Pennsylvania Taxpayer Wins Appeal of Whitehall Township BPT Assessment
Giles & Ransome, Inc. (“Taxpayer”) appealed a Whitehall Township (“Township”) Business Privilege Tax (“BPT”) assessment to the Pennsylvania Commonwealth Court after the initial assessment was upheld at the Tax Appeal Board of Whitehall Township. The portion of the assessment that was appealed by the Taxpayer was based upon imposition of tax on sales and services made and delivered outside the Township territorial limits. The specific issue raised was whether the Township BPT ordinance applies to sales transactions of three salespersons who have desks at the Taxpayer’s place of business in the Township, but where the sale of heavy duty equipment took place outside the territorial limits of the Township. The stipulated facts established that although the three salespersons had the ability to use the Whitehall company location, they worked “on-the-road” and rarely utilized the office facilities. It was also noted that the Whitehall office location was one of seven office locations of the Taxpayer and not the business headquarters. The decision in favor of the Taxpayer, in part, turned on the wording of the Township ordinance which stated that the BPT is levied on the “actual whole or gross volume of business transacted by such taxpayer within the territorial limits of the Township during the preceding year.”
Although the Court recognized the ability of some municipalities, under certain circumstances of broader ordinance language, to tax extra-territorial transactions, it must be demonstrated that there is sufficient nexus with the intra-territorial base of operations. This determination often turns on whether the location within the municipality is the headquarters or otherwise the base of operation for a specific transaction. The Township was unable to support a transactional connection in this case to support a connection to the extra-territorial taxation, even if the Township ordinance supported such an expanded tax base. The Court went on to discuss the Pennsylvania cases of Gilberti, Rendina and J & K Trash and stated that regardless of the similarity, or lack thereof, of the language of the ordinances in these cases, “whether a business privilege tax is one based on intra-territorial activities or transactions or one that reached to extra-territorial revenue, some logical nexus must exist between the activity sought to be taxed and the taxing municipality.” In closing, the Court overturned the assessment of tax on the extra-territorial transactions stating that the ordinance purports to tax intra-territorial transactions, and the Township seeks to tax merely the irregular presence of persons in the Township, not transactions that occur in the Township.