Township Business Privilege Tax Rejected

by McNees Wallace & Nurick LLC
Contact

The Commonwealth Court has ruled that Whitehall Township in Lehigh County could not tax sales occurring outside the territorial limits of the township.

In a February 11, 2013 decision, the Commonwealth Court of Pennsylvania struck down the township’s business privilege tax assessment primarily based upon the plain language of the imposition ordinance. In Giles & Ransome, Inc. v. Whitehall Township, 645 C.D. 2012 (Pa. Cmwlth., February 11, 2013), the Commonwealth Court closely examined Whitehall Township’s Business Privilege Tax ordinance and concluded that the ordinance permitted the imposition of tax only on transactions within the territorial limits of the township.

Whitehall Township had issued a Business Privilege Tax (BPT) assessment on Giles & Ransome, Inc. which taxed the gross sales of three salespeople who occasionally used an office in the township, but were not assigned to any particular office and were not managed by anyone in the township. Giles & Ransome sells heavy equipment 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 only imposes tax 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 . . . .”

The township relied on earlier cases allowing municipalities to impose tax on receipts from services rendered outside the township where the service activities were managed, directed and controlled from a headquarters office or “base of operations” within the taxing jurisdiction.

The Commonwealth Court, however, agreed with Giles & Ransome that the township could not tax the extra-territorial sales of the salespeople. Relying on a plain reading of the ordinance, the court noted that this was not a case for 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 of specific sales occurring within the township, the court concluded that the assessment was improper. The township has filed a petition for allowance of appeal to the Supreme Court of Pennsylvania, which has been opposed by Giles & Ransome. We will keep you updated on further developments.

The lesson to be taken away from the court’s decision is that it is crucial to analyze the language of the statute to determine what the scope of the tax is. Business privilege and mercantile tax ordinances take different forms, which necessarily require different modes of analysis. For instance, an ordinance can be a broad, privilege-based ordinance, with no territorial restrictions, like the City of Pittsburgh ordinance that was analyzed in the seminal case of Gilberti v. City of Pittsburgh, 511 A.2d 1321 (Pa. 1986), the first case to suggest a “base of operations” justification for taxing extraterritorial sales. Alternatively, the ordinance may take the form of a narrow, transaction-based ordinance, with a territorial restriction like the one in Giles & Ransome. In that case, the township may properly tax only those transactions that occur within the territorial limits of the township.

[Editor’s Note:  This case was argued in the Commonwealth Court by Randy Varner.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McNees Wallace & Nurick LLC | Attorney Advertising

Written by:

McNees Wallace & Nurick LLC
Contact
more
less

McNees Wallace & Nurick LLC on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.