414 Pa. 488 | Pa. | 1964
Opinion by
Appellant, Brine Corporation (Brine) was organized January 17, 1944, under the Pennsylvania Business Corporation Law. Its stated purposes are: “Parking, storing, servicing and repairing automobiles and motor vehicles, and the sale of gasoline, oils, tires, automobile accessories, etc.; and the buying, leasing, acquiring, holding and selling buildings and real estate for such purposes, and the transaction of all and any other business that may be necessary or incidental thereto.”
Between 1944 and 1956 Brine acquired eleven properties: seven parking lots, two closed parking garages and two commercial buildings. The seven parking lots and one of the two parking garages were leased to two affiliated corporations which, apparently, operated them. The other parking garage was leased to an unaffiliated corporation, and the two commercial buildings were leased through a rental agent to various tenants not connected with Brine. Brine rendered no services to any of the tenants, nor did it manage any of the properties. It had no employees, but two officers each received $1500 for their services in providing corporate management.
All of Brine’s income was derived from the rents on the properties mentioned and from dividends from 1,800 shares of Atlantic Refining Company stock. It filed and paid mercantile license tax to the City of Philadelphia on its gross receipts for the years 1953 through 1956, inclusive; but in 1958 it filed petitions for refund covering most
Brine thereupon appealed to tbe court of common pleas wbicb dismissed tbe appeal and affirmed tbe decision of tbe Tax Review Board reasoning that since Brine “was incorporated for tbe purpose of owning and leasing certain real estate holdings and deriving income therefrom” and did in fact so derive its income, these receipts were taxable. This appeal followed.
Pursuant to power granted it by State statute
Brine contends that it merely bolds and leases real estate and that tbe receipts therefrom are not taxable
In A. H. Geuting Company v. City of Philadelphia, 1 Pa. D. & C. 2d 341 (1954), the Court of Common Pleas of Philadelphia County held that the corporation there involved was not engaged in “business” as defined in the Mercantile License Tax Ordinance and, hence, was not subject to the mercantile license tax. The corporation had, in prior years, operated a shoe store in a building owned by it; but in 1952 it sold its business and leased the real estate to the purchaser. Thereafter, it did nothing but own the building, receive the rent and pay the property taxes and fire insurance on the building. The court equated the definition of “business” in the Mercantile License Tax Ordinance with the definition of “business” in the Philadelphia Net Profits Tax Ordinance; and finding, under our decisions in Breitinger v. Philadelphia, 363 Pa. 512, 70 A. 2d 640 (1950); Murray v. Philadelphia, 363 Pa. 524, 70 A. 2d 647 (1950); and Pennsylvania Company v. Philadelphia, 346 Pa. 406, 31 A. 2d 137 (1943), a requirement that “business” within the contemplation of the latter ordinance be something more than ownership of property and receipt of income therefrom, it held that Geuting was not engaged in “business” for mercantile license tax purposes.
Recently, this Court had occasion to consider a somewhat similar situation. In Price v. Tax Review Board, 409 Pa. 479, 187 A. 2d 280 (1963), we dealt with the City’s attempt to collect mercantile license tax from a partnership which received rentals from
The Board here relies strongly on Bankers Securities Corp. v. Philadelphia School District, supra, which involved the general business tax imposed by the Act of May 23, 1949, P. L. 1669, as amended, 24 P.S. §§584.1-584.12. The definition of “business” in that Act is substantially the same as in the Mercantile License Tax Ordinance. The taxpayer there realized receipts from numerous sources, including the operation of a department store, four hotels and other properties, dividends from securities and gains from the sale of securities. It attempted to exclude the dividends and gains in computing its tax, but the court held that its activities in toto constituted a “business” which did not, under the circumstances, permit the segregation of the investment segment. The Board here' (and the court below) cites the Bankers Securities Corp. case for the principle that all income of a business corporation must be business income, but we fail to perceive that the case went that far. It held only that all of the income received was derived, in fact, from business activities and, thus, was taxable.
In the present case, as well, we see no reason to completely adopt the Board’s view since, as a matter of law, we cannot reach a conclusion that a corpora
Thus, a person may purchase one piece of real estate and actively engage in renting and managing it. He certainly would be liable for mercantile tax. Another person may inherit ten pieces of rent-producing real estate with regard to which he does nothing but collect net rents. He would not be liable for mercantile license tax. In Geuting, supra, the company did nothing but conserve a piece of real estate retained by it after selling its business; while in the Bankers Securities Corp. case, supra, the facts indicated that the investment aspect of the company’s operation was an integral part of its business. These differences in how the property was acquired or circumstances under which it is retained, in how it is used, in services performed by way of management, and in the overall objectives of the owner are the differences which lead to tax in one case and not in the other.
Thus, in the case before us, although it did not manage its properties, Brine actively engaged in the acquisition and leasing of properties after its formation. While both the Board and the court below state
Order affirmed.
The remainder of the receipts were similar but were erroneously omitted from the refund requests.
Act of August 5, 1932, P. L. 45, §1, 53 P.S. §15971.
The Philadelphia Code, §19-1000 (1956).
To the extent .we indicated otherwise in Pennsylvania Company v. Philadelphia, supra, we disapprove of that opinion.