Appeal from the Order of the Commonwealth Court of Pennsylvania dated May 29, 1985, at No. 1189 C.D. 1984, which reversed the Order entered by the Court of Common Pleas of Allegheny County, Pennsylvania, Civil Division, dated November 24, 1982, at No. S.A. 669 of 1982, an which also remanded the case for recomputation of the tax owed. 89 Pa. Commw.Ct. 541,
Nix, C.j., and Larsen, Flaherty, McDermott, Hutchinson, Zappala and Papadakos, JJ.
years 1977 through 1980. An appeal was taken to the Court of Common Pleas, and the deficiency assessment was affirmed. Commonwealth Court reversed, relying upon Borough of Brookhaven v. Century 21, 57 Pa. Commw.Ct. 211, 425 A.2d 466 (1981) (Tax Enabling Act strictly construed to prohibit borough from imposing business privilege tax on gross receipts from services performed outside the borough), and the case was remanded for recomputation of the Tax owed based only upon gross receipts attributable to activities taking place within the City. The issue to be addressed in the instant appeal, therefore, is whether the City can impose its Tax upon the entire gross receipts of a taxpayer, including the portion of gross receipts derived from services rendered outside the City, when the taxpayer's sole business office is located within the City.
Section 243.02 of the Pittsburgh Code (hereinafter Code) establishes the Tax by providing that "[e]very person engaging in any business in the City shall pay an annual tax at the rate of six mills on each dollar of volume of the gross annual receipts thereof." In defining the types of "business" subject to the Tax, Section 243.01(a)(1) defines "business" as:
Carrying on or exercising whether for gain or profit or otherwise within the City any trade, business, including but not limited to financial business as herein defined, profession, vocation, service, construction, communication or commercial activity, or rendering services from or attributable to a bona fide City office or place of business.
(Emphasis added.) The Code differentiates income attributable to offices maintained outside the City limits, for Section 243.01(e)(3) provides the following exclusion:
Receipts or that portion thereof attributable to interstate or foreign commerce or to a bona fide office or place of business regularly maintained by the taxpayer, outside the City limits, and not for the purpose of evading tax payment, and those receipts which the City is prohibited from taxing by law. Such receipts shall be segregated so
that only that part of the receipts which is properly attributable and allocable to the doing of business in the City shall be taxed hereunder.
(Emphasis added.) Since Gilberti did not maintain an office outside the City limits, the taxing authority deemed that all proceeds of his architectural firm were, in the language of Section 243.01(a)(1), supra., "render[ed] . . . from or attributable to a bona fide City office or place of business.".
The extent of the City's authority to enact a tax such as the present one is governed by The Local Tax Enabling Act,*fn1 supra., for municipalities have the power to enact only such tax ordinances as are authorized by the legislature. Allentown School District Mercantile Tax Case, 370 Pa. 161, 171, 87 A.2d 480, 484 (1952). In F.J. Busse Co. v. City of Pittsburgh, 443 Pa. 349, 279 A.2d 14 (1971), this Court upheld the power of the City, under the Enabling Act, to impose a business privilege tax, but the issue of whether such a tax could be applied to receipts generated by services performed outside the City was not presented. The Enabling Act provides that certain political subdivisions, including the City, are empowered to:
53 P.S. § 6902 (emphasis added). Gilberti asserts that the City, by taxing receipts from services rendered outside of its boundaries, has exceeded the powers conferred upon it by the Local Tax Enabling Act, insofar as the Act restricts the City's taxing authority to "transactions" and "privileges" that are "within the limits" of the political subdivision.
For any given business, transactions occurring outside the City frequently have a ...