Atlantic Refining Co. v. Van Valkenburg

• Court: Pennsylvania Supreme Court
• Writing for the Court: MR. JUSTICE MOSCHZISKER:
• Citation: Atlantic Refining Co. v. Van Valkenburg, 265 Pa. 456, 109 A. 208 (Pa. 1920)
• Decision Date: 05 January 1920
• Docket Number: 287
• Parties: Atlantic Refining Co., Appellant, v. Van Valkenburg

109 A. 208

265 Pa. 456

Atlantic Refining Co., Appellant, v. Van Valkenburg

No. 287

Supreme Court of Pennsylvania

January 5, 1920

Argued October 6, 1919

Appeal, No. 287, Jan. T., 1919, by plaintiff, from decree of C.P. No. 3, Phila. Co., March T., 1918, No. 5727, for defendants in case of the Atlantic Refining Company v. F. A Van Valkenburg, William E. Finlay, Edward A. Devlin, James A Carey and John J. Crout, Board of Mercantile Appraisers for the County of Philadelphia. Affirmed.

Bill in equity for an injunction to restrain the assessment and collection of a mercantile tax. Before McMICHAEL, P.J.

The court entered a decree on demurrer for defendants. Plaintiff appealed.

Error assigned was the decree of the court.

Thomas Patterson, with him Yale L. Schekter and Ira Jewell Williams, for appellant. -- The mere having of a store or warehouse apart from the factory is not sufficient to create liability to mercantile tax.

The legislative intent is to be found in the words "having a store or warehouse apart from the factory for the purpose of vending goods." The purpose, of course, may be proved as a matter of intention or by the actual use to which the particular station is put. If the place is actually used for vending goods, even though it were originally not so intended, then to the extent to which it is so used the manufacturer is carrying on business as a dealer and upon such business he is taxable. But a place which is used for storage merely, at which no sales take place, is not for the purpose of vending goods: Com. v. Teller, 144 Pa. 545; Com. v. Eynon-Evans Mfg. Co., 48 Pa.Super. 474; Com. v. Gillinder, 12 D.R. 635; Com. v. Vetterlein, 29 Pa.Super. 294.

The sales of appellant's manufactured products do not take place at the relay stations: American Tobacco Co., 173 Pa. 531.

Arthur L. Shay and William I. Schaffer, Attorney General, with them John T. Murphy, for appellee. -- The appellant is liable for the tax on its whole volume of business transacted at its four separate stores: Haldeman v. Duncan, 51 Pa. 66; Staake v. Penna. R.R. Co., 231 Pa. 466; Brock & Co. v. McCaffrey, 3 Pa. Superior Ct. 431; Com. v. Thomas Potter Sons & Co., 159 Pa. 583; Com. v. Consolidated Dressed Beef Co., 245 Pa. 605; Perlman & Co. v. Sartorius & Co., 162 Pa. 320; Com. v. Teller, 144 Pa. 545; Pittsburgh Brewers' & Bottlers' Supply Co.'s Mercantile Tax, 38 Pa.Super. 121; Com. v. Cover, 215 Pa. 556.

Before BROWN, C.J., STEWART, MOSCHZISKER, FRAZER, WALLING and KEPHART, JJ.

OPINION

MR. JUSTICE MOSCHZISKER:

Plaintiff corporation filed a bill in equity to restrain the collection of a mercantile tax assessed against it by the defendant appraisers, for the year 1917; the court below, on the authority of Com. v. Atlantic Refining Co., 69 Pa.Super. 32, entered judgment for defendants upon demurrer, and this appeal followed.

The averments of the bill show that defendants compose the Board of Mercantile Appraisers for the County of Philadelphia; that plaintiff is a Pennsylvania corporation engaged in refining oil and manufacturing certain products thereof; that it has in Philadelphia a number of "relay or distribution stations," which it maintains as "storage and distribution points"; that the goods stored at, and distributed from, these stations are "almost entirely goods of the plaintiff's own manufacture." Plaintiff acknowledges, however, that certain of the goods so sold and distributed are not of its "own manufacture," and also that some of its own goods are sold and disposed of at these stations; but, in this connection, it is averred that "to the extent that goods sold by plaintiff are manufactured by others and to the extent to which its own manufactured goods are thus sold, plaintiff admits liability to tax, and has duly tendered the amount to defendants."

