Comptroller of Treasury, Retail Sales Tax Division v. Atlas General Industries

• Decision Date: 09 March 1964
• Docket Number: No. 231,231
• Citation: 198 A.2d 86,234 Md. 77
• Parties: COMPTROLLER OF the TREASURY, RETAIL SALES TAX DIVISION v. ATLAS GENERAL INDUSTRIES.
• Court: Maryland Court of Appeals

Page 77

234 Md. 77

198 A.2d 86

COMPTROLLER OF the TREASURY, RETAIL SALES TAX DIVISION v. ATLAS GENERAL INDUSTRIES.

No. 231.

Court of Appeals of Maryland.

March 9, 1964.

Russell R. Reno, Jr., Asst. Atty. Gen. and Edward F. Engelbert, Chief, Retail Sales Tax Division (Thomas B. Finan, Atty. Gen., Baltimore, on the brief), for appellant.

Walter C. Anderson and William W. Travers, Salisbury (Webb & Travers, Salisbury, on the brief), for appellee.

Before BRUNE, C. J., and HENDERSON, HAMMOND, PRESCOTT and MARBURY, JJ.

PRESCOTT, Judge.

After the trial judge reversed a decision of the Comptroller of the Treasury, denying a petition of the appellee protesting a sales tax assessment, he appealed.

Two questions are presented for decision: (1) does the failure of a vendor to secure, from the vendee, a certificate that a purchase is made for resale create an absolute liability on the part of the vendor to pay a sales tax, or does the statutory requirement of a resale certificate merely create a rebuttable presumption, which may be overcome by a showing that, in fact, the sale was for resale; and (2) under the facts of this case, is the Comptroller estopped from making a tax assessment based on the failure of appellee to secure resale certificates?

Marvil Package Company, a division of Atlas General Industries, the appellee, is engaged in the business of manufacturing baskets and crates used in the packaging of vegetables, chickens, seafood, and other food stuffs. During the period 1954 to 1961, appellee failed to collect retail sales taxes, or, in the alternative, to secure resale certificates from some of its customers upon the sale of various shipping containers.

Certain of the packaging sold by appellee was used by farmers and vegetable packers to hold tomatoes, cucumbers, chickens, oysters, and other food products for shipment to various markets. The farmers and packers who purchased these crates filled them with the various commodities mentioned above and then sold them at market. As indicated above, no resale certificates were secured by appellee from the farmers and packers who purchased these containers, nor was any sales tax collected on these sales.

In 1954, auditors for the Retail Sales Tax Division conducted an audit of appellee's records at their Salisbury Warehouse Division and determined that a small amount of tax was due on certain retail sales of baskets. This assessment was levied and paid by appellee without protest. At that time, the auditors for the Retail Sales Tax Division did not challenge other sales wherein no resale certificates had been received. There is, however, nothing in the evidence to indicate that the auditor was ever concerned with this latter problem and there is no indication that the question of the failure of appellee to seek such resale certificates was ever discussed with the auditor or called to his attention.

As early as 1952, the Retail Sales Tax Division had sent out releases to various segments of the industry calling their attention to the provisions of the sales tax law and attendant regulations requiring that resale certificates be obtained in the event a sale was made to a purchaser for resale. On some occasions these releses were mailed to all taxpayers holding Retail Sales Tax Licenses. The testimony also indicates that the sales tax return forms used by appellee in 1954 and thereafter contained an instruction pointing out the necessity of obtaining resale certificates.

Subsequent to the audit in 1954, a new audit was made by the Retail Sales Tax Division in 1960 and at that time the lack of resale certificates was challenged and an assessment, originally far in excess of the amount presently in contention, was levied against the appellee. This assessment related to taxes alleged to be due on those sales to farmers and food packers where no resale certificates had been furnished. The appellant seems to concede that the purchases here involved were, in fact, for the purpose of resale.

