v. Perfect Photo, Inc., 29 Pa. Commonwealth Ct. 316, 321, 371 A.2d 580, 582 (1977), the difficulty with this and similar cases is the want of a statutory definition of the term "manufacturing." In the absence of such definition, either in the context of an "exemption" as in the Capital Stock Tax Act*fn4 or, as here, in the context of a limitation on the power to tax, the rationale for application of statutory construction principles is absent. Whether a particular activity is "manufacturing" as that term has been defined by case law only is purely an issue of law under

[ 31 Pa. Commw. Page 552]

    the facts of a particular case. We are, of course, mindful of our limited scope of review in equity matters and will reverse only where there is clear error or abuse of discretion or where the evidence fails to justify the Chancellor's findings and the reasonable inferences and conclusions derived therefrom. Gruver v. Howell, 28 Pa. Commonwealth Ct. 296, 298, 368 A.2d 920, 921 (1977).

In Perfect Photo, supra, we summarized the judicial efforts at defining "manufacturing" as follows:

The word 'manufacturing' when employed in a statute or taxing measure, without further definition, consists in the application of labor and skill to material whereby the original article is changed into a new, different, and useful article. Morrisville Scrap Processing Co., Inc. Tax Appeal, 6 Pa. Commw. 121 (1972), aff'd. 453 Pa. 610, 307 A.2d 905 (1973). Whether or not an article is a manufactured product depends on whether it has gone through a substantial transformation in form, qualities, and adaptability in use from the original so that a new article or creation has emerged. General Foods Corp. v. Pittsburgh, 383 Pa. 244, 118 A.2d 572 (1955). If there is merely a superficial change in the original materials without any substantial and well-signalized transformation in form, qualities, and adaptability in use, it is not a new article or new production. Commonwealth v. Berlo Vending Co., 415 Pa. 101, 202 A.2d 94 (1964).

29 Pa. Commonwealth Ct. at 321, 371 A.2d at 582-83.

We also noted the aptness of Justice (now Chief Justice) Eagen's observation in Commonwealth v. Deitch Co., 449 Pa. 88, 295 A.2d 834 (1972), that:

'Concededly, "it is sometimes difficult to determine with legal exactness what is and what is

[ 31 Pa. Commw. Page 553]

    not manufacturing," for as one court has observed, "[i]t is easier to feel the line of distinction than to express it. . . ."' 449 Pa. at ...

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