Golden Triangle Broadcasting, Inc. v. City of Pittsburgh

• Decision Date: 12 September 1977
• Docket Number: WIIC-TV
• Citation: 31 Pa.Cmwlth. 547,377 A.2d 839
• Parties: GOLDEN TRIANGLE BROADCASTING, INC., Westinghouse Broadcasting Company, Inc.,Corporation and WKFJ FM, Inc. v. CITY OF PITTSBURGH, a Municipal Corporation, et al., Appellants.
• Court: Pennsylvania Commonwealth Court

Page 839

377 A.2d 839

31 Pa.Cmwlth. 547

GOLDEN TRIANGLE BROADCASTING, INC., Westinghouse Broadcasting Company, Inc., WIIC-TV Corporation and WKFJ FM, Inc. v. CITY OF PITTSBURGH, a Municipal Corporation, et al., Appellants.

Commonwealth Court of Pennsylvania.

Argued May 4, 1977.

Decided Sept. 12, 1977.

Grace S. Harris, Executive Asst. City Sol., Mead J. Mulvihill, Jr., City Sol., Pittsburgh, for appellants.

Frank L. Seamans, Dale E. Williams, Eckert, Seamans, Cherin & Mellott, Pittsburgh, for appellee.

Before BOWMAN, President Judge, and CRUMLISH, Jr., KRAMER, WILKINSON, MENCER, ROGERS and BLATT, JJ.

BOWMAN, President Judge.

Plaintiffs, television and radio broadcasters, commenced this suit in equity ¹ in the Allegheny County Court of Common Pleas, to enjoin the City of Pittsburgh (City) from collecting Business Privilege Tax ² on their gross receipts alleging that the imposition of the tax violates their rights under the United States and Pennsylvania Constitutions and that they are not subject to the tax by reason of their being engaged in manufacturing.

After an extensive trial, including the presentation of detailed expert testimony on plaintiffs' broadcasting operations and a tour of the broadcasting facilities by the Chancellor, he concluded that the plaintiffs are engaged in manufacturing and are not, therefore, subject to the tax; consequently, he did not reach the constitutional issues raised. The City has appealed this adjudication of the Chancellor which, after consideration of the City's exceptions, was adopted by the court below en banc.

The City's Business Privilege Tax was enacted pursuant to the authority granted by The Local Tax Enabling Act (Enabling Act), Act of December 31, 1965, P.L. 1257, as amended, 53 P.S. § 6901 et seq. Section 2 of the Enabling Act, 53 P.S. § 6902, provides in pertinent part:

"The duly constituted authorities of . . . cities of the second class . . . may, in their discretion, by ordinance or resolution, for general revenue purposes, levy, assess and collect or provide for the levying assessment and collection of such taxes as they shall determine on persons, transactions, occupations, privileges, subjects and personal property within the limits of such political subdivisions . . . . Such local authorities shall not have authority by virtue of this act:

"(4) To levy, assess and collect a tax on goods and articles manufactured in such political subdivision or on the by-products of manufacture . . . , or on any privilege, act or transaction related to the business of manufacturing . . . , by manufactures . . . with respect to the goods, articles and products of their own manufacture . . . ." (Emphasis added).

The issue thus presented is whether the Business Privilege Tax, as applied to plaintiffs, is a tax on a "privilege . . . related to the business of manufacturing . . . with respect to the . . . products of their own manufacture . . ."; or put simply, does broadcasting constitute "manufacturing"? This is a matter of first impression in Pennsylvania and we are aware of only one case directly on point from another jurisdiction. ³

We note at the outset that contrary to the impression left by the City in its citation of Commonwealth v. Philadelphia Gas Works,25 Pa.Cmwlth. 66, 358 A.2d 750 (1976), this case does not involve a tax exemption which would subject the critical statutory words to a strict construction test. See Statutory Construction Act, 1 Pa.C.S. § 1928(b)(5). Rather, as both the Chancellor and the plaintiffs point out, the words "shall not have authority" have been construed to be a limitation on the power to tax so that doubts relating to their construction are resolved in favor of the taxpayers. Directory Publishing Co. v. Pittsburgh, 205 Pa.Super. 423, 425-26, 211 A.2d 509, 511 (1965). However, we do not view this principle as of controlling significance in this case. For the issue here is whether broadcasting is "manufacturing", and, as we recently noted in Commonwealth v. Perfect Photo, Inc., 29 Pa.Cmwlth. 316, 321, 371 A.2d 580, 582 (1977), the difficulty with this and similar cases is the want of a statutory definition of the term "manufacturing". In the absence of such definition, either in the context of an "exemption" as in the Capital Stock Tax Act ⁴ or, as here, in the context of a limitation on the power to tax, the rationale for application of statutory construction principles is absent. Whether a particular activity is "manufacturing" as that term has been defined by case law only is purely an issue of law under the facts of a particular case. We are, of course, mindful of our limited scope of review in equity matters and will reverse only where there is clear error or abuse of discretion or where the evidence fails to justify the Chancellor's findings and the reasonable inferences and conclusions derived therefrom. Gruver v. Howell, 28 Pa.Cmwlth. 296, 298, 368 A.2d 920, 921 (1977).