Immediately following this assessment the Baltimore City Court (Prendergast, J.) on March 16, 1961, decided the case of Bagby Furniture Company v. Comptroller (reported in the Daily Record, May 10, 1961) in which it was determined that the requirement of resale certificates imposed by Section 333 of Article 81 of the Maryland Code was mandatory and that the failure to secure such certificates rendered the transaction taxable. At the conclusion of his opinion, Judge Prendergast suggested that remedial legislation be enacted by the Maryland General Assembly to give the taxpayer a reasonable time after sales had occurred within which to obtain resale certificates. Within two weeks after the opinion was handed down, the Assembly, which was then in session, enacted as an emergency measure Chapter 736 of the Acts of 1961 (effective May 3, 1961) which added two new sections to Article 81, Sections 333A and 333B, giving persons who had failed to secure resale certificates a grace period of sixty days within which to secure the same, after they had been notified by the Comptroller of his intention to make an assessment. An additional provision in Chapter 736 provided that it should be given retroactive effect to include sales occurring before the effective date of the Act in those instances where the Comptroller had not levied an assessment, or, if he had levied an assessment, where the assessment was still subject to contest. Pursuant to this legislation, appellee secured resale certificates for the greater part of the sales involved in the original assessment, thereby reducing the same from far in excess of $100,000 to the amount now in question, to wit, $6,150.18. This reduced assessment relates to those sales where no resale certificates were in fact secured within the new 60-day grace period.

I

The appellee here argues that under Code (1957), Article 81, Section 333, ¹ the failure to obtain resale certificates created only a rebuttable presumption of liability on its part for the tax; and it has successfully rebutted the presumption. It also argues that even if Section 333 creates a conclusive presumption such presumption does not apply to the sales in question because they are excluded from the Sales Tax Act by definition in Code (1957), Article 81, Section 324(f). ²

The appellant counters, contending that Sections 324(f), 333 and 333B must be construed together, and that, under a proper construction thereof, the admitted failure of appellee to secure resale certificates creates an absolute liability that it pay the sales tax. Obviously if appellant be correct in this contention, it is a complete answer to both of the appellee's arguments under this heading.

There can be little doubt, we think, that the statutes should be construed together. It will be noted that although Section 324(f) excludes sales for resale from the definition of 'retail sale,' Sections 333 and 333B set forth what a vendor must do to set on foot such an exclusion, and relieve him from the obligation imposed by Section 325 of collecting a sales tax from the purchaser. These latter sections provide that all receipts for the sale of tengible personal property shall be presumed to be subject to tax, with the burden of establishing the contrary on the vendor or purchaser, and unless the vendor shall have taken from the purchaser a certificate signed by the purchaser and bearing the number of his registration certificate to the effect that the property was purchased for resale, 'the sale shall be deemed a taxable sale,' and in case no certificate is furnished or obtained prior to the time the sale is consummated, 'the tax shall apply as if the sale were made at retail.' It is difficult to see how the Legislature could have used plainer or more precise language to express an intention that the tax applies, unless certificates of resale are obtained. It seems apparent that Section 333 was designed as an easy method of establishing that a purchase has been made for the purpose of resale, but, at the same time, when resale certificates are not obtained to avoid possibly protracted and tedious litigation in attempts to establish that purchases have, in fact, been made for the purpose of resale. We, therefore, hold that the trial court was in error when he found that the assessments made herein by the Comptroller were null and void.

The above conclusion is bolstered by the provisions of Section 333B. We pointed out above that the Legislature enacted this statute shortly after the decision of Bagby, supra, wherein the trial court had held that under the provisions of Section 333 an absolute liability on the part of the vendor to pay the tax arose upon its failure to procure resale certificates even if the purchases were, in fact, for resale. The Legislature expressed no disagreement with this conclusion, but on the contrary, after providing for a sixty-day grace period to obtain resale certificates, stated that if such certificates were not obtained, which is the situation in the case at bar, the Comptroller's assessment 'shall be final.' Again, we think the language of the statute is plain and unambiguous and the legislative intent clear.

There is nothing in the above interpretation of the statutes herein involved that conflicts with our decision in Baltimore Foundry & Machinery Corp. v. Comptroller, 211 Md. 316, 127 A.2d 368. We have construed the statutes as strongly in favor of the taxpayer as their terms will permit.

Our sister State of Ohio, with a statute very similar to ours, reached the same conclusion that we do. Steubenville White Truck Sales & Service, Inc. v. Peck, 162 Ohio St. 251, 122 N.E.2d 790; Bellows Co. v. Bowers, 165 Ohio St. 9, 133 N.E.2d 131. Cf. Faber...