On October 29, 2013, the Pennsylvania Supreme Court declined to hear an appeal from a February 2013 Commonwealth Court decision holding that a township business privilege tax applied only to transactions within the township. (See our June 2013 newsletter for an article on Giles & Ransome, Inc. v. Whitehall Township, 645 C.D. 2012 (Pa. Cmwlth., February 11, 2013).
Whitehall Township had issued a Business Privilege Tax (“BPT”) assessment on Giles & Ransome, Inc. which included in the base the gross sales of three salespeople who occasionally used an office in the township, but were not assigned to any particular office and not managed by anyone in the township. Giles & Ransome is a heavy equipment dealer in the eastern part of Pennsylvania and parts of New Jersey and Delaware. The record showed that the salespeople spent nearly all of their time in the field visiting customers over a multi-county area and that all sales orders were approved or rejected outside the township. The township argued that these sales should be included in the BPT base, even though the township ordinance imposes tax only on “the actual or whole gross volume of business transacted by such taxpayer within the territorial limits of the Township.” Whole or Gross Volume of Business is further defined by the ordinance as “the gross consideration credited or received for or on account of sales made, services performed, rentals of property, and/or other business transactions, within the territorial limits of the Township. . . .” Giles & Ransome argued that the plain words of the township ordinance only permit tax to be imposed on transactions occurring within the territorial limits of the township, and since the evidence in the record made clear that all sales were approved or rejected outside of the township at Giles & Ransome’s corporate headquarters, the tax did not apply to sales made to customers located outside of the township.
The Commonwealth Court agreed with Giles & Ransome that the township could not tax the extra-territorial sales of the salesmen. Relying on a plain reading of the ordinance, the court noted that this was not a case that needed a “base of operations” analysis; but rather, the ordinance specifically restricted the imposition of tax to only those transactions within the territorial limits of the township. Since the record contained no evidence that the sales to outside customers in any way occurred within the township, the court concluded that the township’s assessment was improper.
The take away from this case is that the language of the ordinance always should be examined closely. Often, taxing jurisdictions, especially those using contingent fee auditors, are unreasonably aggressive and issue assessments that go well beyond what their ordinances will support. They often base their positions on cases applying tax ordinances with much different language than their own. The Giles & Ransome case stands for the proposition that Pennsylvania appellate courts will not allow taxing jurisdictions to exceed what their own ordinances permit.