Keystone Metal Co. v. City of Pittsburgh

• Decision Date: 26 June 1953
• Citation: 97 A.2d 797,374 Pa. 323
• Parties: KEYSTONE METAL CO. v. CITY OF PITTSBURGH et al. (two cases). KEYSTONE METAL CO. v. SCHOOL DIST. OF PITTSBURGH et al. (two cases).
• Court: Pennsylvania Supreme Court

97 A.2d 797

374 Pa. 323

KEYSTONE METAL CO. v. CITY OF PITTSBURGH et al. (two cases).

KEYSTONE METAL CO. v. SCHOOL DIST. OF PITTSBURGH et al. (two cases).

Supreme Court of Pennsylvania.

June 26, 1953

Suits involving liability of seller of scrap metal for mercantile license taxes of city and school district on transactions with buyer also located in city, but involving shipments of scrap from points outside of state to a refinery outside the state. The Court of Common Pleas of Allegheny County at Nos 2021 and 2022 January Term, 1951 entered decrees from which the taxpayer appealed. The Supreme Court, Nos. 82, 83, 84 and 86, March Term, 1953, Horace Stern, C. J., held that the transactions possessed sufficient local incidents to make them subject to city and school district mercantile license taxes.

Decrees modified and affirmed as modified.

Anne X. Alpern, City Sol., J. F. McKenna, Jr., David Stahl, Asst. City Sols., Pittsburgh, for City of Pittsburgh and others.

Mortimer B. Lesher, Sol., Oscar G. Peterson, Niles Anderson, Asst. Sols., Pittsburgh, for School Dist. of Pittsburgh and others.

Lee W. Eckels, William D. Sutton, Henry A. Morrow, Jr., Thorp, Reed & Armstrong, Pittsburgh, for Keystone Metal Co.

J. Wray Connolly, W. S. Moorhead, Jr., Moorhead & Knox, Pittsburgh, for Wieman & Ward Co., amicus curiae.

Before STERN, C. J., and STEARNE, JONES, CHIDSEY, MUSMANNO and ARNOLD, JJ.

HORACE STERN, Chief Justice.

The question in appeals Nos. 82 and 83 is whether sales of copper scrap by a Pittsburgh seller to a Pittsburgh buyer are transactions properly includable as gross receipts under the mercantile license taxes of the City of Pittsburgh and the School District of Pittsburgh, in view of the fact that the subject matter of the transactions never came into Pennsylvania but was delivered directly from out-of-State suppliers to an independent refinery in another State for processing.

Pursuant to the power given in the Act of June 25, 1947, P.L. 1145, 53 P.S. § 2015.1 et seq., the City of Pittsburgh enacted an ordinance imposing an annual mercantile license tax of one mill on the taxpayer's gross volume of business, computed on the gross receipts of the preceding year. The School District, in accordance with the Act of June 20, 1947, P.L. 745, 24 P.S. § 582.1 et seq., by resolution levied a similar tax of one-half mill.

Appellant, Keystone Metal Company, (hereinafter called Keystone) is a Pennsylvania corporation having a place of business in Pittsburgh and is engaged in the business of buying, selling and dealing in non-ferrous metals. During the first month in which it operated it sold large quantities of copper scrap to Westinghouse Electric Corporation (hereinafter called Westinghouse) and National Electric Products Corporation (hereinafter called National), both of which are Pennsylvania corporations with offices in Pittsburgh. All of these sales were consummated in the following manner: Purchase orders were placed with Keystone by Westinghouse and National specifying the quantity of scrap desired, and with a provision that it was to be shipped by Keystone directly to a smelting and refining company in Carteret, New Jersey; this latter company was not affiliated with either the seller or the buyers. Since Keystone did not itself keep any copper scrap on hand, it was obliged, in order to fill the orders, to buy the scrap from suppliers in Pennsylvania and other States. These suppliers shipped the scrap-58 carloads-directly to the refinery in New Jersey. Keystone received from Westinghouse and National the sum of $826,961.03 in payment for the scrap. The mercantile license tax ordinance and resolution provided that where, as here, the taxpayer had not been in business during the entire year preceding that for which the tax was imposed, the volume of business on which the tax was to be computed should be twelve times the volume transacted in the taxpayer's first month of business. Accordingly, the City Treasurer claimed that Keystone's tax base for the taxable year should include a sum equal to twelve times $826,961.03; on that amount there would be a tax of $9,935.37, plus interest and penalty of $4,023.82, in the case of the City of Pittsburgh, and $4,967.68, plus interest and penalty of $2,011.91, in the case of the School District of Pittsburgh. Keystone resisted payment of these sums on the ground that the transactions in question constituted interstate commerce, were therefore not within the taxing power of the City or School District, and hence were not properly includable in the tax base.^[1] Its appeals to the court below being disallowed, it now appeals to this court.

