Shelly Funeral Home, Inc. v. Warrington Township
57 A.3d 1136
| Pa. | 2012Background
- LTEA authorized Warrington Twp to levy a mercantile tax; Ordinance 09-0-1 imposes $2,600 flat tax on nonexempt businesses with gross receipts over $1,000,000.
- 27 local businesses challenge the ordinance in court, arguing it violates Section 533(a) of the Local Tax Reform Act prohibiting taxes on gross receipts or parts thereof.
- Board testified the tax was intended to close a $400,000 budget shortfall and considered number of businesses, exemptions, and resources consumed by larger firms.
- Common pleas court upheld the ordinance as a flat tax, and the Commonwealth Court affirmed in an unpublished disposition.
- The Court granted plenary review to address whether the ordinance violates Section 533(a), focusing on statutory interpretation of 'on gross receipts or part thereof.'
- Court concludes the ordinance is unlawful under Section 533(a) because it targets the portion of gross receipts exceeding $1,000,000 and functions as a tax on gross receipts in practice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the ordinance taxes on gross receipts or part thereof. | Warrington argues the $1,000,000 threshold and $2,600 levy tax the portion of gross receipts over $1,000,000. | Warrington contends the tax is a flat levy not calculated by gross receipts. | Violates Section 533(a); constitutes a tax on gross receipts or part thereof. |
| Whether a flat tax with thresholds can be permissible under Smith and McMaster. | Argues the ordinance is distinguishable from prior flat-tax approvals that did not depend on gross receipts. | Relies on Smith & McMaster to justify flat tax as permissible. | Not controlling here; structure still violates Section 533(a). |
| Whether the Board’s design shows intent to tax larger businesses more than smaller ones. | Court views the design as evidence of intent to approximate a gross-receipts tax and thus unlawful. |
Key Cases Cited
- Smith & McMaster, P.C. v. Newtown Borough, 669 A.2d 452 (Pa.Cmwlth. 1995) (upheld flat business privilege tax under Section 533(a))
- Trinova Corp. v. Mich. Dep’t of Treasury, 498 U.S. 358 (U.S. 1991) (discusses taxation measured by gross receipts)
- Airpark Int'l v. Interboro Sch. Dist., 735 A.2d 646 (Pa. 1991) (discusses related tax incidence principles)
- City of Phila. v. Schweiker, 858 A.2d 75 (Pa. 2004) (statutory limits on municipal taxation authority)
- Commonwealth v. E. Motor Express, Inc., 157 A.2d 79 (Pa. 1959) (principle that tax incidence governs legality)
- Shelly Funeral Home, Inc. v. Warrington Twp., 985 A.2d 310 (Pa. Cmwlth. 2009) (unpublished memorandum cited for flat-tax analysis)