City of Allentown v. MSG Associates, Inc.

from practice] to cease desist labor such practice,

such unfair labor and to take action ... as will affirmative

reasonable policies of this

effectuate act.” Section

8(c) 211.8(c). PLRA, § 43 P.S. power remedy

PLRB’s unfair labor

practices and not is remedial nature

punitive. Penn- Township Plumstead v. Board, A.2d

sylvania Labor Relations (Pa.Cmwlth.1998). The chal- district’s merit. The order

lenge to order lacks

is is punitive. remedial The order

reasonable, ob- promotes PLRB’s

jective prac- an unfair remedying labor charge of

tice discrimination.

ORDER NOW, day

AND this 14th of March Pennsylvania the order of the Labor above-captioned Board in the

Relations hereby

matter is AFFIRMED.

Judge SMITH dissents.

CITY OF ALLENTOWN ASSOCIATES, INC., Appellant.

MSG Pennsylvania.

Commonwealth Court

Argued Dec. 1999.

Decided March Gaul,

Michael A. Bangor, appellant. Danks, Allentown, Martin appel- J. lee. DOYLE, Judge,

Before President COLINS, J., McGINLEY, J., PELLEGRINI, J., FRIEDMAN, J., KELLEY, LEADBETTER, J. J. PELLEGRINI, Judge. Associates, (Taxpayer) ap- Inc. MSG peals a decision of the Court of Common (trial court) Pleas of Lehigh County hold- ing that Privilege the Business Tax of the (Allentown City of Allentown or City) does VIII, § Article violate of the Penn- sylvania by levying Constitution a different tax rate on services than it does on sales at by allowing either wholesale or retail or general but not for real brokers in sales contracts estate deduction brokers was Holding that from the tax. contractors. constitutional, trial found that court Allentown enacted a business City’s rate of for whole- general pur- tax ordinance for revenue sale, per- service businesses was retail and receipts poses taxing all busi- separate was and missible each a because City Re- ness conducted within the limits. a differ- allowing distinct classification for at one one- tail businesses were taxed and each of those classes. ent tax rate within mills, mill, half businesses wholesale challenge the deduc- Taxpayer’s As to and businesses at three and service rental brokers, trial court tion for estate the real per gross receipts.1 dollar of mills volume standing to Taxpayer found lacked Taxpayer general con performed the challenge Because that deduction. and within the struction demolition work Tax ordinance was con- Privilege Business gross receipts City making limits those stitutional, court a verdict the trial entered the subject to three mills levied for owed against the defendant the amount re Taxpayer service businesses. Because After the court dis- back taxes. trial tax, pay City the an brought fused to the motions, en- post-trial Taxpayer’s missed against it taxes and action to collect due the Taxpayer a and took judgment tered Taxpayer contending defended owing. instant appeal.3 the business the privilege violated arguments that Pennsylvania clause the same Raising of the Cons below,4 Taxpayer a differ- was no for raised concedes titution2 because there basis and and does tax on ence levying different rate of service between dispute cap on wholesal- than re the taxes on on either wholesale or imposed the Local unreasonably as ers and retailers under tail as well However, it contends allowing Enabling certain Tax Act.5 deduction for revenues taxation, e.g., any Regulation appropriate 333 of rate of 1.Article the Business provides: Code dealer Taxation retail of wholesale transactions BASIS; at the rate established be taxed TAX 333.03 RATE AND BUSI- DETERMINATION; wholesale retail rather than for NESS EX- transactions VOLUME EMPTIONS AND RECORDS transaction. hereby year There is levied for VIII, that, 1,§ provides 2. Pa. Const. Art. annually 1980-1981 and thereafter a tax uniform, upon the same "[a]ll taxes shall general purposes privilege on the revenue subjects, limits doing class of within territorial business as herein defined in the tax, levying authority and shall be follows: general A. of Tax under laws.” Rate and Basis levied and collected The rate of tax on each dollar of the gross whole or volume of business transact- post-trial of a scope 3. Our of review denial limits of ed within territorial the trial court abused motions is whether forth, on shall be as herein set retail busi- law. committed error discretion the rate and one-half mills ness shall be one Castle, Simpson City New 740 A.2d (one and mills means One Dollar one-half 1999). (Pa.Cmwlth. Fifty per Cents Thousand [$1.50] [$1,000.00] gross volume busi- Dollars of you whether 4. No one has raised issue of ness), the rate of the tax wholesale busi- challenge validity the tax to the can raise (one mill mill ness transacted shall be one owing. in an to collect taxes due action per One Dollar thousand [$1.00] means [$1,000.00] gross volume Dollars of of busi- (LTEA) Enabling De- Act 5. The Local Tax ness). for service and rental rate of tax amended, 1965, 1257, 31, P.L. cember be three mills business transacted shall § seq. § Section 53 P.S. P.S. 6901 et (three per Dollars [$3.00] mills means three that: by providing taxation limits the rates of [$1,000.00] gross Dollars of vol- Thousand provisions of this under the business). No taxes levied purposes For of this ume section, by any political subdivi- levied act shall be of the transaction which nature subjects exceeding the following princi- sion on the yields the and not the volume specified in this section: rates vendor shall determine pal business of the City provided that because the imposed no reason a tax on the engaging providers for the taxation of service within city at a measured gross receipt of a higher rate than wholesale and retail business and as- busi- nesses, per sessed at the of six rate mills dollar should be struck down. gross receipts, volume of annual as well as In attacking constitutionality having a one mill tax on wholesale and a tax, aof the burden is on the taxpayer to mill two tax on retail business. The tax- clearly, palpably show that case, payer also a construction com- plainly violates the Constitution demon pany, similarly argued that Pittsburgh’s strating that purposes a classification for tax violated the uniformity clause because of taxation is unreasonable. Leonard v. “every person it taxed engaging any Thornburgh, 507 Pa. in the City” precluding a different (1985). heavy The burden is in that there rate of taxation on their business than it presumption ais that the tax is constitu imposed any up- on other In business. tional, and, such, must holding the in difference rates between that establish no reasonable distinction ex “service” businesses and “sales” busi- ists between Beauty the classes. D/K constitutional, Supreme nesses as our Supply, Inc. v. Huntingdon North Town noted that in Court the obvious defect that 163, ship, 67 Pa.Cmwlth. 446 A.2d 986 argument was “that it fails to recognize (1982). The test of is whether taxing authority may that the distinguish there is a reasonable distinction and differ between taxpayers various classes of ence taxpayers between the classes of suf that the rate equal of taxation need be ficient to different tax treatment. only respect to taxpayers who are Monzo, 26, Allegheny v. County 509 Pa. class[,]” within the same and that the vari- (1985). 500 A.2d 1096 long So as the ations in tax it complained rates which imposed classification upon is based some upon about were based in limitations capable standard of compre reasonable Enabling Act or other statutes. F.J. hension, be that upon standard based abili Busse, 279 A.2d at 19. ty produce to or legiti revenue some other Busse, Court, Relying on F.J. this in distinction, equal protection mate Borough Hanover Associa Professional law has been Apart afforded. Aldine Hanover, Borough tion v. 43 Pa. of ments, Commonwealth, 480, Inc. v. 493 Pa. 47, (1979), upheld Cmwlth. 401 A.2d 856 (1981); Airpark 426 A.2d 1118 Intern. I v. uniformity challenge borough’s to the busi District, Interboro School privilege imposed ness tax that only a tax (Pa.Cmwlth.1996), by equally an affirmed on “services” not being on “sales” Court, divided Pa. 558 735 A.2d 646 challenged as unconstitutional because the (1999). distinction between the two was an invalid classification In uniformity. and violated

In addressing challenge, similar our dismissing argument that we stated: Supreme Court in F.J. Busse v. Company Pittsburgh, Pa. 14 443 279 A.2d authority support appel- is no to [T]here (1971), upheld City Pittsburgh’s theory lant’s that a tax business is inval- Privilege imposed upon Business Tax which id unless it is all Ordinance busi- wholesale dealers and two mills on retail (2) proprietors. On each dollar of the whole volume dealers and No such tax shall by of business transacted wholesale dealers be levied on the dollar volume of merchandise, mill, goods, wares and one transacted wholesale and retail dealers goods, goods, retail dealers in wares and mer- derived from the resale wares merchandise, by proprietors by any chandise and of restaurants taken dealer as trade- food, places part payment goods, other where drink and re- in or as for other served, merchandise, except freshments are one and one-half wares and ex- to the mills; class, except price in cities of the second tent resale exceeds the trade- where rates exceed one mill on in allowance.

