Appeal from Dauphin County, Common Pleas Court; Honorable Sebastian D. Natale, Judge.
Thomas D. Caldwell, Jr., with him, James G. Nealon, Caldwell & Kearns, Harrisburg, for appellant.
Judith Brown Schimmel, City Sol., for appellee.
Barry and Palladino, JJ., and Narick, Senior Judge.
Appellant, Helsel, Inc., a real estate broker, sought a declaratory judgment in the Court of Common Pleas of Dauphin County seeking a ruling that the City of Harrisburg's Business Privilege and Mercantile Tax is invalid as applied to appellant. The tax consists of millage imposed on every thousand dollars of gross receipts. Since there were no facts in dispute, appellant moved for summary judgment and the City filed a similar cross motion. The trial court ruled in favor of the City and appellant filed the instant appeal.
Both of appellant's arguments are based on the fact that it pays a fee biennially to the Pennsylvania Real Estate Commission which is used to support the Commission's operations. We will first address the argument that the Commonwealth has preempted the taxation of real estate operators by establishing the Real Estate Commission. Appellant is correct in stating that we must determine whether the legislature intended to preempt the field in enacting the Real Estate Licensing and Registration Act.*fn1 City of Pittsburgh v. Allegheny Valley Bank of Pittsburgh, 488 Pa. 544, 412 A.2d 1366 (1980). In Allegheny Valley Bank the Pennsylvania Supreme Court held that the legislature had preempted the taxation of banks by enacting the Banking Code and the Department of Banking Code and that a local business privilege tax on banks was therefore invalid. Appellant also points to case law holding that the harness racing industry and the liquor industry have been preempted. Commonwealth v. Wilsbach Distributors, Inc., 513 Pa. 215, 519 A.2d 397 (1986), rev'g, 81 Pa. Commonwealth Ct. 244, 473 A.2d 1123 (1984); Liberty Bell Racing v. City of Philadelphia, 86 Pa. Commonwealth Ct. 83, 483 A.2d 1063 (1984).
In examining the Real Estate Licensing and Registration Act, we find that it merely establishes a system for professional registration to control the ethical character and conduct of real estate brokers. The Act does not provide for the pervasive regulation of every aspect of the real estate industry as the acts in the industries discussed in the above cases. We therefore hold that the real estate field has not been preempted.
Appellant's main argument is that the local tax is barred by Section 2 of the Local Tax Enabling Act (LTEA),*fn2 which states that local authorities cannot tax "a privilege, transaction, subject, occupation or personal property which is now or does hereafter become subject to a State tax or license fee". 53 P.S. § 6902(1). While the appellate courts
of this state have dealt with the question of when a local tax is barred under this language and under similar language in prior statutes, there is some confusion in the case law as to what standard is to be applied in making this determination. We begin with the case on which appellant relies, National Biscuit Co. v. Philadelphia, 374 Pa. 604, 98 A.2d 182 (1953). In National Biscuit the Pennsylvania Supreme Court held that a local mercantile license tax is prohibited only when the Commonwealth has enacted a "true license fee", that is, a fee which is enacted in order to reimburse the licensing authority for the cost of supervision and regulation of the industry. The Court was distinguishing a license fee from a mere registration fee which is a nominal fee, insufficient to cover the cost of regulating the industry. The Court held that such a registration fee does not bar local taxation.
The City responds by citing Philadelphia Tax Review Board v. Smith, Kline & French Laboratories, 437 Pa. 197, 262 A.2d 135 (1970), in which our Supreme Court held that a local mercantile license tax was not prohibited by a state license fee.*fn3 The case is cited for the proposition that a local tax is not barred unless the state has enacted a revenue raising measure, characterized by a large level of monetary income and a large income compared to the costs of collection and supervision. Smith, Kline & French is a plurality decision and no more than two justices joined in any one opinion.
Subsequent to issuing Smith, Kline & French the Supreme Court decided F.J. Busse Co. v. Pittsburgh, 443 Pa. 349, 279 A.2d 14 (1971), in which it held that a local business privilege tax was not duplicative of several state taxes. The Court based this holding on its conclusion that the incidence of the local and state taxes were not the same. The incidence of a tax was defined as embracing the subject matter of ...