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Philadelphia Ass’n of Linen Suppliers v. City of Philadelphia, 139 Pa.Super. 560, 12 A.2d 789

Facts

The City of Philadelphia adopted a sales tax ordinance in February 1938, which defined 'sale' broadly to include various forms of transfer of possession for consideration. The plaintiffs, engaged in supplying freshly laundered linens and garments, argued that their business was primarily a service and not a sale of tangible property. They contended that the tax was discriminatory since the laundry business was not taxed under the same ordinance. The Receiver of Taxes ruled that while sales of tangible property to linen suppliers were tax-exempt, the leasing of these supplies was taxable.

Plaintiffs in this suit in equity are persons and corporations in the business of supplying freshly laundered flat linens and garments at regular intervals to business establishments or professional offices requiring a supply of such articles, and laundering the soiled articles previously supplied.

Issue

The main legal issues were whether the plaintiffs' business constituted the sale of tangible personal property subject to the sales tax and whether the application of the tax was discriminatory.

Appellants rest this appeal upon three grounds: (1) That their business constitutes the furnishing of a service, and not the selling of tangible personal property; (2) that the taxing of their business is discriminatory and capricious, since admittedly the laundry business is not subjected to the tax; (3) that the ordinance is void as it violates section 6, art. 16, of the Charter Act of June 25, 1919, P.L. 581, 53 P.S. § 3256.

Rule

The court applied the definition of 'sale' from the ordinance, which included any transfer of title or possession for consideration, and emphasized that fiscal measures should be strictly construed against exemptions.

The word ‘sale’ or ‘selling’ means any transfer of title or possession or both, exchange or barter, license to use or consume, conditional or otherwise, in any manner or by any means whatsoever for a consideration, or any agreement therefor.

Analysis

The court found that the plaintiffs' business involved the transfer of possession of tangible personal property (linens) with a license to use them, which fell within the ordinance's definition of 'sale.' The court also noted that the classification of businesses for tax purposes is primarily a legislative function, and the plaintiffs' business did not fall under the same category as the laundry business, which was not subject to the tax.

The description of appellants' business would seem, without any doubt, to bring it within the general language of the ordinance.

Conclusion

The court affirmed the lower court's decree, concluding that the plaintiffs were engaged in taxable sales under the ordinance and that the tax was not discriminatory.

The decree of the court below is affirmed, at the cost of appellants.

Who won?

The City of Philadelphia prevailed in the case because the court upheld the validity of the sales tax ordinance and found that the plaintiffs' business activities were taxable under its provisions.

The City of Philadelphia prevailed in the case because the court upheld the validity of the sales tax ordinance and found that the plaintiffs' business activities were taxable under its provisions.

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