Appeal of Atlantic Refining Co.

• Decision Date: 30 December 1959
• Citation: 398 Pa. 30,156 A.2d 855
• Parties: Appeal of ATLANTIC REFINING CO. from Decision of and Assessment of Mercantile Tax by David A. Smith, Treasurer of School District of City of Pittsburgh. Appeal of SCHOOL DISTRICT OF PITTSBURGH and David A. Smith, Treasurer. Appeal of ATLANTIC REFINING CO. from Decision of and Assessment of Mercantile Tax by David A. Smith, Treasurer of City of Pittsburgh. Appeal of CITY OF PITTSBURGH and David A. Smith, Treasurer.
• Court: Pennsylvania Supreme Court

Page 855

156 A.2d 855

398 Pa. 30

Appeal of ATLANTIC REFINING CO. from Decision of and

Assessment of Mercantile Tax by David A. Smith,

Treasurer of School District of City of

Pittsburgh.

Appeal of SCHOOL DISTRICT OF PITTSBURGH and David A. Smith,

Treasurer.

Appeal of ATLANTIC REFINING CO. from Decision of and

Assessment of Mercantile Tax by David A. Smith,

Treasurer of City of Pittsburgh.

Appeal of CITY OF PITTSBURGH and David A. Smith, Treasurer.

Supreme Court of Pennsylvania.

Dec. 30, 1959.

Niles Anderson, Edmund W. Ridall, Jr., Pittsburgh, for appellant.

Robert A. Rundle, George I. Minch, Wright & Rundle, Pittsburgh, for appellee.

No. 189:

David Stahl, City Sol., Regis C. Nairn, Asst. City Sol., Pittsburgh, for appellant.

Reed, Smith, Shaw & McClay, Elder W. Marshall, Pittsburgh, Roy W. Johns, Philadelphia, for appellee.

C. William Campbell, Campbell, Casteel & Thomas, Con F. McGregor, Pittsburgh, Brady O. Bryson, Thomas V. Lefevre, Morgan, Lewis & Bockius, Philadelphia, Elder W. Marshall, Carl E. Glock, Jr., Frank W. Ittel, Alan D. Riester, Brandt, Riester, Brandt & Malone, Pittsburgh, amici curiae.

Before CHARLES ALVIN JONES, C. J., and BELL, MUSMANNO, BENJAMIN R. JONES, COHEN, BOK and McBRIDE, JJ.

COHEN, Justice.

The Act of June 25, 1947, P.L. 1145, as amended, 53 P.S. § 6851 ¹ and the Act of June 20, 1947, P.L. 745, as amended, 24 P.S. § 582.1 ² enable the City of Pittsburgh and the School District of Pittsburgh to impose mercantile taxes on vendors or dealers of goods, wares and merchandise measured by their gross receipts from sales within the city and school district. The former act forbids the city to tax 'any privilege act, or transaction related to the business of manufacturing * * * or * * * of processing by-products of manufacture * * *' and the latter act also forbids a school district to tax any person 'vending * * * articles of his own growth, product or manufacture.'

The appellee, Atlantic Refining Company, sold within the School District and the City of Pittsburgh merchandise which included, inter alia, products of its refineries located in Philadelphia and elsewhere such as: gasoline, naptha, kerosene, motor oils, lubricating oils, fuel oils, waxes, detergents and greases. In 1957, the Treasurer of the City and School District assessed against appellee for the years 1952, through 1956, mercantile taxes based on sales of appellee's products with the exception of greases and products made from its own production of crude oil. These assessments were sustained by the Treasurer on review, but, on appeal to the County Court of Allegheny County, were held to be invalid because these products were 'manufactured' by the appellee. From this decision, the City and School District have taken these appeals.

The sole issue is whether the refining of oil is 'manufacturing' within the meaning of the above-quoted exceptions.

The Statutory Construction Act, Act of May 28, 1937, P.L. 1019, art. III, § 33, 46 P.S. § 533, provides that 'words and phrases should be construed according to rules of grammar and according to their common and approved useage.' In Gulf Oil Corporation v. Philadelphia, 1947, 357 Pa. 101, 53 A.2d 250, 172 A.L.R. 302, this Court held that certain tanks used in oil refinery were within the provisions of the Act of June 3, 1915, P.L. 787, 53 P.S. § 4742 ^* which exempted 'machinery * * * used in manufacturing' from real estate tax. While in Gulf Oil there is nothing that indicates that the question whether refining is 'manufacturing' was specifically raised and argued, it serves as an excellent example of how this process had been viewed by this Court in prior cases. In that case, 357 Pa. at page 102, 53 A.2d at page 250 this Court stated: 'Appellant is a Pennsylvania corporation engaged in the manufacture of gasoline and various petroleum products at its Philadelphia refinery.' (Emphasis supplied). Still further, 357 Pa. at page 106, 53 A.2d at page 252, it was said again that 'these tanks are part of the machinery used in manufacturing.' (Emphasis supplied.) In Commonwealth v. National Oil Company, Limited, 1893, 157 Pa. 516, 27 A. 374, the court held that capital employed by a company in oil refining was exempt from the capital stock tax as assets used in manufacturing. In that case, the Commonwealth did not dispute that oil refining was manufacturing; this is a further example of the common assumption that refining is a manufacturing process.

The taxing authorities argue that petroleum is simply a mixture of liquids and that the task of the refinery is merely to separate these liquids from each other. There was ample evidence and findings of the court below that the appellee's factory creates hundreds of products in other materials and each product is new in physical and chemical qualities and also in their function and use,...