Court Opinion

ID: 4969235
Source: CourtListenerOpinion
Date Created: 2021-09-24 16:38:58.202041+00
Date Added: 2024-06-11T08:16:28.627062
License: Public Domain

DISSENTING OPINION BY
President Judge PELLEGRINI.
Because Lower Merion Township’s (Township) business privilege tax (BPT) is a tax on the privilege of leasing real property in the Township, a different subject of tax, and not on the leases or lease transactions themselves, I would hold that the Township’s BPT does not violate Section 301.1(f)(1) of the Local Tax Enabling Act (LTEA).1 Accordingly, I respectfully dissent.
Appellants have a number of rental properties in the Township from which they derive rent. Section 301.1(a) of the LTEA authorizes local taxing authorities to levy, assess and collect “taxes as they shall determine on persons, transactions, occupations, privileges, subjects and personal property within the limits of such political subdivisions ...” 53 P.S. § 6924.301.1(a) (emphasis added). Pursuant to that authorization, the Township has enacted a business privilege tax on any “business, trade or occupation.”2 Appellants contend such a tax on their privilege of doing business, measured by the amount of rent they received, is actually a tax on rent prohibited under Section 301.1(f)(1) of the LTEA, which excludes taxing authorities from imposing any tax on “leases or lease transactions.”
Reversing the trial court and based on our Supreme Court decision in Lynnebrook and Woodbrook Associates, L.P. ex rel. Lynnebrook Manor, Inc. v. Borough of Millersville, 600 Pa. 108, 963 A.2d 1261 (2008) (“Lynnebrook ”), the majority finds that the business privilege tax is a tax on a lease or a lease transaction. I disagree that the Township’s business privilege tax is a tax on a lease or lease transaction and that Lynnebrook is controlling.
Lynnebrook is not controlling because the tax at issue in that case was not a “business privilege tax.” In that case, the municipality’s ordinance provided that “[a] tax is hereby levied and imposed, for general Borough purposes, on every Lease Transaction, at the rate of thirty ($30.00) dollars.” Id. at 1262. The Ordinance defined a lease transaction as “a transaction under which an Owner, either directly or through an agent ... and any other person or persons enter into an agreement under which such person or persons is/are allowed to become Occupant(s) of a Residential Rental Unit for a period equal to or less than one year.” Id. Our Supreme Court found that this flat rate on every transaction violated Section 301.1(f)(1) of the LTEA’s prohibition against taxing leases or lease transactions. What is involved here is not a tax on a lease transaction involving the receipt of rent.
*754As our Supreme Court explained in Gilberti v. City of Pittsburgh, 511 Pa. 100, 511 A.2d 1321, 1324 (1986):
The “privilege” of engaging in business within the City, which the [LTEA] establishes as a subject that may be taxed, ... must be regarded as being separate and apart from “transactions” within the City that may be taxed. To regard it otherwise would be to ignore the significance of the two subjects for taxation having been separately stated in the [LTEA]. (Citation omitted).
Since Gilberti, this Court has consistently reaffirmed the proposition that “a business privilege tax does not tax each ... and every transaction.” School District of City of Scranton v. R.V. Valvano Const. Co., Inc., 863 A.2d 48, 54-55 (Pa.Cmwlth.2004) (citing Township of Lower Merion v. QED, Inc., 738 A.2d 1066 (Pa.Cmwlth.), appeal denied, 565 Pa. 680, 775 A.2d 811 (2001)). Instead, a business privilege tax is a tax on a different subject of taxation than a lease — the privilege of doing business measured on the gross receipts of the person engaged in business.3
A case similar to this one that illustrates that a business privilege tax is a different subject of taxation than a lease or lease transaction is School District of City of Scranton v. Dale and Dale Design and Development, Inc., 559 Pa. 398, 741 A.2d 186 (1999), where our Supreme Court rejected an argument similar to the one made here. In that case, the issue was whether a business privilege tax could be imposed on a contractor’s receipts from residential construction given that Section 2(11) of the LTEA provided that local governments shall not have the authority “[t]o levy, assess or collect a tax on the construction of or improvement to residential dwellings.” 53 P.S. § 6902(11), renumbered as 53 P.S. § 6924.301.l(f)(ll). Like here, the taxpayer in that case contended that imposition of a business privilege tax for residential construction violated the LTEA. Our Supreme Court rejected that argument, stating that “the business privilege tax is imposed upon the privilege of conducting business within the City, determined by the gross receipts of the business. It is not a tax upon the construction of a residential dwelling ..., which is prohibited by the Act.” School District of City of Scranton, 741 A.2d at 189.
Given the well-established distinction between business privilege taxes, taxes on transactions and real property taxes, the majority’s assertion that Lynnebrook’s holding extends to the privilege of leasing real estate is unavailing. As the trial court correctly found, Lynnebrook is inapplicable here.
Accordingly, I respectfully dissent.
Judge LEADBETTER joins in this dissenting opinion.

. Act of December 31, 1965, P.L. 1257, as amended, renumbered by the Act of July 2, 2008, P.L. 197, 53 P.S. § 6924.301.1(f)(1).

. Section 138-42 of the Lower Merion Township Business Privilege Tax Ordinance.

. A business privilege tax is not a tax on a lease either. A lease is an interest in real property entered between a property owner— the lessor — and a lessee who may or may not occupy the properly and, if not forbidden by the lease, may sublease the property. A tax on a lease would be imposed on the value of the lease — what a willing lessee would pay to rent the property given the term of months or years left on the lease. In a long-term commercial lease, the rent imposed may not have any relationship to the rent received. Moreover, leases themselves are taxed as part of the real estate on the owner of the real estate because leases are included in the value of the real property. See Tech One Associates v. Board of Property Assessment, Appeals and Review of Allegheny County, 617 Pa. 439, 53 A.3d 685 (2012).