Court Opinion

ID: 6260180
Source: CourtListenerOpinion
Date Created: 2022-02-17 22:00:47.880123+00
Date Added: 2024-06-11T08:59:41.132616
License: Public Domain

Dissenting Opinion by
Mr. Justice Pomeroy:
Under the so-called “Little Sterling Act” (Act of August 9,1963, P. L. 640, as amended, 53 P.S. §16101 et seq.) the City Council of Philadelphia was given the power to authorize the Philadelphia School District Board of Education to impose any tax, for school purposes, which the city could impose for general revenue purposes. Pursuant thereto, Philadelphia City Council has adopted Ordinance No. 1861, amending Chapter 19-1800 of The Philadelphia Code. This ordinance authorizes the Board of Education to impose for general school purposes a tax, not to exceed ten percent of the sale price, “on the sale in the [School] District of liquor and malt and brewed beverages which are sold or dispensed during the tax year ... by any hotel, restaurant or club, or other person licensed by the Commonwealth” to sell or dispense such beverages. Plaintiffs, being such licensees, contend that the City of Philadelphia has no power to impose such a tax and therefore cannot delegate the authority to do so to the Board of Education. Our inquiry, then, is directed to the extent of and limitations upon the city’s power to tax.
The two basic reasons asserted by the appellees, and discussed by the majority, for the invalidity of the ordinance, are that (1) the regulation of the liquor industry and sales of liquor have been preempted by the Commonwealth by the enactment of the Liquor Code, Act of April 12, 1951, P. L. 90, as amended, 47 P.S. *288§1-101 et seq., and (2) since the Commonwealth is already taxing the retail sale of liquor, the City of Philadelphia does not have the power to impose a tax on an over-the-counter sale of liquor because of the limitations of the Sterling Act, Act of August 5, 1932, Ex. Sess., P. L. 45, §1, as amended, 53 P.S. §15971. In my view, neither reason is meritorious.
1. As to the preemption issue, I agree with the majority that by enacting the Liquor Code, supra, the legislature did not indicate explicitly any intention that its statewide regulation of liquor (or brewed beverages) should preempt the field not only as to local regulation but also as to local taxation; neither do I see any indication that it meant to do so by implication. Moreover, we are not here concerned with a tax which is in reality regulation because so excessive as to be confiscatory. The appellee has not cited, nor does our research reveal, any cases where the doctrine of preemption as it exists in Pennsylvania has been applied so that state regulation of an industry or other area of state interest has the effect of preventing local taxation of the regulated field.1
I cannot, however, accede to the majority’s proposition that preemption is a concept that, in Pennsylvania at least, is applicable to the field of taxation as well as that of regulation; specifically, that when the state enacts a specific tax for revenue purposes it thereby intends to occupy the field exclusively for itself. To my knowledge there has not heretofore existed in Pennsylvania a doctrine of preemption in the field of taxation, nor do I see any basis or need for creating one. Municipal subdivisions in Pennsylvania are creations of the sovereign state; they have no inherent power to tax, but *289only such as the state gives them. The Pennsylvania legislature has from time to time made specific grants of such power. With respect to the City of Philadelphia, that power has been delegated by the Sterling Act, supra,. That act grants to Philadelphia the power to levy and collect such taxes as it may determine “on persons, transactions, occupations, privileges, subjects and personal property”, subject, however, to the exception that the city may not levy “any tax on a privilege, transaction, subject or occupation, or on personal property, which is now or may hereafter become subject to a State tax or license fee”. The stated intent of the legislature in so providing was “to confer upon cities of the first class the power to levy, assess and collect taxes upon any and all subjects of taxation which the Commonwealth has power to tax but which it does not now tax or license. . . .” 53 P.S. §15971 (a). The approach that has traditionally been followed, and which to me seems still to be proper and adequate, is simply to ascertain whether a tax levied by Philadelphia is or is not within its Sterling Act power. In practical effect, the inquiry becomes one of ascertaining whether the city is without such power because the “privilege, transaction, subject or occupation, or . . . personal property” sought to be taxed is already subject to a state tax or license fee.2
The inquiry is thus not whether the state has imposed a tax in a particular area of taxation; it is whether a particular state tax and city tax are coincident with respect to a privilege, transaction, subject or occu*290pation, or to personal property. The appellees do not dispute that the state could tax (and therefore the city can tax) the sale of liquor, malt and brewed beverages as dispensed by state licensees; they assert that since the local tax and the state tax are both upon the sale of liquor, the subject of the taxes is the same, i.e., liquor; and the transaction is the same, i.e., sale of liquor. In my view, this is an overbroad reading of the Sterling Act.
The Commonwealth levies and collects two taxes in the area of liquor—the general 6% sales tax and the 18% emergency tax on liquors. The sales tax, Tax Act of 1963 for Education, Act of March 6, 1956, P. L. (1955) 1228, art. I, §1, as amended, 72 P.S. 3403-1 et seq., is imposed upon “each separate sale at retail as defined herein” (72 P.S. 3403-201 (a)). As to liquor, malt and brewed beverages, sales at retail are defined so as to include all sales of liquor by Pennsylvania liquor stores (“State Stores”) to any person for any purpose and the sale of malt or brewed beverages from the manufacturer or distributor thereof to any person for any purpose, but to exclude sales of liquor by any person holding a retail liquor license or sales of malt and brewed beverages by a retail dispenser (72 P.S. 3403-2 (j) (7) (d)). The 18% Emergency Liquor Tax, Act of June 9, 1936, Ex. Sess., P. L. 13, §2, as amended, 47 P.S. §795, imposes a tax on “the net price of all liquors sold” by the Pennsylvania Liquor Control Board.3
It is clear to me that these state taxes are imposed upon a transaction, which is the sale of liquor as it is dispensed from the “State Stores” or, in the case of malt or brewed beverages, the sale of such beverages as *291they are dispensed by the manufacturer or distributor. The proposed city tax authorized by Ordinance No. 1861, on the other hand, although a tax upon a transaction of sale, is upon an entirely different transaction, being a sale between different parties; at different times, and on a different subject.
It is of course true that both sales transactions involve liquor or brewed beverages, as the case may be, but this point in common is not determinative. The taxes are not taxes on property; they are taxes on sales. Moreover, although alcoholic beverages are involved in both sales, the entire context of the sales and, indeed, the form of dispensing of the articles sold, is different in the two situations. The Commonwealth chooses to tax only the liquor sales which are made by its State Stores, which must be by the unopened bottle (47 P.S. §3-305 (d)), and to tax only the brewed beverage sales which are made by the distributors thereof, which must in general be by packages containing not less than 24 containers (47 P.S. §1-102). Neither the liquor sold at State Stores nor the malt or other brewed beverage sold by distributors may be consumed on the premises. In contrast, the proposed city tax is on the sale by licensees which sale must, in the case of liquor, be by “the glass, open bottle or other container, in any mixture” (47 P.S. §4-406 (d)) for consumption on the premises and, in the case of malt or other brewed beverages, by individual containers for consumption on the premises, or, if to “take out”, in quantities not in excess of 144 ounces (two “six packs”) in a single sale to one person (47 P.S. §1-102).
The majority opinion, in rejecting the view that the transactions being taxed by the Commonwealth and the city, respectively, ■ are not the same, gives as its reason that the Commonwealth taxes sales at the State Store level because of ease of collection through its own stores. Conceding that this may be. the motivation for *292the arrangement, it appears to me quite irrelevant to the determination of whether the same transaction as the state taxes at State Stores is sought to be taxed by the city at places other than State Stores.4
In sum, since the city has been granted by the Commonwealth the same power to tax as the Commonwealth itself possesses, since it is uncontradicted that the Commonwealth itself could enact a statute having the same content as the contested ordinance, and since the Commonwealth has not already taxed the over-the-counter sale of liquor and malt or brewed beverages, there is no basis for invalidating the ordinance as enacted by Philadelphia City Council. I would, therefore, reverse the decree of the court below and I accordingly dissent.
Mr. Justice Eagen joins in this dissent.

