A+ Printing, Inc. v. City of Altoona
| Decision Date | 06 June 2001 |
| Citation | 778 A.2d 769 |
| Parties | A+ PRINTING, INC. (Michael A. Colledge), v. CITY OF ALTOONA, Appellant. |
| Court | Pennsylvania Commonwealth Court |
James A. Baxley, Pittsburgh, for appellant.
Stephen D. Wicks, Altoona, for appellee.
Before COLINS, Judge, FRIEDMAN, Judge, and McCLOSKEY, Senior Judge.
The City of Altoona appeals the order of the Court of Common Pleas of Blair County that reversed the City's denial of an exemption from its business privilege tax. The trial court concluded that A+ Printing is a manufacturer within the meaning of Section 2(4) of The Local Tax Enabling Act (LTEA),1 which denies local taxing authorities the authority to levy, assess, and collect taxes on any privilege, act or transaction related to the business of manufacturing.
A+ Printing is engaged in commercial printing. Ninety to ninety-five percent of its business involves the production of catalogs, brochures, reports, carbon forms, and programs.2 Production includes design, layout, and typography; the making of printing plates; printing onto paper, which may then be folded, cut, and bound. Five to ten percent of A+ Printing's business is the printing of cards, letterhead, and business envelopes.
The City assessed its business privilege tax against A+ Printing for the years 1997 through 1999. A+ Printing filed an appeal, requesting that it be exempt from payment of the tax as a manufacturer. After taking evidence, a hearing officer concluded that A+ Printing was not a manufacturer because it failed to show that it substantially transforms the material it receives or creates a new product. The hearing officer distinguished Mar-Pat Company, Inc. v. City of Allentown, 687 A.2d 1198 (Pa.Cmwlth.), petition for allowance of appeal denied, 548 Pa. 640, 694 A.2d 624 (1997), and found A+ Printing's commercial printing operation to be more analogous to the imprinting of designs and wording on ready-made clothing, which process was held not to be manufacturing in Ohiopyle Prints v. Uniontown Area School District, 662 A.2d 672 (Pa.Cmwlth.1995), petition for allowance of appeal denied, 544 Pa. 639, 675 A.2d 1254 (1996).
A+ Printing appealed to the court of common pleas, which took additional evidence. A+ Printing supplemented the record with the testimony of Michael Colledge, its president and sole owner. Colledge testified as to the nature of its products and each product's proportion of its gross volume. He clarified that 40 to 45 percent of its volume consists of printing catalogs, and he detailed the various processes involved in producing a printed catalog from the photographs and written copy the customer submits. He explained the expertise involved in having the text typeset; creating the layout/design in terms of placing the text and photos or other artwork; pagination; creating photographic negatives and stripping them into page position; burning the plates from the negatives; printing using a printing press; and finally, folding, cutting trimming, and binding the printed material and wrapping it for shipment. (June 23, 2000 transcript, p. 6.) Colledge further testified that even for many of the simplest of printing jobs, his staff creates designs and logos.
Based on all of the evidence, the trial court concluded that A+ Printing is engaged in manufacturing and exempt from the business privilege tax. The court concluded that A+ Printing's business operations are most analogous to newspaper printing, which we have held to be manufacturing. In support of its conclusion, the court quoted from Ohiopyle Prints, in which we distinguished newspaper printing, which is exempt as manufacturing, from the transfer of a design onto readymade garments, which is not considered to be manufacturing. The court concluded that A+ Printing, like a newspaper publisher, through the application of labor transforms its original material into a new, different, useful article.
Before Commonwealth Court, the City argues that the trial court erred in concluding that A+ Printing is engaged in manufacturing. It argues that A+ Printing's commercial printing business, which it characterizes as applying ink to paper, does not constitute a substantial transformation in form, quality, or use and therefore does not meet the legal definition of manufacturing. In support of its arguments, the City directs our attention to analogous taxing statutes that distinguish manufacturing and processing and that treat printing as processing. The City also argues that the trial court erred when it relied on dictum from Ohiopyle Prints.
Whether an activity is manufacturing within the meaning of the LTEA is a question of law to be determined on a case-by-case basis. Mar-Pat. In making that determination, courts have construed the term "manufacturing" narrowly. City of Pittsburgh v. Tucker, 74 Pa.Cmwlth. 290, 459 A.2d 1333 (1983), affirmed, 504 Pa. 580, 475 A.2d 1318 (1984). The term "manufacturing" as it is used in the LTEA means the transformation of material or things into something different from that received, and the difference cannot be a superficial change; basic materials or goods must be given new identity that can easily be traced to the producer and that is the product of skill and labor. Bindex Corporation v. City of Pittsburgh, 504 Pa. 584, 475 A.2d 1320 (1984). Courts will construe the term in light of its purpose of taxation, giving the term its popular or practical understanding. Tucker v. City of Pittsburgh, 504 Pa. 580, 475 A.2d 1318 (1984).
The term "manufacturing" does not include the reproduction of originals (i.e., photocopying), printing of designs and text on ready-made clothing, treating unfinished cloth (i.e., including dyeing, printing, and applying chemical processes), wholesale meat processing and packing, annealing and galvanizing rolled steel, or commercial illustration. Ikon Office Solutions, Inc. v. City of Pittsburgh, 771 A.2d 870 (Pa.Cmwlth.2001); Ohiopyle Prints; HAB Industries, Inc. v. City of Allentown, 168 Pa.Cmwlth. 151, 649 A.2d 198 (1994),appeal discontinued, 540 Pa. 607, 655 A.2d 994 (1995); Tucker; City of Reading v. Forty-Five Noble Street, Inc., 50 Pa.Cmwlth. 431, 413 A.2d 1153 (1980). Manufacturing does include bookbinding, the processing of odd lots of cardboard into packaging (e.g., shirt and hosiery inserts, collar supports, and ribbon reel covers), and the commercial printing of newspapers. Mar-Pat; Bindex; City of Pittsburgh v. Pittsburgh Press Company, 14 Pa.Cmwlth. 551, 322 A.2d 390 (1974).
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