1279 only because it nesses, tax unconstitutional upon one class business, “places type of service there are taxed is invalid unless simi- others, and not we went all F.J. of amusements” upon lar taxes other businesses. City only hold if the apparently Pa. City Pittsburgh, Busse v. Co. (1971) goods sellers A.2d held a business taxed tax, all then the ordi- borough like and not that of here, valid, unconstitutional nance and the were against the same to be classification of sellers uniformity and attack because the classification used ser- and seller of services Although goods which has been here. raised so, doing In we to the extent. separate had vices same Pittsburgh favorably opin- from the trial court applicable quoted busi- mercantile nesses, that stated: of the mercantile ion existence way in no to the hold- was essential goods providers and service [T]he ing the Busse case. city providers utilize similar extents, such, the groups As two busi- Id. similarly situated con- nesses are this Taxpayer contends that F.J. Busse However, targets text. and bur- inapplicable light Hanover are of our only providers. goods dens Mercadante, decision in Commonwealth Mercadante, Adopting 676 A.2d at 1313. (Pa.Cmwlth.1996), which on reasoning, that Mercadante then went asserts tax proportion stands the that a hold the unconstitutional as violat- tax may be struck down the au where in that were ing uniformity sig- there no thority no proffers unequal reason for City in use of nificant differences the rates of tax on different classes. In Mer providing services between businesses cadante, City of the enacted a Uniontown goods that selling services from those receipts tax6 the gross that taxed of busi justifi- concrete provided reasonable and selling goods nesses as well as restaurants only levying cations for tax on the only and one service business but not oth the provider goods exempting and er providing businesses services. The that provider of services from business provide ratio Uniontown could no However, ap- privilege tax. Mercadante requirement nale the busi plied the incorrect standard to determine nesses, restaurants and amusements bore ser- whether the classification between city ser burden services while goods and was constitutional. vices paid industry vice no tax for the same distinguished services. F.J. Mercadante validity of a clas constitutional tax, Company, sification, Busse that in Busse noting F.J. made to tax or not Pittsburgh rates, all Company, depend taxed on at different does not limits objects but different rates because of tax use govern whether the the imposed act If by enabling on retailers services to a similar extent. mental so, and in no be treated differ group wholesalers and limitations other were could if just ently they gov- as to rate used the declaring state statutes. Rather than imposed each of the volume of 6. The Uniontown Ordinance half mills on dollar gross as follows: receipts of the business transacted a) goods, by or dealers in him. Wholesale vendors c)Wholesale the rate of one wares and merchandise —at vendors and and retail dealers mill each dollar of volume of goods, and in wares merchandise —at receipts by him. business transacted vol- mill on each dollar rate one b) goods, vendors dealers in Retail gross receipts of the wholesale ume of the merchandise, persons all en- wares and him, by business transacted gaged conducting restaurants or other on each dollar of volume one-half mills food, places drink or where refreshments gross receipts retail sold, persons conducting places are and all by transacted him. one- rate of one amusement —at the (For ernment to a similar services extent as sales-—retail or wholesale the Trade another (law no sector matter how Only) in service being industry —or different from they were firms) see, or government, e.g., Standard e.g., manufacturing vis-a-vis services. (SIC) Industrial Classification codes and misperceives position What this is that tax- industry the North American classification group just es are not raised on to cover (NAIC) system,7 public well as governmental their use of services but to and media generally referring to the fund the general operations govern- economy.”8 “service This difference is ment, any and there not be need correla- recognized by also the General Assembly tion between the services received or the Enabling the Local Tax Act which clas- justify services used to the class. The sifies separately and retail wholesale busi- only standard is that the classification is nesses they engage because sales of generally recognized up and it is to the goods from all other businesses that do not prove that was not. Aldine for purposes of local distribution. 63 Inc., 1121-1122; Apartments, 426 A.2d at 6908(2); § P.S. F.J. Busse Company, see I, Airpark Intern. 