While it is quite clear that a direct State tax upon the privilege of conducting interstate commerce is invalid, Freeman v. Hewit, 329 U.S. 249, 67 S.Ct. 274, 91 L.Ed. 265; Joseph v. Carter & Weekes Stevedoring Co., 330 U.S. 422, 67 S.Ct. 815, 91 L.Ed. 993; Spector Motor Service, Inc., v. O'Connor, 340 U.S. 602, 71 S.Ct. 508, 95 L.Ed. 573, it has also been held by the Supreme Court of the United States that, although a transaction viewed as a whole may be one in interstate commerce, there may be certain ‘ intrastate events', Southern Pacific Co. v. Gallagher, 306 U.S. 167, 176, 59 S.Ct. 389, 83 L.Ed. 586, or ‘ local activities', McGoldrick v. Berwind-White Coal Mining Co., 309 U.S. 33, 58, 60 S.Ct. 388, 84 L.Ed. 565, in connection therewith that permit the imposition of a State tax. Western Live Stock v. Bureau of Revenue, 303 U.S. 250, 58 S.Ct. 546, 82 L.Ed. 823; International Harvester Co. v. Department of Treasury, 322 U.S. 340, 64 S.Ct. 1019, 88 L.Ed. 1313; Norton Company v. Department of Revenue of Illinois, 340 U.S. 534, 71 S.Ct. 377, 95 L.Ed. 517. The solution of the question whether a State tax falls within this latter category depends entirely on the particular facts in each instance and may, admittedly, require the drawing of ‘ nice distinctions.’ It was said in McLeod v. J. E. Dilworth Co., 322 U.S. 327, 329, 64 S.Ct. 1023, 1025, 88 L.Ed. 1304:‘ Once it is recognized, as it long has been by this Court, that federal and state taxation do not move within wholly different orbits, that there are points of intersection between the powers of the two governments, and that there are transactions of what colloquially may be deemed a single process across state lines which may yet be taxed by the State of their occurrence, ‘ nice distinctions are to be expected’, Galveston, H. & S. A. R. Co. v. State of Texas, 210 U.S. 217, 225, 28 S.Ct. 638, 639, 52 L.Ed. 1031.'

The court below came to the conclusion that the transactions here in question constituted business in interstate commerce because of the fact that the purchase orders called for the transportation of goods across State lines. This view would seem to be supported by the case of Flanagan v. Federal Coal Co., 267 U.S. 222, 45 S.Ct. 233, 69 L.Ed. 583. But in cases involving the legality of State taxation the question is not determined by the broad concept of what constitutes interstate commerce when problems of State regulation are concerned; it depends rather on whether there are sufficient local incidents to validate the tax, even though the total activities from which the transaction arises may have incidental interstate attributes. Cf. Coverdale v. Arkansas-Louisiana Pipe Line Co., 303 U.S. 604, 58 S.Ct. 736, 82 L.Ed. 1043.

In International Harvester Co. v. Department of Treasury, 322 U.S. 340, 64 S.Ct. 1019, 88 L.Ed. 1313, there were sales by an Indiana seller to Indiana buyers, but the contracts provided that the goods were to be shipped to the buyers directly from points outside Indiana. The United States Supreme Court held that a gross income tax on these transactions imposed by the State of Indiana, and characterized by the court as a privilege tax, was valid. The Court said, 322 U.S. at page 344, 64 S.Ct. at page 1021:‘ * * * neither the Commerce Clause nor the Fourteenth Amendment prevent the imposition of the tax on receipts from an intrastate transaction even though the total activities from which the local transaction derives may have incidental interstate attributes.’

In Department of Treasury of State of Indiana v. Wood Preserving Corporation, 313 U.S. 62, 61 S.Ct. 885, 85 L.Ed. 1188, a Delaware Corporation, with its principal place of business in Pennsylvania, sold ties to a railroad company. It procured the ties from Indiana suppliers who delivered them to the railroad company in Indiana, whence they were immediately shipped to a plant of the seller in Ohio for treatment there pursuant to a supplemental agreement between the parties to that effect. It was held that the transactions involved sufficient intrastate activities to validate a tax imposed by Indiana on the gross income derived therefrom by the sellers, notwithstanding the fact that the ties were to be shipped across State lines.

In Western Live Stock v. Bureau of Revenue, 303 U.S 250, 58 S.Ct. 546, 82 L.Ed. 823, a State tax on gross receipts from the sale of advertising space by newspaper publishers was upheld as valid in the case of one who sold such space to advertisers outside the State, the advertising cuts, mats and copy were shipped across State lines, and the newspaper was circulated to subscribers both within and without the State. The court said, 303 U.S. at page 253, 58 S.Ct. at page 547:‘ Nor is taxation of a local...