ARGUED: October 19, 2016
BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge,
HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE P.
KEVIN BROBSON, Judge, HONORABLE ANNE E. COVEY, Judge,
HONORABLE MICHAEL H. WOJCIK, Judge, HONORABLE JULIA K.
HEARTHWAY, Judge, HONORABLE JOSEPH M. COSGROVE, Judge.
K. HEARTHWAY, JUDGE
Moreland Township (Township) appeals the decision of the
Court of Common Pleas of Montgomery County invalidating the
Township's tax assessment of 7-Eleven, Inc. We affirm in
part, reverse in part, and remand for further proceedings
consistent with this opinion.
trial court made the following findings of fact. 7-Eleven is
a Texas corporation with a registered business address in
Dallas. 7-Eleven owns and operates convenience stores
throughout the United States. Some 7-Eleven stores are
"corporate stores, " which are owned and operated
by 7-Eleven directly. Other 7-Eleven stores are
"franchise stores, " which are licensed to
franchisees and operated according to the terms of a
franchise agreement. Pursuant to the terms of the franchise
agreement, franchise stores pay to 7-Eleven a fee known as
the "7-Eleven Charge, " in exchange for various
services provided to franchise stores by 7-Eleven.
2003 to 2011, the years relevant to this appeal, 7-Eleven
maintained a regional office for its Northeast Division in
the Township. The Northeast Division included 7-Eleven stores
in Pennsylvania and New England. Also within the Township was
one corporate store and one franchise store. During those
years, 7-Eleven filed business privilege tax (BPT) returns
with the Township; these returns reported receipts generated
by sales at the corporate store within the Township, but did
not include the 7-Eleven Charges collected by 7-Eleven from
franchise stores in the Northeast Division.
an audit, the Township made an assessment of delinquent BPTs
based on 7-Eleven's receipt of 7-Eleven Charges from
stores in the Northeast Division. The Township's BPT is
assessed at a rate of 3.5 mills on taxable gross receipts.
Pursuant to regulation,  the Township calculates the gross
receipts of businesses with multistate offices engaged in
interstate commerce by combining (1) all receipts from within
Pennsylvania; and (2) receipts from outside of Pennsylvania
multiplied by an apportionment factor. The regulation defines
the apportionment factor as the average of the following
(i) Wages, salaries, commissions and other compensation in
Township, as a percentage of total wages, salaries and other
(ii) Receipts in Township as a percentage of total receipts.
(iii) Value of the tangible personal and real property owned
or leased as situated within the Township as a percentage of
total tangible personal and real property owned or leased.
at ¶ 2. However, in this case, the parties agreed to use
only factor (ii), receipts in Township as a percentage of
total receipts, for determining the apportionment factor. The
Township then calculated the apportionment factor by dividing
the yearly 7-Eleven Charge gross receipts from within the
Township by the yearly 7-Eleven Charge gross receipts of the
Northeast Division. Applying the resulting apportionment
factor to the 7-Eleven Charges from the Northeast Division,
the Township assessed 7-Eleven for the years 2003 to 2011, as
Total Principal Tax $726, 461.69
Total Tax Penalties $ 80, ...