426 Pa. 69 | Pa. | 1967
Lead Opinion
Opinion by
On this appeal, American Cyanamid Company, [Cyanamid], challenges the validity of an order of the Court of Common Pleas No. 4 of Philadelphia County which upheld the propriety of an assessment of taxes by the School District of Philadelphia, [School District]. These taxes were assessed and levied under
Cyanamid, a Maine corporation, engaged in the manufacture and marketing of chemicals, pharmaceutical and related products, maintains its principal office in Wayne, New Jersey.
In July, 1958, Cyanamid opened a branch office in Fort Washington, Montgomery County.
Insofar as presently pertinent, Cyanamid maintains two bank accounts at Girard Trust Company in Fort Washington and has no account or accounts in any bank in Philadelphia. Adjustments of customers’ complaints, collections of delinquent accounts and the selection of common carriers are all handled by Cyanamid’s facilities and personnel located outside Philadelphia. The Fort Washington office has a Philadelphia telephone number and is listed in the Philadelphia telephone directory for the purpose of rendering available emergency services to hospitals, etc. in connection with its pharmaceutical products. Prices for products, terms of sales, freight allowances, etc. are arranged only at the home offices of Cyanamid’s nine operating divisions none of which offices are located in Philadelphia. Customers’ orders are accepted or rejected only at such home offices.
A review of the record indicates the following contacts between Cyanamid and Philadelphia: (1) twelve of Cyanamid’s forty-one medical representatives— whose function is to encourage and promote the use of pharmaceuticals manufactured by Cyanamid — have assignments which include geographical areas within Philadelphia and these twelve medical representatives spend approximately 5% of their time calling at hospitals and talking to medical staff members and the balance of their time is spent calling upon pharmacists; while such representatives do receive complaints and
The School District contends that the regularity and continuity of sales by Cyanamid of its various products to customers located in Philadelphia constitutes “business” and “commercial activity” within the school district’s territorial limits and that the receipts from such sales are subject to the general business fax. With this contention we do not agree. The tax theory of the School District is well expressed by Cyanamid’s counsel: “[The School District] place the emphasis on who is in the school district, rather than what has gone on within the school district.”
The statute which levies the general business tax must be strictly construed; if there exists any reasonable doubt as to its application and construction, such doubt must be resolved in favor of the taxpayer and against the taxing unit. See: Commonwealth v. Rieck Investment Corporation, 419 Pa. 52, 59, 213 A. 2d 277 (1965); Commonwealth v. Willson Products, Inc., 412 Pa. 78, 83, 84, 194 A. 2d 162 (1963).
In Alan Wood, Steel Company v. Phila. School District, 425 Pa. 455, 229 A. 2d 881 (1967), we recently construed the “General Business Tax” statute: “The general business tax ... is imposed by the Common
“. . . A review of the applicable case law would indicate that the ‘carrying on or engaging in business’ set forth in the statutory law contemplates activities which involve more than a mere presence of an office and a solicitation therefrom of business or courtesy calls on customers. ‘Doing business’ requires proof that the taxpayer was actually effecting sales of its products and performing acts regularly and continuously which, in a direct as opposed to an incidental manner, effects the taxpayer’s corporate objects (Shambe, supra, p. 247).”
In view of the factual situation presented upon this record, considered in the light of the statutory provisions, we conclude that Cyanamid’s activities within the taxing district did not rise in the taxable years to the statutory level requisite for the imposition of this general business tax. The School District maintains that Cyanamid is taxable because it “has its registered address in Philadelphia,
Even if we were to assume that the factual matrix upon which the School District relies finds support in this record, the School District still has failed to establish the liability for the general business tax of Cyanamid under both the statutory provisions and our case law. It requires no citation of authority to refute the School District’s argument that simply because some of Cyanamid’s personnel maintained their individual residences in Philadelphia that such fact would render Cyanamid liable for this tax. Nor is the fact that Cyanamid’s Fort Washington office is listed in the Philadelphia telephone directory significant. See: Lutz v. Foster & Kester Co., Inc., 367 Pa. 125, 129, 79 A. 2d 222 (1951). That Cyanamid has personnel who promote, even on a “regular, continuous and systematic basis”, its products in Philadelphia simply amounts to “solicitation” which is not sufficient to equate engagement in business or commercial activity requisite under the statute for the imposition of the tax. See: Shambe, supra, p. 244; New v. Robinson-Houchin Optical Company, 357 Pa. 47, 49, 53 A. 2d 79 (1947); Lutz, supra, p. 129; Motch & Merryweather Machinery Co. v. Pittsburgh School District, 381 Pa. 619, 116 A. 2d 733 (1955). Moreover, the fact that Philadelphia customers order and purchase Cyanamid’s products in substantial quantities does not in itself satisfy the statutory requirement. The School District’s so-called “facts”, standing alone or viewed in their entirety, do not render Cyanamid liable for this tax.
Order reversed.
Aet of Hay 23, 1949, P. L. 1669, as amended, 24 P.S. §584.1 et seq.
The City of Philadelphia, which- assessed and levied mercantile license taxes against Cyanamid for the same years, intervened, as amicus curiae, in the court below.
Cyanamid’s home office, until May, 1962, had been in New York City. Its shareholders’ meetings are held in Portland, Maine, and its directors’ meetings are held either in New York City or Wayne, New Jersey.
This Fort Washington facility is one of fifteen branch offices with “on premises” warehousing in the United States and it is the sole branch office in Pennsylvania. As part of the “Transportation and Distribution” division — one of nine service divisions which provide services for Oyanamid’s eleven operating divisions— the Fort Washington office is supervised by a branch manager under whom are 61 office and shipping room personnel. This office services a territory which embraces four States, including Pennsylvania, parts of two other States and Washington, D. C.
Of these four men, one spends 15%, two spend 10% and o.ne spends no time in Philadelphia.
From an examination of the School District’s argument, one gains the impression that the proximity of the Fort Washington office to the territory of the School District vitally affects the taxing authority’s thinking. Unfortunately for the taxing authority, the taxing statute requires activity in, not close to, the territory of the taxing authority.
Apparently, the School District makes reference to the designation by Cyanamid, at the time it registered to do business as a foreign corporation in Pennsylvania, of the office of C. T. Corporation as the address at which process might be served upon Cyanamid. Such is not a fact of record. Even if it were of record, such designation is not the equivalent of being engaged in business or commercial activity in the taxing district within the statutory concept.
Appellee’s brief, pp. 7, 8.
Dissenting Opinion
Dissenting Opinion by
This is a companion case to Alan Wood Steel Company v. Philadelphia School District, 425 Pa. 455, 229 A. 2d 881 (1967), decided only a few weeks earlier. I dissented in Alan Wood and believe that American Cyanamid is also engaged in “commercial activity, or making sales to persons within such school district of the first class.” General Business Tax Act of May 23, 1949, P. L. 1669, as amended, 24 P.S. §584.1. As the majority point out each case must be decided on its own facts. Thus, as in Alan Wood, I am content to rely upon an excerpt from the opinion of the court below which, in my view, amply demonstrates that appellant’s commercial contacts with the City were not insubstantial: “American Cyanamid is a Maine
I dissent.