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D. L. Ward Co. v. Tax Review Board

Supreme Court of Pennsylvania
Sep 27, 1966
222 A.2d 923 (Pa. 1966)

Opinion

May 4, 1966.

September 27, 1966.

Taxation — Municipalities — Philadelphia — Mercantile license tax — Words and Phrases — Retail dealer — Philadelphia Code.

1. A taxpayer who sells paper (1) to customers who use It for the production of pamphlets, brochures, catalogues and magazines and (2) to book publishers who print upon it and bind it as pages in books is a retail vendor under the Philadelphia Mercantile License Tax Ordinance.

2. The test of a wholesale vendor or dealer is whether his customer buys a product for the purpose of reselling it; and the determination of whether a transaction is wholesale or retail should be made by reference to what the buyer does with the product.

Mr. Chief Justice BELL dissented.

Argued May 4, 1966. Before BELL, C. J., MUSMANNO, JONES, COHEN, EAGEN, O'BRIEN and ROBERTS, JJ.

Appeal, No. 259, Jan. T., 1966, from judgment of Court of Common Pleas No. 4 of Philadelphia County, March T., 1965, No. 1499, in case of D. L. Ward Co., also known as D. L. Ward, Incorporated v. The Tax Review Board of the City of Philadelphia. Judgment reversed.

Appeal by taxpayer from decision of tax review board.

Order and judgment entered sustaining appeal, opinion by BROWN, JR., P. J. City of Philadelphia appealed.

Levy Anderson, First Deputy City Solicitor, with him Edward G. Bauer, Jr., City Solicitor, for City of Philadelphia, appellant.

William G. Handfield, with him Bernard J. McNamee, and Clark, Ladner, Fortenbaugh Young, for appellee.


This is an appeal under Rule 68 1/2 by the City of Philadelphia from the judgment of the Court of Common Pleas No. 4 of Philadelphia County reversing the decision of the Tax Review Board of the City of Philadelphia, which held that certain sales by appellee-taxpayer were sales at retail for purposes of the Philadelphia Mercantile License Tax.

This tax is imposed by the City of Philadelphia upon the privilege of engaging in business in Philadelphia for gain or profit. Philadelphia Code, § 19-1000. The tax is computed at the rate of three mills per dollar on the gross volume of business transacted, but a wholesale dealer or wholesale vendor may pay the tax by an alternative method of computation, permitted only to wholesalers, if the latter method is more favorable to him. § 19-1003. Appellee employed this formula in determining his tax liability, and the City issued an additional assessment on the ground that appellee did not qualify as either a wholesale dealer or wholesale vendor.

Appellee is engaged in business in Philadelphia in the sale of various kinds of paper, paper products, wrapping and packaging materials. The sales in question involved paper sold (1) to customers who used it for printing or embossing for the production of pamphlets, brochures, catalogues and magazines and (2) to book publishers who printed upon it and bound it as pages in books. In each category the Tax Review Board held that the sales were at retail, but was reversed by the court of common pleas which held that they were sales at wholesale.

Section 19-1001(12) defines wholesale dealer or wholesale vendor as "Any person who sells to dealers in or vendors of goods, wares, and merchandise." All other dealers or vendors are defined by subsection (10) as retailers. In Pennsylvania, ". . . the test of a wholesale dealer is whether its customer buys for the purpose of reselling." Brown Zortman Machinery Company v. Pittsburgh, 375 Pa. 250, 256, 100 A.2d 98, 102 (1953). In Kerchner, Marshall Company v. Pittsburgh, 406 Pa. 158, 176 A.2d 645 (1962), we decided that the sale of mineral and metal products to manufacturers of iron, steel and glass products constituted a sale at retail because the customers of the taxpayer did not resell the purchased products either in the same condition or as the same product. We stated that ". . . the determination of whether a transaction is wholesale or retail should be made by reference to what the buyer does with the product. . . ." 406 Pa. at 161, 176 A.2d 647. If the taxpayer's customers consume the materials in the production of different products, they are not vendors of the goods which they buy from the taxpayer; and the taxpayer is a retail seller. Indeed, this is so even where the material purchased from the taxpayer and used to make a new and different product is identifiable in the end product.

In the present case, when the paper was resold with printing or embossing upon it in the form of pamphlets, brochures, catalogues and magazines, or as pages in a book, the paper was not the same product nor was it in the same condition as the product which the taxpayer had sold to its customer. Furthermore, even though the paper was readily identifiable in the finished article, unlike the components of steel or glass, it was not the subject of the sale. The purchasers from the taxpayer's customers did not buy paper. Rather, they purchased a new and totally different product, given a new value and utility by virtue of the reproductions placed upon them or by their placement within the binding of a book.

Accordingly, we determine that the taxpayer is a seller at retail under the Philadelphia Mercantile License Tax Ordinance.

Judgment reversed without interest or penalty.

Mr. Chief Justice BELL dissents.


Summaries of

D. L. Ward Co. v. Tax Review Board

Supreme Court of Pennsylvania
Sep 27, 1966
222 A.2d 923 (Pa. 1966)
Case details for

D. L. Ward Co. v. Tax Review Board

Case Details

Full title:D. L. Ward Co. v. Tax Review Board (et al., Appellant)

Court:Supreme Court of Pennsylvania

Date published: Sep 27, 1966

Citations

222 A.2d 923 (Pa. 1966)
222 A.2d 923

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