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CITY PITTSBURGH v. INTERNATIONAL BUSINESS MACHINES CORPORATION (09/28/78)

decided: September 28, 1978.

CITY OF PITTSBURGH, A MUNICIPAL CORPORATION, AND JOSEPH L. COSETTI, TREASURER OF THE CITY OF PITTSBURGH, APPELLANTS
v.
INTERNATIONAL BUSINESS MACHINES CORPORATION, APPELLEE



Appeal from the Order of the Court of Common Pleas of Allegheny County in case of City of Pittsburgh, a municipal corporation, and Joseph L. Cosetti, Treasurer of the City of Pittsburgh v. International Business Machines Corporation, No. SA744 of 1972.

COUNSEL

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

Robert L. Frantz, with him George L. Cass, and Buchanan, Ingersoll, Rodewald, Kyle & Buerger, for appellee.

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

Author: Crumlish

[ 38 Pa. Commw. Page 53]

The City of Pittsburgh and Joseph L. Cosetti, Treasurer of the City of Pittsburgh (Appellants/City) appeal a decision of the Court of Common Pleas which held that the International Business Machines Corporation (IBM) is exempt from the City's business privilege tax on rental receipts generated from the lease of IBM manufactured equipment within the City.

[ 38 Pa. Commw. Page 54]

We affirm.

By authority of The Local Tax Enabling Act, Act of December 31, 1965, P.L. 1257, as amended, 53 P.S. § 6901 et seq. (Act 511), the City enacted Ordinance No. 675 (Ordinance) imposing a tax on the privilege of engaging in commercial activities within the City. Section 2(4) of Act 511, 53 P.S. § 6902(4), circumscribes the City's taxing powers and provides, in pertinent part, as follows:

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.)

IBM is a New York corporation which manufactures general purpose computers, accessory equipment and office equipment. It has no manufacturing plants in Pennsylvania, but it sells and leases equipment to customers throughout the Commonwealth. It also renders maintenance and repair service upon IBM equipment owned by others.

For the tax years here in question, IBM paid business privilege taxes on all repair and maintenance receipts but claimed a tax exemption by virtue of Section 2(4) of Act 511 on receipts from the sale and lease of equipment. The City allowed the exemption for sales receipts but levied taxes on rental receipts and IBM appealed to the court below. That court, relying on Fischer v. ...


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