Tax Review Board of Philadelphia v. Brine Corporation

In Tax Review Board of Philadelphia v. Brine Corporation, 414 Pa. 488, 200 A.2d 883 (1964), our supreme court considered whether a business could be subject to a local mercantile license tax if the business's receipts were unearned income. The court stated that: Simply because a certain type of receipt may be derived as rent from real estate, dividends or interest from securities or gain from the sale of property (i.e. receipts generally referred to as "unearned") is not itself sufficient reason for holding that such receipts are not derived from the conduct of a business. It is as possible to conduct a business which generates only "unearned" receipts as it is to conduct an enterprise producing only "earned" receipts. Id. at 494, 200 A.2d at 886. The court never addressed whether a tax on earned income, but not unearned income, violated constitutional principles of uniformity. The court disapproved of Pennsylvania Company only in its explanation of the factors to consider in determining whether an enterprise is liable for the mercantile license tax. Thus, a person may purchase one piece of real estate and actively engage in renting and managing it. He certainly would be liable for mercantile tax. Another person may inherit ten pieces of rent-producing real estate with regard to which he does nothing but collect net rents. He would not be liable for mercantile license tax.