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QUALITY MARKETS v. COMMONWEALTH PENNSYLVANIA (08/08/86)

decided: August 8, 1986.

QUALITY MARKETS, INC., PETITIONER
v.
COMMONWEALTH OF PENNSYLVANIA, RESPONDENT



Appeal from the Order of the Board of Finance and Revenue in the case of In Re: Quality Markets, Inc., Docket No. C-12,883, dated May 29, 1984.

COUNSEL

Sherill T. Moyer, with him, Frank A. Sinon and Jack F. Hurley, Jr., Rhoads & Sinon, for petitioner.

Vincent J. Dopko, Deputy Attorney General, with him, Eugene J. Anastasio and LeRoy S. Zimmerman, Attorney General, for respondent.

President Judge Crumlish, Jr. and Judges Rogers, Craig, Doyle, Barry, Colins and Palladino. Opinion by Judge Palladino.

Author: Palladino

[ 99 Pa. Commw. Page 538]

Quality Markets, Inc. (Taxpayer) appeals from an order of the Board of Finance and Revenue (Board) which refused Taxpayer's Petition for Refund of Franchise Tax for the year ending January 30, 1982. We affirm.

The relevant facts, stipulated to by the parties, are as follows: Taxpayer is incorporated under the laws of the State of New York, and is engaged in the operation of retail grocery stores located in both New York and the Commonwealth of Pennsylvania. Of Taxpayer's twenty-one stores, thirteen are located in New York and

[ 99 Pa. Commw. Page 539]

    eight are located in Pennsylvania. Taxpayer's corporate headquarters and distribution center are located in Jamestown, New York.

In October of 1982, Taxpayer filed with the Commonwealth a Franchise Tax Report for the fiscal year ending January 30, 1982, declaring a franchise tax liability of $24,660. The Department of Revenue settled the report and determined that Taxpayer owed $29,127 in franchise tax, which Taxpayer paid in full. The amount of Taxpayer's franchise tax liability was calculated according to the three-factor apportionment formula specified in Section 602(b)(1) of the Tax Reform Code of 1971.*fn1 This formula is designed to apportion the value of a corporation's capital stock attributable to the corporation's activities in the Commonwealth, using the three factors of tangible property, payroll, and sales.

In June of 1982, the Supreme Court of Pennsylvania, in Gilbert Associates, Inc. v. Commonwealth, 498 Pa. 514, 447 A.2d 944 (1982), held that foreign corporations must be afforded the option heretofore given only to domestic corporations, of using either the three-factor

[ 99 Pa. Commw. Page 540]

    apportionment formula of the franchise tax or the single-factor apportionment formula applicable to the capital stock tax.*fn2 Thereafter, Taxpayer filed with the Board a Petition for Refund, claiming the right to compute its tax owed using the single-factor apportionment formula. Taxpayer conditioned its election of single-factor apportionment, however, on the assumption that Taxpayer's intangible assets are not legally includable in the single-factor ...


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