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SKI ROUNDTOP v. COMMONWEALTH PENNSYLVANIA (06/15/87)

decided: June 15, 1987.

SKI ROUNDTOP, INC., PETITIONER
v.
COMMONWEALTH OF PENNSYLVANIA, RESPONDENT



Appeals from the decision of the Board of Finance and Revenue in case of In Re: Ski Roundtop, Inc., Nos. C-7414, C-7415, and C-7416, dated March 30, 1982.

COUNSEL

Ronald L. Hershner, Blakey, Yost, Bupp & Schaumann, for petitioner.

Bryan E. Barbin, Deputy Attorney General, with him, LeRoy S. Zimmerman, Attorney General, for respondent.

Judges Craig and Doyle, and Senior Judge Barbieri, sitting as a panel of three. Opinion by Senior Judge Barbieri.

Author: Barbieri

[ 106 Pa. Commw. Page 609]

In this consolidated appeal, Ski Roundtop, Inc., Petitioner, petitions for review from three decisions of the Board of Finance and Revenue (Board) denying its petition for refund of capital stock taxes for its tax years ending March 31 of 1977, 1978, and 1979. The Board rejected Roundtop's claim that equipment utilized in snowmaking for its ski resort was engaged in "manufacturing" within the meaning of the manufacturing exemption for imposition of the capital stock tax. We affirm.

Roundtop is a Pennsylvania corporation that operates two ski resorts, Ski Roundtop and Ski Liberty, within the Commonwealth. Section 602 of the Tax Reform Code of 1971, Act of March 4, 1971, P.L. 6, as amended, 72 P.S. § 7602, imposes upon domestic corporations an annual tax, hereinafter referred to simply as the Capital Stock Tax, on the value of the capital stock of such corporations at the rate of ten mills. Section 602 was amended in 1983 to provide for a minimum capital stock tax of $75.00. See Act of December 23, 1983, P.L. 370. The statute did, however, exempt certain assets from the imposition of the Capital Stock Tax. The exemption pertinent to the case at bar was Section 602's exemption of assets engaged in manufacturing from the imposition of the Capital Stock Tax. The pertinent portions of Section 602, as it existed during the tax years in question, provided:

Provided, That the provisions of this section [72 P.S. § 7602] shall not apply to the taxation of the capital stock of corporations, limited partnerships and joint-stock associations organized for manufacturing, processing, research or development purposes, which is invested in and actually and exclusively employed in carrying on manufacturing, processing, research or development

[ 106 Pa. Commw. Page 610]

    within the State, . . . , but every corporation, limited partnership or joint-stock association organized for the purpose of manufacturing, processing, research and development . . . shall pay the State tax of ten mills herein provided, upon such portion of its capital stock, if any, as may be invested in any property or business not strictly incident or appurtenant to the manufacturing, processing, research or development business, . . . , it being the object of this proviso to relieve from State taxation only so much of the capital stock as is invested purely in the manufacturing, processing, research or development plant or business.

While the Tax Reform Code of 1971, specifically Section 601, 72 P.S. § 7601, relating to definitions and reports, does not define the term "manufacturing" as used in Section 602, our appellate courts have set forth a judicial determination. In Commonwealth v. Weiland Packing Co., 292 Pa. 447, 141 A. 148 (1928), the Pennsylvania Supreme Court stated that:

[T]he process of manufacture brings about the production of some new article by the application of skill and labor to the original substance or material out of which a new product emerges. If however there is merely a superficial change in the original materials or substances and no substantial and well signalized transformation in form, qualities and adaptability in use, quite different from the originals, it cannot properly and with reason be held that a new article or object has emerged -- a new production been created.

Id. at 450, 141 A. at 149. See also Armour and Co. v. Pittsburgh, 363 Pa. 109, 116, 69 A.2d 405, 408-409 (1949). Thus, in Kirks Milk Products, Inc. v. ...


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