Commonwealth v. Southern Pennsylvania Bus Co.
| Decision Date | 30 September 1940 |
| Docket Number | 34 |
| Citation | 339 Pa. 521,15 A.2d 375 |
| Parties | Commonwealth, Appellant, v. Southern Pennsylvania Bus Company |
| Court | Pennsylvania Supreme Court |
Argued May 6, 1940.
Appeal, No. 34, May T., 1940, from judgment of C.P. Dauphin Co., Com. Docket 1940, No. 362, in case of Commonwealth v Southern Pennsylvania Bus Company. Judgment reversed.
Appeal to common pleas from settlement of Department of Revenue. Before FOX, J., without a jury.
The opinion of the Supreme Court states the facts.
Findings and judgment for defendant taxpayer. Plaintiff, Commonwealth appealed.
Errors assigned, among others, related to the dismissal of exceptions to the findings and conclusions of the trial judge.
The judgment of the court below is reversed and is here entered for the Commonwealth. Costs to be paid by the appellee.
Frank A. Sinon, Deputy Attorney General, with him Claude T. Reno, Attorney General, for appellant.
Geo. Ross Hull, with him Chas. W. Hull, of Snyder, Hull, Leiby & Metzger, and Roy J. Keefer, for appellee.
Before SCHAFFER, C.J., MAXEY, DREW, LINN, STERN, BARNES and PATTERSON, JJ.
The question upon this appeal is the validity of a settlement made by the Commonwealth against the defendant, a domestic corporation, for interest upon an underpayment of its capital stock tax for the year 1936.
The issue arises under two statutes enacted by the legislature in 1937. The first of these is the Act of February 2, 1937, P.L. 3, amending sections of the Fiscal Code of April 9, 1929, P.L. 343. The second is the Act of April 8, 1937, P.L. 239, amending the Capital Stock Tax Act of June 1, 1889, P.L. 420. Prior to these amendments of 1937 it was provided by the Fiscal Code [1] that "The amount of every tax . . . shall become due and payable sixty days after the date of the settlement . . ." and corporations subject to the capital stock tax were directed by Section 21 of the Act of 1889, as amended, "to transmit the amount of said tax to the Treasury of the Commonwealth within the time prescribed by law for the payment of state taxes settled by the Department of Revenue. . . ."
The first amending statute, the Act of 1937, P.L. 3, [2] now provides that "Every corporation . . . at the time of making every report required by this section, shall compute and pay to the department the capital stock tax or franchise tax, as the case may be, due to the Commonwealth upon or with respect to the value of its capital stock." The filing date of the report is made March 15 in each year for the preceding year. The Act also adds to the Code Section 805(c) which requires that "The amount of all . . . taxes and bonus due the Commonwealth shall be due and payable upon the dates the reports or returns thereof are required by law to be made. . . ." Included therein is the capital stock tax. Then follows an amendment to Section 806 which prescribes that "All tax and bonus due the Commonwealth, as provided by law, shall bear interest at the rate of six per centum per annum from the date they are due and payable until sixty (60) days after settlement, and thereafter at the rate of twelve (12) per centum per annum until paid. . . ."
The second statute, the Act of 1937, P.L. 239, amends Section 21(c) of the Capital Stock Tax Act of 1889 to read as follows: "It shall be the duty of the treasurer or other officers having charge of any such corporation, . . . upon which a tax is imposed by this section, to transmit the amount of said tax to the Treasury of the Commonwealth within the time prescribed by law. . . ."
The Commonwealth contends that by these Acts of 1937 the legislature has substituted a new and comprehensive system for the assessment and payment of capital stock tax liability, in lieu of the method which existed prior thereto whereby the tax was settled by the fiscal officers of the Commonwealth, and payment thereof was not due until sixty days after settlement, even though the amount of the tax was not in dispute. It asserts that the corporate taxpayer is now required to assess or compute the amount of its tax, and to pay the same at the time the capital stock tax report is filed; that any deficiency in the tax, which results from an undervaluation of the capital stock by the taxpayer, bears interest at the rate of six per cent per annum from the due date of the tax (when the report is filed) until the date when payment of the tax deficiency is made.