 See, e.g., Harris-Welch, Inc. v. Dickson City Boro, 420 Pa. 259, 216 A. 2d 329 (1966) ; Dept. of Licenses v. Weber, 394 Pa. 466, 147 A. 2d 326 (1959) ; Western Pennsylvania Restaurant Association v. Pittsburgh, 366 Pa. 374, 77 A. 2d 616 (1951).

 There are many examples in the boohs of this- approach to the problem. See, among others, Tax Review Board v. Smith, Kline and French, 437 Pa. 197, 262 A. 2d 135 (1970) ;.L. J. W. Realty Corp. v. Philadelphia, 390 Pa. 197, 134 A. 2d 878 (1957) ; Cahill v. Philadelphia, 381 Pa. 611, 114 A. 2d 99 (1955) ; National Biscuit Co. v. Philadelphia, 374 Pa. 604, 98 A. 2d 182 (1953) ; Murray v. Philadelphia, 364 Pa. 157, 71 A. 2d 280 (1950).

 The taxing clause provides in relevant part: “An emergency State tax is hereby imposed and assessed at the rate of Eighteen percentum of the net price of aU liquors sold by the board. The tax herein imposed shall be collected by the board from the purchasers of the liquor from the board.”

 Another reason for the state scheme is probably that the imposition of a tax on sales by State Stores is the only method of reaching sales of liquor in unopened bottles, of which there is, needless to say, a substantial volume. None of such sales would be reached by the proposed city tax. It is true that holders of licenses to sell liquor, such as the restaurants, hotels, clubs,, taverns whose sales would be reached by the proposed city tax, are obliged to pay the state sales taxes at the State Store level in the same manner and amount as individual purchasers for personal use. Such institutional purchasers, however, normaUy buy in bulk, and as such enjoy a wholesale price (47 P.S. §3-305 (b)). The appellees argue that because the licensee has already paid a state sales tax on his purchase from the State Store, the tax on his resale amounts to tax “pyramiding” and therefore is violative of the state taxing scheme, citing Commonwealth v. Wetzel, 435 Pa. 468, 257 A. 2d 538 (1969). Though the Commonwealth’s 6% sales tax does expressly exclude this tax on a sale made for resale, this exclusion in no way affects the city’s power as granted by the Sterling Act.