Appeal from the Order of the Pennsylvania Board of Finance and Revenue, in case of RE: Welded Tube Company of America, Docket No. R-6392.
Richard B. Pearl, with him, Bruce S. Haines, Cohen, Shapiro, Polisher, Shiekman and Cohen, for petitioner.
Bryan E. Barbin, Deputy Attorney General, with him, Eugene J. Anastasio, Chief, Deputy Attorney General, and LeRoy S. Zimmerman, Attorney General, for respondent.
President Judge Crumlish, Jr., Judges Rogers, Craig, MacPhail, Doyle, Barry and Colins. Opinion by Judge Colins.
[ 101 Pa. Commw. Page 33]
Welded Tube Company of America, a Pennsylvania business corporation (taxpayer), has appealed an order of the Board of Finance and Revenue (Board) resettling its corporate net income tax for the year ending January 31, 1980, by which the Board included the gain from the sale of the taxpayer's Philadelphia manufacturing facility as nonbusiness income described by Section
[ 101 Pa. Commw. Page 34401]
(3)2.(a)(1)(D) of the Tax Reform Code of 1971 (Code), Act of March 4, 1971, P.L. 6, as amended, 72 P.S. § 7401(3)2.(a)(1)(D).
The parties submitted a Stipulation of Facts which we adopt as our findings of fact:
1. Taxpayer was incorporated under the laws of the Commonwealth of Pennsylvania on April 10, 1952. Taxpayer is authorized to conduct business in the Commonwealth of Pennsylvania and had its principal place of business at 2400 South Weccacoe Avenue, Philadelphia, Pennsylvania 19148 during the tax year ended January 31, 1980. In August 1977, Taxpayer ceased its manufacturing operations at the Weccacoe Avenue location and completed the sale of the premises on February 9, 1979. Pursuant to a lease, Taxpayer retained its executive and administrative office at that location until February 1984. Since February of 1984, Taxpayer has maintained its administrative and executive offices at 1818 Market Street, 36th Floor, Philadelphia, Pennsylvania 19103.
2. Taxpayer is a corporation engaged in the manufacture and sale of welded steel tubing in square, rectangular and round shapes and in a variety of sizes.
3. Prior to 1978, Taxpayer had two manufacturing facilities, one located at 2400 South Weccacoe Avenue, Philadelphia, Pennsylvania, which commenced operations in 1965, and one located in Chicago, Illinois, which commenced operations in 1970. (As used herein the word 'facility' means land and buildings.) On February 9, 1979, Taxpayer sold its Philadelphia manufacturing facility, machinery and equipment for a taxable gain of $2,111,543.
[ 101 Pa. Commw. Page 354]
. Taxpayer filed its corporate net income tax report for the fiscal year ended January 31, 1980, in which it reported its business income to be apportioned as $7,838,962, including the taxable gain of $2,111,543. It also reported nonbusiness income of $274,418. Its self-assessed corporate net income tax was computed at $73,807.
5. On September 8, 1981, the Department of Revenue and the Department of the Auditor General settled Taxpayer's corporate net income tax for the year ended January 31, 1980, by finding business income to be apportioned of $6,001,837 and nonbusiness income of $2,111,543, which resulted in an increase in corporate net income tax determined to be $264,501.85.
6. On December 15, 1981, Taxpayer timely filed a Petition for Resettlement with the Board of Appeals requesting that its business income to be apportioned be increased to $7,993,246 and that there be no gain allocated as nonbusiness income. This Petition would have resulted in Taxpayer's corporate net income tax being resettled to $54,428.
7. On August 20, 1982, the Board of Appeals refused to resettle Taxpayer's corporate net income tax for the year ended January 31, 1980.
8. On November 12, 1982, Taxpayer timely filed a Petition for Review with the Board of Finance and Revenue requesting the corporate net income tax for year ended January 31, 1980, be resettled to $54,428.
9. On April 19, 1983, the Board of Finance and Revenue resettled Taxpayer's net income tax
[ 101 Pa. Commw. Page 36]
by reducing the taxable gain in issue to $1,991,409 and thereby found Taxpayer's business income to be apportioned to be $6,137,000 and nonbusiness income of $1,991,409. Taxpayer's corporate net income tax was thereby reduced to $251,886.85.
10. The Board of Finance and Revenue rejected Taxpayer's claim that the gain on the sale of the Taxpayer's Philadelphia manufacturing facilities, machinery and equipment was business income.
11. On May 11, 1983, the Board of Finance and Revenue mailed a copy of its Order to the Taxpayer.
12. Taxpayer timely filed its Petition for Review with this Court on June 8, 1983, and filed a bond as security on August 4, 1983.
13. Since it commenced business, Taxpayer has manufactured and sold welded steel tubing in various sizes and shapes. Taxpayer produces round tubular products in addition to the traditional square and rectangular shapes. The round tubular products can be used in a variety of applications, including structural, mechanical and machinery manufacturing, in addition to the casing and line pipe used in the oil industry and other similar applications. Taxpayer's product is manufactured by a process utilizing an integrated mill or line. ...