Mid-Atl. Sys. of WPA, Inc. v. Tax Office of the Municipality of Monroeville

204 A.3d 579

MID-ATLANTIC SYSTEMS OF WPA, INC., Appellant

v.The TAX OFFICE OF THE MUNICIPALITY OF MONROEVILLE

No. 588 C.D. 2018

Commonwealth Court of Pennsylvania.

Submitted on Briefs February 11, 2019

Decided March 4, 2019

Stephen C. Goldblum, Huntingdon Valley, for appellant.

Robert J. Wratcher, Pittsburgh, for appellee.

BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE ROBERT SIMPSON, Judge HONORABLE P. KEVIN BROBSON, Judge

OPINION BY JUDGE COHN JUBELIRER

Mid-Atlantic Systems of WPA, Inc. (Mid-Atlantic) appeals from the March 27, 2018 Order of the Court of Common Pleas of Allegheny County (common pleas) denying Mid-Atlantic's appeal from the Decision of a Tax Hearing Officer (THO) of the Tax Office of the Municipality of Monroeville (Tax Office). The THO denied Mid-Atlantic's Consolidated Tax Appeal and Petition for Refund of Business Privilege Taxes for Tax Years 2012 to 2016 (Tax Appeal) and found that Mid-Atlantic owed $ 51,712.15 in additional Business Privilege Taxes (BPT), penalties, and interest. On appeal, Mid-Atlantic argues the Municipality of Monroeville (Monroeville) cannot assess the BPT against it because Monroeville is precluded from doing so by Section 12 of the Home Improvement Consumer Protection Act¹ (HICPA) and Subsections 301.1(f)(1) and (f)(11) of the Local Tax Enabling Act² (LTEA). Mid-Atlantic further asserts that, because Monroeville's taxing scheme as applied to it is invalid under HICPA and the LTEA, that scheme violates the Uniformity Clause of the Pennsylvania Constitution³ and the Equal Protection Clause of the United States Constitution.⁴ Finally, Mid-Atlantic seeks the abatement of the penalties, interest, and costs as permitted by Monroeville's BPT Regulations. Discerning no error, we affirm.

I. Background

A. Monroeville's BPT Ordinance and Regulations

Section 3.A of Monroeville's Ordinance 2329 (BPT Ordinance), enacted pursuant to the LTEA, assesses "an annual tax ... on each dollar of volume of the gross annual receipts" on "[e]very person engaging in any business in the Municipality ...." (Reproduced Record (R.R.) at 97a.) The BPT "is a tax on the privilege of doing business in ... Monroeville." (Id. at 122a.) For corporations, the BPT is calculated on the corporation's gross receipts. (Id. at 121a.) In order to ascertain what businesses are subject to the BPT, Monroeville's BPT Regulations state that anyone "desiring to do business in ... Monroeville [is] required to obtain a business privilege ... license (business license) ...." (Id. at 110a; see also Section 5 of the BPT Ordinance, R.R. at 98a.) To obtain a business license, Monroeville requires the completion and filing of a business registration form with Monroeville's Tax Collector and payment of a yearly fee of $ 25.00. (R.R. at 113a.) If a business owes taxes to Monroeville, including the BPT, no license will be issued. (Id. ) An entity that engages in business in Monroeville without obtaining a license can be subject to a penalty and fine. (Id. at 116a.)

B. Monroeville's Assessment of the BPT Against Mid-Atlantic

Mid-Atlantic is a Pennsylvania corporation that "improv[es] real property through customization, installation and application of basement waterproofing materials, technologies and techniques." (Common Pleas 1925(a) Opinion (1925(a) Op.) at 2.) It began its business operations in Monroeville on March 1, 2012, and this location is its principal place of business. Mid-Atlantic registered with the Tax Collector, obtaining a business license and paying the annual business license fee for the tax years 2012 through 2016 (Reassessment Years). It also filed BPT returns and paid that tax in the Reassessment Years. In August 2016, the Tax Office requested Mid-Atlantic to provide records of its gross receipts for the Reassessment Years. Upon reviewing those records, the Tax Office issued Notices of Assessment, assessing additional BPTs, penalties, and interest based on Mid-Atlantic's purported failure to report all of its gross receipts. After an informal conference to discuss excluding Mid-Atlantic's gross receipts from the BPT and an abatement, the Tax Office rejected Mid-Atlantic's arguments and abatement request.

