The Right to Seek Declaratory Judgement and Refunds of Philadelphia Mercantile License Tax

In Automobile Trade Association of Greater Philadelphia v. City of Philadelphia, 528 Pa. 233, 596 A.2d 794 (1991) of Greater Philadelphia, automobile dealers and their trade association sought declaratory judgment and refunds of the Philadelphia Mercantile License Tax paid on the basis that the tax was violative of the uniformity requirement of Article 8, Section 1 of the Pennsylvania Constitution. While the matter was pending before the court of common pleas, the tax ordinance was repealed. The court subsequently granted summary judgment in favor of the City of Philadelphia on both the claims for declaratory relief and the claims for refunds. The court concluded that as the grant of retroactive relief is discretionary, it would not grant refunds even if it were to determine that the tax was unconstitutional. As a result, the court avoided addressing the constitutionality of the repealed tax ordinance. Following affirmance by this Court, the automobile dealers and trade association appealed to the Pennsylvania Supreme Court. In reversing and remanding for further proceedings on the claims for refunds, the Supreme Court noted: Here, the lower courts relied almost exclusively on the conclusory assertion that requiring refunds would impose a substantial hardship on the City's budget as the basis for denying retroactive application. Little attention was given to determining whether a decision that the tax violated the uniformity requirement was "clearly foreshadowed", the courts merely stating that the taxes had been "collected under a presumptively valid statute." More importantly, there was no discussion of the purpose of the uniformity rule and the effect retroactive or prospective application of a decision invalidating the Mercantile License Tax would have on its operation. This is not surprising, in that the courts did not actually find the tax to be violative of the uniformity provision, but instead avoided deciding that question by addressing the retroactivity question first. In approaching the questions in this manner, putting the cart before the horse, the courts below committed fundamental error. It makes little sense to follow the precept of avoiding resolution of constitutional questions unless absolutely necessary, where the alternate grounds for decision call into play the reasoning necessary to the constitutional decision. The Chevron Oil v. Huson, 404 U.S. 97, 30 L. Ed. 2d 296, 92 S. Ct. 349 (1971) retroactivity analysis requires a full understanding of how the decision in question was reached, and the purposes to be served by application of the decision. Such analysis is virtually impossible to undertake in any meaningful way where the "decision" is nothing more than assuming the unconstitutionality of the statute arguendo. Automobile Trade Association of Greater Philadelphia, 528 Pa. at 238, 596 A.2d at 797.