Source: http://www.pazoninglawyers.com/municipal-law-2/property-owners-can-be-required-to-pay-business-privilege-tax-on-rental-proceeds/
Timestamp: 2019-06-15 23:56:27
Document Index: 507914546

Matched Legal Cases: ['§ 301', '§6924', '§ 301', '§ 301', '§6924', '§ 301', '§ 301', '§ 301']

Property Owners Can Be Required to Pay Business Privilege Tax on Rental Proceeds - Pennsylvania Real Estate, Land Use, Zoning, and Municipal Lawyers Property Owners Can Be Required to Pay Business Privilege Tax on Rental Proceeds - Pennsylvania Real Estate, Land Use, Zoning, and Municipal Lawyers
Fish and several other rental property owners in Lower Merion Township (“Landlords”) brought a declaratory judgment action against the Township. The Township had notified them that they were obligated to pay the BPT on all of their rental proceeds. Landlords sought a declaratory judgment that the Township’s BPT could not be applied to rental proceeds from leases and lease transactions because of § 301.1(f)(1) of the LTEA, which prohibited the levying, assessing, or collecting of “any tax on…leases or lease transactions[.]”53 P.S. §6924.301.1(f)(1).
The Court of Common Pleas of Montgomery County granted the Township’s motion for judgment on the pleadings. It found that the BPT was not a transactional tax, and that the § 301.1(f)(1) exception only applied to transaction taxes. Therefore the BPT could be applied to Landlords’ rental income. The Commonwealth Court, in a divided en banc decision, reversed. It held that the term “any tax” encompassed both privilege taxes and transaction taxes.
On appeal, the Supreme Court reversed and reinstated the trial court’s ruling. It found that “any tax” did not encompass privilege taxes. The decision was based on another exception in § 301.1(f) on manufacturing. In the manufacturing exception the legislature had prohibited taxes “on any privilege, act or transaction related to” the manufacturing of goods. 53 P.S. §6924.301.1(f)(4). The emphasized language, the Court reasoned, would be superfluous if “a tax”—which the Court held was the same as “any tax”—on manufactured goods was intended, without more, to prohibit privilege taxes “related to” the making of goods. Therefore § 301.1 (f)(1) could not be read to prohibit privilege taxes “related to” leases unless it expressly said so. As § 301.1(f)(1) did not, the lease exception in § 301.1(f)(1) did not encompass privilege taxes and the Township was within its authority when it levied the BPT against Landlords. The Court emphasized the general applicability of the BPT to all for-profit businesses offering services within the Township’s borders, and indicated that a tax directed specifically to lease transactions would be prohibited. Justice Baer’s concurrence succinctly summarized the point when he stated: “The tax at issue is not a tax on leases. It is a tax on the privilege of doing business within the township. As I view the privilege of doing business as a landlord to be distinct from a tax on a lease, I agree that the tax at issue is not prohibited.”
Click here to read: Fish v. Twp of Lower Merion, 29 MAP 2015 (Pa. Dec. 21, 2015).
Business Privilege Tax (BPT)Chief Justice SaylorCommonwealth CourtCourt of Common Pleas of Montgomery Countylease exceptionstatutory interpretationSupreme Courttransactional tax