11 A.2d 529 | Pa. Super. Ct. | 1939
Argued October 9, 1939. This suit in equity is concerned with the City Sales Tax ordinance of Philadelphia, adopted February 8, 1938, but since repealed, which imposed a tax of two per centum upon the amount of every sale in the City of Philadelphia of:
"(a) Tangible personal property sold at retail, except those articles described in Schedule `A' below;1
(b) Gas, electricity, refrigeration and steam, and gas, electric, refrigeration, steam, telephone and telegraph service, for domestic or commercial use; *335
(c) Food and drink (other than alcoholic beverages) and entertainment in restaurants, cafes and similar establishments, including in the amount of such receipts any cover or minimum or other charge made to patrons. . . . . ."
It has special reference to the construction of the following clause from Schedule "A" (which contained the exceptions from the tax imposed by the ordinance):
". . . . . . sales or services by or to semi-public institutions, . . . . . . shall not be subject to tax hereunder."
The word "semi-public" had been previously defined in the ordinance as follows:
"(g) The word `semi-public' means those charitable and religious institutions which are supported wholly or in part by public subscriptions or endowment and are not organized or operated for profit."
It is not disputed that the plaintiff appellant is a charitable institution supported in part by public subscriptions or endowment, and that it was not organized for profit, and having regard to its activities as a whole, that it is not operated for profit, although certain activities conducted by it as incidental to its main charitable purposes return a profit, which is used to reduce the deficit which it incurs in its general charitable work.2 It brought this bill to enjoin the city authorities from enforcing the said ordinance against it and imposing the tax upon sales or service by or to it.
The lower court held that as to the sales or services by or to the appellant in connection with certain activities *336 conducted by it as incidental3 to its main charitable purposes, and on which it received an immediate profit over and above their cost, the tax was collectible, and dismissed the bill. We think the court's construction of the ordinance was too narrow and limited, and that the decree should be reversed.
In the first place, if the appellant is a `semi-public institution', as defined in the ordinance, it is specifically excepted from the payment of any sales tax on the sales and service subjected to such tax by the ordinance.
It may be well at the outset to consider again the subjects which are taxable under the ordinance. They are:
(a) — Tangible personal property sold at retail, which do not fall within the thirty odd subdivisions excepted in Schedule "A", supra.
(b) 1 — Sales of gas, electricity, refrigeration and steam for domestic or commercial use.
(b) 2 — Gas, electric, refrigeration, steam, telephone and telegraph service for domestic or commercial use.
(c) — Food, drink and entertainment in restaurants, cafes and similar establishments, and the service necessary for preparing and furnishing the same, including cover and minimum charges.
Next, the tax is to be paid by the purchaser4 to the vendor, the latter to receive the tax for the City of Philadelphia and be liable for its payment to the City. The only classes of service taxable under the ordinance are gas, electric, refrigeration, steam, telephone and telegraph, for domestic or commercial use, and such service as may be furnished in connection with food, drink and entertainment in restaurants, cafes,5 etc. *337
Further, the ordinance specifically provides that "sales or service by or to semi-public institutions . . . . . . shall not be subject to tax"; that is, as to sales by them or services, if any, rendered by them, they are not required to collect the tax from the purchaser and pay it over to the City, and as tosales to them or services rendered to them, they are relieved of paying the tax to the vendor. This certainly contemplates that "semi-public institutions" may make sales and renderservice to purchasers, or there would be no point in excepting such institutions from the tax on "sales or services by . . . .. . semi-public institutions." To that extent, certainly, the ordinance contemplated a departure by such institutions from the activities of a public charity, which, in its narrowest sense, sells nothing and is supported wholly by public subscriptions and contributions or endowment; and may be said to recognize that many institutions organized for charitable purposes and supported in part by public subscriptions or endowment, do engage in certain incidental activities, of a commercial nature, the proceeds of which, and any profits derived therefrom, are devoted to the general charitable work of the institution and applied to no alien or selfish purpose. This is somewhat similar to the clause contained in our Act of Assembly of April 9, 1921, P.L. 119, which after reciting the institutions to be embraced within the constitutional exemption of "institutions *338 of purely public charity," to wit, "all hospitals, universities, colleges, seminaries, academies, associations and institutions of learning, benevolence or charity . . . . . . founded, endowed or maintained by public or private charity," added the proviso, "Provided That the entire revenue derived by the same be applied to the support of and to increase the efficiency and facilities thereof, the repair and the necessary increase of grounds and buildings thereof, and for no other purpose."