The position of the defendant corporation is, first, that the Act of 1937, P.L. 3, does not impose upon a domestic corporation the duty of assessing the tax upon its own capital stock; second, that a self-assessing capital stock tax would be unconstitutional; third, that the imposition of interest as a penalty for a period prior to the time the tax liability has been ascertained and determined by the taxing officers of the state is violative of due process of law.
It is apparent that the real question before us is whether these statutory provisions enacted in 1937 constitute a valid exercise of the taxing power of the Commonwealth.
On March 15, 1937, the defendant filed its capital stock tax report for the year 1936, declaring the taxable value of its stock at $500,000, and in accordance therewith paid a tax of $2,500 on the same day to the Department of Revenue. The payment was accompanied by a written protest. After an examination of the report by the fiscal officers of the Commonwealth, the Auditor General, on April 22, 1938, approved a settlement of the tax which increased the valuation of the defendant's capital stock to $750,000, and the amount of its tax to $3,750. The defendant did not appeal from this settlement and does not now challenge its correctness. The tax deficiency of $1,250 was paid on May 23, 1938. Shortly thereafter an additional settlement was approved by the Auditor General charging the defendant with interest of $89.38, or six per cent of the amount of its underpayment for the period from March 15, 1937, -- the filing date of the report when the initial payment was made, to May 23, 1938, -- when the deficiency payment was made. From this interest settlement the defendant appealed to the court below, which sustained its contention that the imposition of interest was invalid, and entered judgment in its favor. The Commonwealth has appealed from the decree accordingly entered.
Defendant's first contention is that under the Acts of 1937 the capital stock tax must be assessed by the proper officers of the state, and that no duty is imposed by the Acts upon a corporation to make a self-assessment. However, it is clear to us that the legislature intended to substitute for the assessment of the capital stock tax, theretofore made by the taxing officials of the state, a new method of self-assessment by the taxpayer, and to change the date upon which the tax became due and payable. The provisions of these two Acts require the corporate officials to "compute and pay" the tax, which is expressly made "due and payable" on the date prescribed by law for the filing of the annual return. We are satisfied that the legislature used the word "compute" in the sense of "assess," and this is apparent to us from the context of the Act of 1937, P.L. 3, as a whole.
The defendant's contention that the assessment must be made by officers of the Commonwealth fails to give effect to the provisions of Section 801(d) of the Code, as amended by the Act of 1937. This section retained the provision that if the Department of Revenue shall not be satisfied with "the appraisement and valuation" of the capital stock, as made and returned by the officers of any corporation, the Department itself is authorized to make a valuation thereof, and added thereto is the new provision for payment of the tax at the time of the filing of the return. It is manifest that it is the purpose of the legislature to place upon the corporate taxpayer the duty which the Department of Revenue theretofore performed of assessing the capital stock tax. This seems to us a reasonable construction of the Act, and one that implies no violation of the legal requirement for an assessment of the tax. We therefore cannot agree that the legislature intended to require payment of the tax before its amount had been determined by an assessment, as the defendant unwarrantedly assumes.
We find no merit in the second objection of defendant that the capital stock tax cannot constitutionally be self-assessed. While it may be conceded that an assessment is necessary to create and define the liability of the taxpayer, inasmuch as the capital stock tax is a property tax, [3] (Fox's Appeal, 112 Pa. 337; Broad & Sansom Realty Co. v. Fidelity Bldg. Corp., 292 Pa. 287; Ellis v. Houseknecht, 57 Pa.Super. 55), the assessment to be made by the taxpayer satisfies that requirement.
The device of self-assessment is not new in the field of taxation, though its most familiar application is to franchise or privilege taxes, such as those upon income and gross receipts. The burden placed upon the taxpayer in the present instance is not onerous, because it falls upon the corporate officers who are in the best possible position of ascertaining the value of the property and assets of the corporation, and the legislature has fixed the rate and supplied a basis for the valuation thereof. The officers are compelled merely to make a mathematical calculation and a determination of fact in the same manner as they have been required in the past to prepare the annual return to the state's fiscal authorities.
We have heretofore recognized the validity of self-assessment in taxation. In Com. v. McKean County, 200 Pa. 383 suit was instituted by the state to recover from the county commissioners the amount of a tax which they had...
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