449 Pa. 59 | Pa. | 1972
Lead Opinion
Opinion by
This is an appeal
The sole question involved here is whether appellant’s receipts from its contracts with advertisers whose advertisements were placed on outdoor billboards situated in this Commonwealth are to be regarded as “rentals . . . from property situated . . . within this Commonwealth” for purposes of the Corporate Net Income Tax.
Appellant and the Commonwealth submitted this ease to the court below on a stipulation of facts. That stipulation reveals that appellant owns certain road signs and leases as lessee certain other road signs [apparently referred to in the trade as bulletins] and locations therefore in Pennsylvania. Appellant, during the year in question, made contracts with advertisers
In addition to the activities specified in the contracts, it was stipulated that appellant also performs the folloAving for its advertiser-customers:
“(a) Prepares sketches and full size samples of the proposed sign, including the idea for the arrangement of words and pictures and artwork pertaining thereto.
(b) Makes traffic surveys and recommends quantities of signs needed to give adequate advertising coverage of the advertiser’s markets Avithout oversaturation.
(c) Works with advertiser in testing the effectiveness of the media in certain markets by traffic surveys, etc.
(d) Fabricates and/or purchases the signs parts.”
It was also stipulated that: “The advertisers have no right of possession of the bulletins or signs or the land on which same were located. The sole use of the bulletins or billboards is the placement of advertisements thereon.”
Appellant contends that the receipts from its contracts Avith the advertisers are not rentals from property, but rather represent payment for services performed by the appellant in the conduct of its business. The Commonwealth, on the other hand, contends that the receipts are “rentals” from appellant’s property— i.e., appellant’s billboards. If appellant’s contention is correct, its Corporate Net Income Tax liability for 1963 will be reduced by $1,173.38.
The question of whether appellant’s receipts should be regarded as “rentals” from property or as income
At the other end of the spectrum would be an accounting firm. In part the firm’s fees could be regarded as a return on its investment in its business property—i.e., the firm’s typewriters, dictaphones, office furniture, and calculators—but it is obvious that accountants’ fees represent primarily compensation for services rendered.
In the case at hand, it is clear that appellant owns certain bulletins which it makes available to its advertiser-customers. It is also clear that appellant renders certain services to advertisers such as preparing advertising copy and making market surveys. However, appellant has not offered evidence to establish that its receipts represent primarily compensation for services rendered.
It is a well-established principle of tax law that a regularly made tax assessment is presumed to be valid.
The judgment of the Dauphin Common Pleas Court is affirmed.
This appeal is taken pursuant to Section 203 of the Appellate Court Jurisdiction Act of 1970, Act of July 31, 1970, P. L. 673, art. II, §203, 17 P.S. §211.203 (Supp. 1972).
The appeal to the Dauphin Common Pleas Court was filed September 22, 1967, before that court’s jurisdiction as the Commonwealth Court was assumed by the new Commonwealth Court. However, the final order of the Dauphin Common Pleas Court in this matter was not issued until August 18, 1971.
Act of May 16, 1935, P. L. 208, §§1 et seq., as amended, 72 P.S. § §3420a et seq. This act was repealed by Section 411 of the Tax Reform Act of 1971, Act of March 4, 1971, P. 1¡. 6, art. IV, §411, 72 P.S. §7411 (Supp. 1972). However, the Act of May 16, 1935, still determines liability for tax years beginning prior to January 1, 1971. See Act of March 4, 1971, P. L. 6, art. IV, §412, 72 P.S. §7412 (Supp. 1972).
Act of May 16, 1935, P. L. 208, §2, as amended, 72 P.S. §3420b, 2(c).
Id. §3420b 2(c) (3).
See, e.g., Deitch Co. v. Board of Property Assessment, 417 Pa. 213, 221, 209 A. 2d 397, 402 (1965) ; 36 P.L.E. Taxation §§242, 247.
See Commonwealth v. Hellertown Mfg. Co., 438 Pa. 134, 140-41, 264 A. 2d 382, 386 (1970) ; Commonwealth v. Stretchnit, Inc., 2 Pa. Commonwealth Ct. 270, 273-74, 273 A. 2d 750, 751 (1971).
Dissenting Opinion
Dissenting Opinion by
I do not dispute the proposition that this regularly made tax assessment is presumed to be valid, Deitch Co. v. Board of Property Assessment, 417 Pa. 213, 209 A. 2d 397 (1965), nor the proposition that where the assessment is based upon a certain view of the operative facts, the burden must rest on the taxpayer to demonstrate that the facts are not as the authorities have found them, Commonwealth v. R. S. Noonan, Inc., 419 Pa. 411, 213 A. 2d 787 (1965). Neither of these principles, however, can be said to control this case. The majority opinion, in my view, misapplies both and rides roughshod over a legislative enactment regarding construction of tax statutes. I accordingly dissent.
The Pennsylvania Corporate Net Income Tax Act, May 16,1935, P. L. 208, §1 et seq., as amended, 72 P.S. §3420a et seq., provides that “rentals . . . from property situated . . . within this Commonwealth” shall be included in the numerator of the gross receipts, or third fraction used in determining taxable net income of a corporation all of whose business is not transacted in the Commonwealth. The majority correctly perceives that the issue is solely that of interpreting the word
The Statutory Construction Act, Sec. 58(3), Act of M!ay 28, 1937, P. L. 1019, 46 P.S. §558(3), provides that provisions of a law imposing taxes shall be strictly construed against the taxing authority. See, e.g., Mastrangelo v. Buckley, 433 Pa. 352, 250 A. 2d 447 (1969) ; Commonwealth v. High Welding Co., 428 Pa. 545, 239 A. 2d 377 (1968); Commonwealth v. Rieck Inc., 419 Pa. 52, 213 A. 2d 277 (1965); Panther Valley Television Co. v. Borough of Summit Hill, 376 Pa. 375, 102 A. 2d 699 (1954). It is admitted in the Court’s opinion that interpretation of the word “rentals” is not easy, and that, as viewed by the majority, the line must be drawn at some ill-defined point lying somewhere between income received for rendition of personal services and income received from the “rental” of property. Having admitted that there is considerable uncertainty in the reach of this legislatively chosen word, I cannot understand how the issue can then be resolved against the taxpayer. We have always held that “any doubt or uncertainty as to the imposition of a tax must be resolved in favor of the taxpayer.” Commonwealth v. Rieck Inc., supra.
The preferable manner in which to decide this case, in my opinion, would be to recognize that the legislature has directed us to construe a word “according to [its] common and approved usage.” 46 P.S. §533. The common, almost invariable usage of the word “rent” or “rental” is to describe the consideration paid by a tenant or occupant of real estate for the right of posses
In another context we have recently stated, although the statement may not have been necessary to the decision, that income received from outdoor advertising customers was not to be considered as rent. Pittsburgh Outdoor Advertising Co. Appeal, 440 Pa. 321, 324, 272 A. 2d 163 (1970). I am unable to perceive any compelling reason to hold the opposite in this case, especially in light of the legislative direction to resolve uncertainty in favor of the taxpayer.