Offhand, we know of no `service', within the category established by this ordinance, which is sold or rendered by a charitable institution, except the service incidental to the cooking, preparing and furnishing of food, drink and entertainment in connection with dining rooms, restaurants, cafes or cafeterias, etc., maintained by certain of such institutions as auxiliary to their main charitable purposes. Certainly, so far as we know, no institution of charity is engaged in the business of supplying gas, electric, refrigeration, steam, telephone or telegraph service to consumers for domestic or commercial use; and the ordinance, in its exempting clause, evidently had in mind the incidental furnishing of restaurant, etc., service by a charitable institution, in connection with its main charitable work.
The expression used in this ordinance, `semi-public institutions' is not familiar to, or in accustomed use in the law of Pennsylvania. We have not been able to find a prior instance of its use in any statute or municipal ordinance in this Commonwealth. It was imported bodily, along with most of the rest of the ordinance from the City of New York, where a similar sales tax was adopted in 1934. See Local Laws of New York City, (1934) No. 20 (published as No. 21) as amended by No. 24 (published as No. 25). The definition of a semi-public institution first appears in the amendment, published as No. 25, and is absolutely identical in language with that herein quoted from the Philadelphia ordinance. *339 The ordinance having been imported almost bodily from the Local Laws of New York City, where it was in comparatively successful operation for nearly four years at the time when it was enacted in Philadelphia, it is only reasonable that expressions and definitions unfamiliar to our laws and judicial decisions, which were copied exactly from the New York Local Laws, were used, and were intended to be used, in the same sense and with the same meaning as the same expressions had been employed in New York City, and to be subject to the same interpretations which had been placed by the courts of New York on those terms and expressions.
It so happens that the very same question which is under consideration here arose in New York, in connection with the Y.M.C.A. of the City of New York — which carries on incidental activities practically the same as the plaintiff in this case — and had been finally settled by the highest appellate court of the State of New York in accord with this appellant's contention prior to the adoption of the Philadelphia ordinance. In Young Men's Christian Assn. of the City of New York v. Cityof New York,
The same question came up also in the Appellate Division of the Supreme Court on an appeal from the decision of the City Comptroller in New York University v. Taylor
It would seem that in New York the term "institution of public charity" or "public charitable institution" is limited to charitable institutions established, controlled, maintained and administered by the state or a governmental subdivision of the state, while a semi-public charitable institution is a private institution supported wholly or in part by public subscription or endowment and not organized or operated for profit. This distinction was considered by our Supreme Court, in relation to the phrase in the Constitution of 1873 (Art. IX, sec. 1), "institutions of purely public charity," in Donohugh'sAppeal,
While we do not mean to rule that those decisions are absolutely controlling here, they are very persuasive (59 C.J. 1068) in this instance, where the ordinance adopted precisely the same term or expression — one wholly foreign to our law — after the Court of Appeals of New York had passed upon and determined its meaning and had ruled the Y.M.C.A., in all its activities, exempt from the tax.
As we said, at the outset, on the face of the ordinance, appellant is exempt. The exemption clearly applies to it if it is a charitable or religious organization, supported wholly or in part by public subscriptions or endowment and not organized or operated for profit. We think the admitted facts clearly establish that it is.