Mid-Atlantic filed an appeal with the Tax Office.⁵ The Tax Office requested that Mid-Atlantic submit additional records to support claims made in that appeal. Thereafter, the Tax Office issued Revised Notices of Assessment, which reflected adjustments based on the additional records:

 BPT
Additional
Year Reported Adjusted Assessed Penalties Interest Total
2012                     $0.00                   $3,818.07                  $3,818.07               $1,164.51               $1,164.51               $6,147.09
2013                     $74.95                  $4,581.69                  $4,506.74               $1,104.15               $1,104.15               $6,715.04
2014                     $179.88                 $9,450.79                  $9,270.91               $1,715.12               $1,715.12               $12,701.15
2015                     $205.81                 $11,382.12                 $11,176.31              $1,397.04               $1,397.04               $13,970.39
2016                     $0.00                   $10,277.42                 $10,277.42              $668.03                 $668.03                 $12,178.48
Total         $460.64                 $39,510.09            $39,049.45        $6,048.85               $6,048.85          $51,712.15

(R.R. at 174a (emphasis in original).) Mid-Atlantic timely filed a BPT return for 2017 and paid $ 6,056 under protest.

C. Mid-Atlantic's Tax Appeal and the THO's Decision

On July 31, 2017, Mid-Atlantic filed the Tax Appeal,⁶ asserting Monroeville improperly assessed the BPT against it. Therein, it sought relief related to the Reassessment Years (2012-2016).⁷ Mid-Atlantic first argued that Monroeville could not assess the BPT and related penalties and interest against Mid-Atlantic because Monroeville was preempted from doing so by Section 12 of HICPA, which states that "[r]egistration under [HICPA] shall preclude any requirement of payment of a fee or registration or licensing of any home improvement contractor by any political subdivision," 73 P.S. § 517.12. Mid-Atlantic asserted it could not be made to pay the BPT because doing so required it to register and obtain a license from Monroeville.

The THO rejected this argument, holding there is a distinction between the licensing or registration of an entity or person and the taxation of the privilege of doing business within a municipality under the LTEA. (Decision at 3.) The assessment of the BPT and the related registration/licensing requirement on Mid-Atlantic, the THO reasoned, was not based on Mid-Atlantic's status as a home improvement contractor or the intention of regulating Mid-Atlantic's contracting business, but on the privilege of Mid-Atlantic conducting its business operation within Monroeville. The BPT and the registration/licensing requirements, the THO explained, were "imposed upon all business enterprises in [Monroeville] which may be lawfully subject to the tax pursuant to the LTEA." (Id. (emphasis added).)

The THO additionally rejected Mid-Atlantic's attempt to "bootstrap" the HICPA's prohibition against local registration and licensing of home improvement contractors to the assessment of the BPT. The THO concluded this argument was not supported by the Supreme Court's decision in City of Philadelphia v. Clement & Muller, Inc. , 552 Pa. 317, 715 A.2d 397, 398 (1998), which described the boundaries of preemption. (Decision at 4.) The THO observed that, even if Monroeville's licensing/registration scheme was preempted, this did not lead to the conclusion that Mid-Atlantic was not subject to the BPT. According to the THO, the intended target of Section 12 of HICPA was clear on its face and was limited to the registration and licensing of home improvement contractors in order to regulate those entities' construction activities. Because of that clear target, the "permitted" "outer bounds" of that preemption could be determined and did not include the preemption of the assessment of a BPT. (Id. (citing City of Philadelphia , 715 A.2d at 398 ).)

Mid-Atlantic next argued it does not have to pay the BPT, citing Subsections 301.1(f)(1) and (f)(11) of the LTEA. Subsection (f)(1), Mid-Atlantic asserted, excepts certain activities "from any tax ... on a privilege, ... subject, [or] occupation ... which is now or does hereafter become subject to a State tax or license fee ," 53 P.S. § 6924.301.1(f)(1) (emphasis added), and, citing National Biscuit Co. v. City of Philadelphia , 374 Pa. 604, 98 A.2d 182 (1953) ( National Biscuit ), Mid-Atlantic claimed the fee it pays under HICPA is the type of "State tax or license fee" that falls under this exception. Subsection (f)(11) likewise supported an exception here, Mid-Atlantic argued, because that provision precludes taxation "on the construction of or improvement to residential dwellings ...," 53 P.S. § 6924.301.1(f)(11), and Mid-Atlantic provides these services.

The THO was unpersuaded by Mid-Atlantic's arguments and held that National Biscuit , as well as School District of City of Scranton v. Dale and Dale Design Development, Inc. , 559 Pa. 398, 741 A.2d 186 (1999) ( Dale and Dale ), and Middletown Township v. Alverno Valley Farms , 105 Pa.Cmwlth. 311, 524 A.2d 1039 (1987), did not support Mid-Atlantic's asserted exceptions under the LTEA. National Biscuit , the THO concluded, held that not all State licensing or registration fees are true licensing fees that support a preemption or tax exception claim. Relying on the factors used by the Supreme Court in National Biscuit , such as the amount of the asserted fee, the nature of the fee, and the fee's purpose, the THO concluded that the HICPA registration fee is not a true license fee. As for the exception for construction and improvement to residential dwellings, the THO noted that both the Supreme Court,...