The contention of plaintiff is that it should not be obliged to pay a tax on sales of its own products, delivered from its so-called relay stations, where the orders for such sales did not originate at such stations but came through its central selling force. On the other hand, defendant's claim for the right to assess the tax on the whole volume of business done at such stations, represented by goods delivered therefrom, without regard to where the sale orders originated.

The method of doing business as set forth in plaintiff's bill is as follows: "The plaintiff's products are made to sell . . . and plaintiff employs the usual methods of selling . . ., namely, by traveling salesmen . . .; these salesmen travel out of the factory office into territories assigned to them, the city being divided into sections . . .; they make regular calls on prospective customers, make contracts, solicit truck orders and make daily reports and returns of the contracts and sales to the factory office; . . . plaintiff's manufactured products are transferred in large quantities by railroad or barge to its relay stations, where they are temporarily stored and where plaintiff's delivery trucks [which leave the factory with their first load] relay and refill, instead of going to the factory for fresh supply of goods; . . . credits are passed on at the factory office," where the executive organization is located.

Section 1 of the Act of May 2, 1899, P.L. 184, under which defendants propose to assess plaintiff, provides that each "vender" or "dealer" in "goods, wares and merchandise" shall pay an annual license and mercantile tax, in the amounts there fixed, on "the whole volume, gross, of business transacted annually." Section 11 of the Act of April 22, 1846, P.L. 489, as interpreted by section 1 of the Act of February 27, 1868, P.L. 43, provides that a manufacturer "having a store or warehouse apart from his manufactory . . ., for the purpose of vending goods," shall be classified and required to pay an annual license and mercantile tax.

In arranging a scheme of classification as a basis for taxation, the legislature may properly consider the "purpose" back of a given state of facts, and make the existence of such purpose the controlling element in determining tax liability: see Com. v. McGlinn Distilling Co., 265 Pa. 346. Here, on the facts at bar, it is quite clear that, no matter what other purpose plaintiff may have in view, it maintains its so-called relay stations "for the purpose of vending goods," and does in fact there vend certain of its merchandise, as well as the goods of others; -- and these facts are controlling. In brief, plaintiff's stations are not mere storage houses but, to a certain extent at least, sales stores; and, as stated in Com. v. Campbell, 33 Pa. 380, 385, a manufacturer is taxed for selling his wares "when he keeps a store or warehouse away from his manufactory, in which he sells the wares, in the manufacture of which he is 'concerned or interested.'"

Since plaintiff keeps its stations, or stores, for the purpose of vending goods, it must, under the relevant acts of assembly, pay a mercantile tax on the "whole gross volume" of business there transacted, and not on a part only. The very words of the legislation are repugnant to plaintiff's idea of a division of the volume of such business into sales which, from every aspect, should be credited to the stores and those which, although delivered from the stores, might from some aspects be credited to the main factory. As stated by the Superior Court in Com. v. Atlantic Refining Co., supra, 35: "The goods delivered or handled through the stations do not become the subject of barter and sale until they arrive there, and, for purposes of the Act of 1899, the sales are accomplished from [and taxable at] the place where they are so made available."

In Com. v. Abbott's Alderney Dairies, 62 Pa.Super. 451 454, 455, HENDERSON, J., citing the Act of May 2, 1899, P.L. 184, very properly states: "It was the purpose of the statute to impose such tax on permanent dealers having a place of business within the county; the assessment is not on the sales, however, but on the dealer. It is not important, therefore, whether these sales are actually made from wagons sent out from the place of business or are made at the store. . . . In this view of the case it is not material whether the title . . . was transferred at the time the driver delivered the [goods] or whether it was received by the purchaser at [the business establishments of the seller]." The tax is on the gross volume of business transacted annually (Act of 1899), which, of course,...