677 A.2d at 393-394. Moreover, 279 A.2d at 19. it recognizes Because incorrectly Mercadante assumed it imposes distinction when a sales that there had to a correlation between tax, subject retail making sales at to that governmental the tax rate and the tax but not sales at wholesale. Because utilized to a difference tax rates the difference sales and between service is and is at Supreme variance our similarly recognized as making Busse, holding Court’s in F.J. we have no classification, them a separate and as long choice but to Mercadante. reverse class, tax is within that uniform relying Other than on Mercadante Pennsylvania clause of the Con- saying that the offered no basis stitution implicated. is not Because the for treating that used the same City’s tax indistinguishable is from that in differently, Taxpayer offered F.J. Busse it is Company, by controlled no evidence to meet its burden that the and, therefore, precedent, that constitu- classification unconstitutionally is invalid. tional. surprising This is not because there is a Even if the of classifications different generally recognized distinction between types justified, of Taxpayer businesses are engage wholesalers and retailers that in contends that the court erred in trial hold- sales and sales and service businesses suf ing that it standing did not have to chal- ficient to treatment among lenge constitutionality provision of that those classifications. Those dis businesses, by providing tinctions of the Ordinance for a recognized e.g., are deduction when the in classify being split themselves as for brokers who commissions.9 As to Management Budget, ing entirely 7.Office and service-producing Execu and are fifteen President, tive Office of the Standard Industri industries. North American In- Classification Manual, 1987, replaced al by, dustry System, at 3. Classification Management Budget, Office and Executive President, Office of the try North American Indus addition, 8. In the Bureau of Labor and Statis- System, 1997. SIC and Classification reports tics uses classifications various NAIC used codes have been the business economy including the state of the the Cur- community purposes for such as identification Employment rent Statistics and the Consumer market, in the see Dunn & stock Bradstreet Methods, Price Index. BLS Handbook Bul- Directory, Million Dollar Series and 2490, April letin 1997. reporting Occupational Safety with the Administration, Health see 29 CFR 333.03(E) provides part Section in relevant 1904.14(h). systems The and NAIC SIC di that: activity categories vide all economic into system upon [G]ross sectors. The divides whole volume NAIC twenty according production computed into which the is sectors to tax hereunder criteria, largely goods-produc- gross include five sectors are consideration credited or challenge to consti As to the it contends challenge, the substance deduction, Taxpayer con tutionality of to a give that is no basis deduction there receipts excluding gross from that tends gross it is a tax on for brokers because to an paid from one broker commissions receipts is no similar deduction and there clause be violates the pay contractors subcon- general who payouts of brokers it those cause treats tractors, it to such standing has make by other payouts than differently similar challenge. a that it to the fact pointing its yet is taxed on but pays subcontractors has Taxpayer As to whether The any deductions. receipts before constitutionality standing challenge to is that the broker deduction City asserts brokers, it provision to relating of this required are where two brokers permitted it was aggrieved must that show brokerage fees portion a to receive a by showing direct interest ordinance with each transaction “multi-listing” in a matter, subject which is immediate being taxed receiving his share and broker Parking William Penn Ga substantial. in its receipt. It asserts brief upon that Pittsburgh, 464 Pa. rage, Inc. v. gen from a a is also different broker (1975). Taxpayer’s chal con general in that eral contractor to use subcon similarly tractor is neither mandated claim that a lenge is based on a purpose conducting tractors for pays that has income that it group situated to its commis required split business nor differently out to is treated than others with subcontractors. sions argu being is treated. Subsumed argument problem City’s may paying that it a higher ment is justifies upon which is the factual basis required pay if bro than it is taxes differently “multil- treating brokers required to a tax pay. kers were While —that brokers each isting” require agreements payer not have the direct interest does commis- portion sale’s receive challenge necessary to allow plain lan- with the accord sion—is taxpayer pays, another amount of taxes multi- While of the Ordinance. guage Jostens, Inc., Appeal See 97 Pa.Cmwlth. provide fee listing agreements (1986), A.2d does e.g., the list- arrangements, both sharing right