In Perfect Photo, supra, we summarized the judicial efforts at defining "manufacturing" as follows:

"The word 'manufacturing' when employed in a statute or taxing measure, without further definition, consists in the application of labor and skill to material whereby the original article is changed into a new, different, and useful article. Morrisville Scrap Processing Co., Inc. Tax Appeal, 6 Pa.Cmwlth. 121 (1972), aff'd, 453 Pa. 610, 307 A.2d 905 (1973). Whether or not an article is a manufactured product depends on whether it has gone through a substantial transformation in form, qualities, and adaptability in use from the original so that a new article or creation has emerged. General Foods Corp. v. Pittsburgh, 383 Pa. 244, 118 A.2d 572 (1955). If there is merely a superficial change in the original materials without any substantial and well-signalized transformation in form, qualities, and adaptability in use, it is not a new article or new production. Commonwealth v. Berlo Vending Co., 415 Pa. 101, 202 A.2d 94 (1964)." 29 Pa. Cmwlth. at 321, 371 A.2d at 582-83.

We also noted the aptness of Justice (now Chief Justice) Eagen's observation in Commonwealth v. Deitch Co., 449 Pa. 88, 295 A.2d 834 (1972), that:

" 'Concededly, "it is sometimes difficult to determine with legal exactness what is and what is not manufacturing", for as one court has observed, "(i)t is easier to feel the line of distinction than to express it . . . ." ' 449 Pa. at 94, 295 A.2d at 837-38. (Citations omitted.)" Perfect Photo, supra, at 321, 371 A.2d at 583.

Nevertheless, with the above definitions in mind, we must now turn to the rather complex and technical facts of this case.

Inasmuch as the parties stipulated at trial that evidence would be limited to the operations of plaintiff Westinghouse Broadcasting Company ("KDKA", an affiliate of the Columbia Broadcasting System (CBS)) which is engaged in both television and radio broadcasting, and that the other plaintiffs' cases would be determined thereby, our discussion of plaintiffs' activities is similarly limited. In addition, we do not find it necessary to discuss, in any great detail, the radio broadcasting aspect since television broadcasting appears to include much, if not all, that is involved with radio and more. While there are no doubt great differences in the two operations to those trained in the field, we do not, for the purposes of this case, perceive any basis for a legal distinction between the two, such that one and not the other could be considered "manufacturing". Consequently, the following discussion of television broadcasting is intended to apply, by analogy, to radio broadcasting and reference will be made to the latter only when necessary.

The record reveals that KDKA's television broadcasting operations begin with what the plaintiffs refer to as pre-camera activities. These activities begin in the Program Department where the program schedule is prepared and basic decisions are made as to which programs are to be broadcast and how they are to be produced or otherwise obtained. As to programs, commercials, and other material that are to be produced in the studio, assignments are made to producer-directors to coordinate the activities of various personnel and departments with respect to writing scripts, arranging for talent, constructing sets, arranging for studio time and crews, etc. These programs and other material are then prepared for live broadcast or are filmed, edited, integrated with other material (e. g. commercials) and placed on videotape for the actual broadcasting process.

However, only a small part of the total broadcasting time consists of programs, commercials and other materials that actually originate or are originally produced in the local studio. ⁵ The local news, local programs such as "Marie Torre" and various announcements, station breaks and the few studio produced commercials are the major examples. The vast bulk of the total broadcasting time consists of: (1) network programming which is transmitted to the local station over telephone lines; and (2) other materials which arrive at the station in film or videotape form such as syndicated features (e. g. "That Girl", "Mike Douglas Show"), movies and virtually all commercials. ⁶

How the actual process of broadcasting begins depends, to some extent, on the particular source of the material being broadcast. In the case of live broadcasts, the studio camera is the source. Light from the studio subject is focused on a photo-sensitive surface in the camera and that light is transformed from light information into an electrical signal. If the source is film, light is projected through the film on a photo-sensitive surface and that light is then transformed into an electrical signal. The videotape sources is played or processed through a videotape machine which recovers audio and visual information which as previously (in the process of making the videotape) been reduced to an electrical signal. Finally, as mentioned,...