Court: Commonwealth Court of Pennsylvania; March 14, 2001; Pennsylvania; State Appellate Court
The City of Pittsburgh is appealing a decision from the Court of Common Pleas of Allegheny County, which upheld Ikon Office Solutions’ appeal regarding the denial of its refund request for business privilege taxes for the years 1993 to 1997. Ikon argues that its activities qualify as manufacturing under Section 2(4) of The Local Tax Enabling Act (LTEA), which would exempt it from the business privilege tax. Ikon, previously known as Aleo Office Systems and operating as Nigh-tRider, sought refunds after being denied by the City Treasurer.
The City Treasurer found that Ikon employs 75 to 85 people and utilizes various high-speed copiers and binding equipment to reproduce and bind documents as directed by clients. While the Treasurer concluded that most of Ikon’s activities do not qualify for the manufacturing exemption, a portion related to bound documents was deemed exempt.
On appeal, the court concluded that Ikon’s document reproduction services fit the manufacturing definition, referencing a precedent case that defined manufacturing as the transformation of materials into new, useful items through labor and machinery. The City contests this interpretation, arguing that Ikon’s photocopying does not meet the LTEA manufacturing criteria, thus denying the refund and exemption from future taxes.
The appellate review focuses on whether legal errors occurred, constitutional rights were violated, and whether the findings were backed by substantial evidence. The determination of whether an activity qualifies as manufacturing under the LTEA is case-specific, with courts interpreting the term narrowly. The LTEA defines manufacturing as requiring a significant transformation of materials into a new identity, supported by skill and labor, while previous Pennsylvania case law clarifies that certain activities, like printing on clothing or processing meat, do not qualify as manufacturing.
Manufacturing encompasses activities such as bookbinding, processing odd lots of cardboard into packaging, and the commercial printing of newspapers. However, photocopying does not qualify as manufacturing. In the case of Pittsburgh Press, the court ruled in favor of a newspaper publisher who was taxed on gross receipts from advertising printing, distinguishing between newspaper printing—which is considered manufacturing—and photocopying, which results in only superficial changes to materials. The court found Ikon’s photocopying services more closely resemble activities deemed non-manufacturing in previous cases (Ohiopyle Prints, Tucker, and Forty-Five Noble Street) rather than manufacturing processes like bookbinding or newspaper printing. Consequently, the trial court's order was reversed, emphasizing that photocopying does not align with the common understanding of manufacturing. The reversal was issued on March 15, 2001, under the Act of December 31, 1965. Ikon primarily provides photocopying services to the legal community, handling confidential documents.