challenge have the re- their buyer’s broker receive ing taxpayers that treats certain dif scheme justify not closing, may spective share similarly than treats situ ferently others in the entire commission including the See, e.g., ated that are the taxes. paying even gross receipts with- listing broker’s v. Westinghouse Corp. Electric Board deduction, provision the a specific out Review, Assessment, Property & Appeals all provides a deduction on here blanket (1995). Be 539 Pa. A.2d 1306 652 broker to an- paid by listing commissions substantial, a Taxpayer cause has direct broker, ar- matter. what the no other and immediate interest in the constitution e.g., is the brokers rangement between ality that the Ordinance of the deduction the employee an broker could be brokers, to provides standing for has fa- Because the Ordinance other broker. paid by excluding others that all commissions challenge propriety cially the allows to broker are listing to another pay be the tax.10 a broker required that should to the issue no one has raised made 10. Just as on account of sales received rendered, subject only challenge to can the constitutionali- you whether and/or ex- following the allowable deductions a collection action ty a ordinance in tax emptions: body, brought no one has raised by the whether, you in such an action issue of the by a to Any paid broker commissions similarly that others as a defense can use purchase a on account of another broker tax. excluded from the situated are initiated, cleared contract executed or broker. with such other However, be deducted from listing the broker’s I do not read Mercadante to gross receipts, Rather, impose any no matter what the ar- requirement. such I brokers, rangement only is between the believe that propo- no case stands for the constitutionally taxing authority valid sition that the distinction exists be- must artic- tween ulate some manner which the taxpayers brokers classifica- give tions it has rise pay performed, for work drawn to a rational making the de- (unless, basis a difference duction brokers rates Section here, self-evident). 388.03(E)(3) such a nexus is of the Ordinance unconstitu- As notes, majority Commonwealth, “The test of tional. See v. Ritz (1981). is whether there is Pa. reasonable distinction A.2d 169 and difference between the of tax- classes However, provision while the al payers sufficient lowing deduction for null brokers is Busse, treatment.” F.J. 443 Pa. at void, that does not mean that the entire [emphasis Further, 279 A.2d at 19 added]. privilege tax ordinance is invalid. I do not believe suggests any Mercadante severability The clause contained under change the well-settled law that provides Section 333.0 Ordinance persuasion ultimate burden of remains on a provision that if is declared taxpayer classification, challenging the unconstitutional “it or im affect nor suggests authority’s stated pair any provisions” of its remaining justification subject must be of evi- Ordinance. Taxpayer’s While claim that However, authority dence. until the has paid the deduction from gross receipts classification, proffered some its basis for one broker to another broker regarding possibly expected cannot of property sale unconstitutional was disprove legitimacy of that basis. successful, because the tax is otherwise Conversely, authority if the has no at basis constitutional, its success does not excuse all, Mercadante, inas that fact alone satis- it from its obligation pay the business fies taxpayer’s burden. privilege tax levied. Accordingly, be Accordingly, I would not overrule Mer- cause we found tax to be otherwise cadante, simply clarify but would hold- constitutional, we affirm the trial court’s ing in this regard. entering judgment order against Taxpay er.

ORDER NOW, day March,

AND this 14th

2000, the Order of the Court of Common AIKEN, Appellant, Joshua D. No.98-C-0062, County Pleas of Lehigh Associates, directing MSG Inc. to pay $1,668.02 in past due business BLAWNOX, BOROUGH OF Po- taxes, hereby is affirmed. Section Subdivision; Borough litical 333.03(E)(3) Allentown Business Oakmont, Subdivision; a Political Regulation and Taxation Code is unconsti- Borough Tarentum, a Political tutional declared null and void. Subdivision, and; Newcom, Pennsyl- Partnership vania of Political Subdi- Judge COLINS dissents. visions. LEADBETTER, concurring. Judge, Pennsylvania. Commonwealth Court of I concur in the result reached Argued Nov. 1999. majority. fully agree analysis I March Decided extent holds that authorities need difference in tax treat-

ment of different entities classifications of upon municipal

based their use of services.

Case Details

Case Name: City of Allentown v. MSG Associates, Inc.

Court Name: Commonwealth Court of Pennsylvania

Date Published: Mar 14, 2000

Citation: 747 A.2d 1275

Docket Number: 1486 C.D. 1999

Court Abbreviation: Pa. Commw. Ct.