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July 2, 1997


Appealed From No. 14 September Term, 1995. Common Pleas Court of the County of Philadelphia. Judge LEVIN.

Before: Honorable James Gardner Colins, President Judge, Honorable Rochelle S. Friedman, Judge, Honorable Charles A. Lord, Senior Judge. Opinion BY Senior Judge Lord. Judge Leadbetter did not participate in the decision in this case.

The opinion of the court was delivered by: Lord



FILED: July 2, 1997

This is an appeal from an order of the Court of Common Pleas of Philadelphia affirming a decision of the Philadelphia Tax Review Board (TRB, or board) in which it was found that Realen Gateway Development Associates (Realen) was not responsible for the Philadelphia Business Use and Occupancy Tax (U&O Tax) in connection with the operation of a public parking garage located at 15th and Vine Streets, Philadelphia. The U&O Tax is imposed by the School District of Philadelphia on the use and occupancy of certain real estate in the School District pursuant to the Act of August 9, 1963, P.L. 640, as amended, 53 P.S. §§ 16101-16103.3.

The agreement to operate the garage is succinctly described by the trial court as follows:

The owner of the property is the Pennsylvania Department of Transportation, which leases the property to the Philadelphia Parking Authority. The Parking Authority subleases the parking garage to Realen Gateway Development Associates, L.P. ("Realen"), through a July, 1988 sublease agreement whereby Realen agreed to construct the garage on the behalf of the Parking Authority and in return Realen was authorized to undertake commercial development above and below the garage. The garage has been in use since 1992.

Realen and the Parking Authority are parties to a management agreement. Under this agreement, Realen asserts that it is the Parking Authority who is the manager/operator of the garage for an assured term and therefore responsible for any U & O Tax. The School District argues that the facts presented to the TRB demonstrate that Realen is the actual user and occupier of the garage because it controls the operation of the garage through the management agreement.

Neither the TRB or the trial court decided the issue of who was user/occupier of the garage, Realen or the Philadelphia Parking Authority (Parking Authority). Instead, since both the School District and Realen agree that if the Parking Authority, a state agency, is the user/occupier of the premises, the tax cannot be levied on it, the TRB and court assumed that Realen was the user/occupier. They then concluded that, because the ordinance obligates landlords to collect and tender the tax, and the landlord is Parking Authority, an entity neither liable for the tax nor obliged to collect it, the tax was not collectable. Both the TRB and the trial court relied upon the absence of any specific authority in the statute or ordinance permitting the School District to go directly against the user/occupier on whom the tax is imposed when the landlord, who is charged to collect the tax, is a tax-exempt entity.

In this appeal, the School District points out several facts which it contends supports its position that it can collect the tax directly from a user or occupier even though the collecting landlord is tax-exempt.

First, the taxing ordinance imposes the tax "on the use or occupancy of real estate within [the School District] for the purpose of carrying on any business, trade, occupation, profession, vocation, or any other commercial or industrial activity. This tax is imposed on the user or occupier of real estate." Philadelphia Code § 19-1806(2) (emphasis added). Thus, by its plain terms, the tax is levied on users or occupiers, not on landlords, who are defined in the Code as "persons who grant the right to use or occupy real estate or any part thereof to any lessee, sub-lessee, licensee or concessionaire..." The pertinent exclusions, found at Section 19-1806(3)(b) of the Philadelphia Code, excludes "any person exempt from real estate taxes in the City of Philadelphia." This provision does not exclude lessees or sub-lessees of exempt persons.

Next, the ordinance provides that the landlord must act as the School district's agent to collect the tax.

Any person required under this Section to collect the tax from a user or occupier, who shall fail to collect the proper amount of such tax, shall be liable for the full amount of the tax which is due from such users or occupier, provided however, that if the person collect the tax shall notify the [School Revenue] Commissioner, concurrently with the timely filing of a tax return...of such information as the Commissioner may require concerning the identity of such user or occupier who has not paid the tax, and the amount of tax not paid for the taxable period ...

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