It is the institution itself — not some incidental activity of it — which is excepted from the tax in the ordinance, and no one can justly contend, from the facts, that the Y.M.C.A. of Philadelphia is not a charitable or religious organization, supported in part by public subscriptions or endowment, and that it — that is the institution — is not organized or operated for profit, although certain incidental activities may produce revenue *342
greater than their cost, which is applied to the reduction of the general deficit. A somewhat analogous ruling was recently made by our Supreme Court in Fixl's Appeal,
The appellees chiefly rely on the case of Y.M.C.A. ofGermantown v. Phila.,
The Court, in that case, did not dispute that the Y.M.C.A. was an institution of purely public charity, within the constitutional provision (Art. IX, sec. 1), see page 408;University of Penna. Christian Assn. v. Phila. et al.,
Counsel for appellant justifiably points out that the term "institution of charity" may have two separate and distinct meanings: The term sometimes is used to designate a charity, or charitable corporation or organization, as an entity; and the term at other times is used to refer to the physical plant, building or premises, which is being used and occupied by a charitable organization in connection with its charitable objects and purposes. This distinction would seem to be clear, and it is equally clear that in the above quoted statutory provision, the said term, "institution of charity," is used to refer to, or designate, the physical plant, building or premises occupied by a charitable corporation or organization. Thus, in the statute, the use of the words, "The following property shall be exempt from all . . . . . . tax, to wit: . . . . . . institutions . . .. . . of charity . . . . . .," clearly indicates that the term, "institutions of charity" refers to the physical plant or building used and occupied *344
by a charitable organization; this construction of the provision being further indicated by the addition of the words, "with the grounds thereto annexed, etc." "Grounds" are obviously not "annexed, etc." to a charitable organization regarded as an entity, — "grounds" are "annexed etc." to the physical plant or building used and occupied by a charitable organization. This distinction is also important because it explains the actual holding of the Supreme Court in the Germantown Case. That is to say, from a careful reading of the opinion in that case, it is evident that Justice MAXEY also used the term, "institution of charity", to refer to the physical plant or building used and occupied by a charitable organization. Such was the meaning which had been attributed to that term in the earlier cases, and that fact was recognized by Justice MAXEY, in his citations fromWagner Institute v. Phila.,
In the present case it is not the property of the charitable institution which is excepted from the tax imposed by the ordinance, but the institution itself, provided it comes within the definition of a semi-public institution as declared in the ordinance, as this appellant does.
The expression in the constitutional provision (Art. IX, sec. 1, supra) is broad enough to apply to the institutions of purely public charity, no less than their property, real and personal.
Nor can we agree with counsel for the appellees that if appellant's contention is sustained the ordinance would in this respect violate the constitutional provision above referred to (Art. IX, sec. 1) that "All taxes shall be uniform upon the same class of subjects, within the territorial limits of the authority levying the tax," etc. City ordinances are, of course, subject to this constitutional provision, no less than statutes of the Commonwealth (Lighton v. Abington Twp. et al.,
This ordinance was enacted under the authority of the Act of August 5, 1932, P.L. 45, commonly known as the Sterling Act. That Act does not forbid the granting of exemptions within the constitutional provision aforesaid. The constitutionality of the ordinance, except as respects certain minor features not here involved, was upheld by the Supreme Court in Blauner's Inc. etal. v. Phila.,
Furthermore, the appellant suggests that schedule A, which includes the exception from taxation here relied upon, may be sustained on the basis of classification. See Turco Paint Varnish Co. v. Kalodner,
All of the assignments of error but the second are sustained. The decree is reversed and the record is remitted to the court below with directions to enter a decree in accordance with the first and second prayers of the plaintiff's bill. Costs to be paid by the City of Philadelphia.
"Cereals and cereal products; Milk and milk products; Meat and meat products; Fish and fish products; Egg and egg products; Vegetables and vegetable products; Fruits, spices and salt;
"Sugar and sugar products, other than candy and confectionery;
"Coffee and coffee substitutes, wines and liquors, beer and other similar malt beverages; tea, cocoa, and cocoa products; other than candy and confectionery;
"Water, when delivered to the consumer through mains and pipes;
"Drugs and medicines sold upon a physician's prescription;
"Newpapers and periodicals.
"Sales or services by or to the State of Pennsylvania or City of Philadelphia, and sales or services by or to semi-public institutions, and sales or services upon which the State of Pennsylvania and City of Philadelphia are by virtue of the provisions of the Constitution of the United States or otherwise without power to impose a tax, shall not be subject to tax hereunder."
"16. These activities are essentially commercial in character.
17. These activities are operated for profit.
18. The profits made from these activities are paid into the general treasury of the plaintiff Association, and are used to reduce the deficit which it incurs in its efforts to carry into effect its charitable objects and purposes."
