Comptroller of Treasury v. M. E. Rockhill, Inc.

• Decision Date: 22 July 1954
• Docket Number: No. 173,173
• Parties: COMPTROLLER OF TREASURY v. M. E. ROCKHILL, Inc.
• Court: Maryland Court of Appeals

Page 226

205 Md. 226

107 A.2d 93

COMPTROLLER OF TREASURY v. M. E. ROCKHILL, Inc.

No. 173.

Court of Appeals of Maryland.

July 22, 1954.

Charles McC. Mathias, Jr., Asst. Atty. Gen. (Edward D. E. Rollins, Atty. Gen., on the brief), for appellant.

No appearance for appellee.

Before BRUNE, C. J., and DELAPLAINE and COLLINS, JJ.

DELAPLAINE, Judge.

The Comptroller of the Treasury, acting through his Retail Sales Tax Division, appellant, contended here that M. E. Rockhill, Inc., appellee, a corporation engaged in the development and management of real estate in Calvert County, is liable for the Maryland sales tax on rentals of cottages at Long Beach, a summer resort along the Chesapeake Bay.

The Retail Sales Tax Act, Code 1951, art. 81, § 321, provides that for the privilege of selling certain tangible personal property at retail and for the privilege of dispensing certain selected services defined as sales at retail by Section 320(f), a vendor shall collect from the purchaser a tax on the price of each separate retail sale made in this State, the tax to be computed as follows: (a) on each sale where the price is from 51 cents to $1, both inclusive, 2 cents; (b) on each 50 cents of price or fraction thereof in excess of $1, 1 cent.

Section 320(f) specifies five classes of services which are included within the term 'sale at retail'. The fifth class is described as follows:

'(5) The sale or charges for any room or rooms, lodgings, or accommodations furnished by any hotel, inn, tourist camp, tourist cabin or any other place in which rooms, lodgings or accommodations are regularly furnished to the public for a consideration.'

The Retail Sales Tax Act took effect on July 1, 1947. The State Comptroller thereupon adopted various rules and regulations to guide in the enforcement of the Act. He interpreted the tax on the sale or charges for any room or rooms, lodgings, or accommodations, Laws 1947, ch. 281, § 259, to apply to transient guests, not to permanent tenants. This interpretation is included in Rule 61 of the Retail Sales and Use Tax Rules and Regulations, entitled 'Room Rentals,' which reads in part as follows:

'Persons who regularly furnish living accommodations to transient guests for a consideration must collect and pay to the Comptroller a sales tax on the receipts therefrom. If there are guests in any such establishments who rent living accommodations on a monthly basis or who maintain a permanent residence therein, the sales tax shall not apply to the receipts from such permanent guests. However all rentals in resort areas for terms of four months or less are subject to the sales tax.'

The controversy in this case is over an assessment made by the Retail Sales Tax Division in 1951 on rentals of cottages in the period of three and a half years from July 1, 1947, to December 30, 1950. That Division found that the appellee had rented the cottages for the owners for terms of less than four months, and made an assessment against it of $155.97, with interest thereon of $15.60, making a total of $171.57.

The statute authorizes any taxpayer to apply to the Comptroller for revision of an assessment. When such an application is made, the Comptroller shall promptly act thereon and shall notify the taxpayer of his action. Thereafter the taxpayer may request a formal hearing before the Comptroller. The Comptroller shall thereupon grant a hearing, and after the hearing he shall make such revision of the assessment as he deems just and shall notify the taxpayer of his determination. The taxpayer may appeal from the final determination of the Comptroller to the Circuit Court for the county in which the taxpayer regularly conducts his business, or to the Baltimore City Court if the taxpayer regularly conducts his business in Baltimore City. Such appeal shall be limited to questions of law only, but the Comptroller shall file in the Court a certified copy of the record of proceedings held before him. The taxpayer, or the Attorney General on behalf of the State, or the Comptroller may appeal from the final order of the Court to the Court of Appeals of Maryland. Code 1951, art. 81, §§ 347, 348.

The appellee applied to the Comptroller for abatement of the assessment, but its application was denied. Thereafter it requested a hearing, and the Director of the Retail Sales Tax Division held a hearing on June 17, 1952. That officer, as duly authorized agent for the Comptroller, held that the accommodations furnished by the appellee at Long Beach were regularly furnished to the public in a resort area, and therefore he refused to make any revision of the assessment. The appellee appealed from that decision to the Circuit Court for Calvert County. That Court entered an order setting aside the assessment. The Retail Sales Tax Division then appealed from the Court's order.

First, it was contended by the appellee that Long Beach has no public bathing beach and no public amusements, and hence none of the 'honky-tonk atmosphere' of resorts. The Court, however, noted that only 10 per cent of the owners of cottages at Long Beach live there all the year round, and that 90 per cent come there in summer for rest and recreation. Accordingly the Court found Long Beach to be a resort area.

The commonly accepted definition of a 'resort' is a haunt or place of frequent assembly. In re Sic, 73 Cal. 142, 14 P. 405, 410; United States ex rel. Dobra v. Lindsey, D.C., 51 F.2d 141. It was held in Illinois, for example, that a street or alley, not used as a driveway, which adjoined a brewery, and where from six to twelve persons were in the habit of congregating daily for the purpose of drinking beer, was a place of public resort. Bandalow v. People, 90 Ill. 218, 220. But the definition of the term 'resort' includes not only a place frequented by many people, but also a place resorted to by an individual. Thus the lexicographers sanction such illustrations as 'The forest is my resort,' and 'Newport is a fashionable resort.'

Evidently the Comptroller, in using the term 'resort area' in Rule 61, contemplated public resort area. It is undeniable that the popular conception of a 'resort' is a place to which crowds of people go for their vacations. A summer resort is generally thought of as a popular place of entertainment or recreation. It is common knowledge, however, that recreation may be obtained without going to a theater or participating in some public amusement. Recreation denotes refreshment of body or mind after toil. It may come from any pleasant and diverting exercise or employment. There can be no doubt that the owners of the cottages at Long Beach have been attracted there by its location on the Chesapeake, which affords opportunities for recreation. One of the available recreations is bathing. On the beach is a bathhouse for residents and their guests. Another recreation is fishing. There are docking facilities in the harbor for rowboats and sailboats. For these reasons we are of the opinion that, even though Long Beach has no public beach and no public amusements, and hence no 'honky-tonk atmosphere,' nevertheless it may reasonably be considered a resort area.

Secondly, the appellee contended that the tenancies of the cottages at Long Beach were not 'regularly furnished to the public,' and therefore they were not sales at retail within the scope of Section 320(f)(5). The Court below did not accept that contention, but set aside the assessment on the ground that the Comptroller had no right to discriminate, as he attempted to do in Rule 61, between rentals in resort areas and rentals in other areas of the State.

We agree that the tenancies were not subject to the sales tax. But we reach this decision, not on the ground of discrimination between resort areas and non-resort areas, as it is unnecessary to discuss that question here, but on the ground that the tenancies were not 'regularly furnished to the public.'

The sales tax is an excise tax imposed by the Legislature in the exercise of the police power of the State. The Legislature, in Section 361 of the Retail Sales Tax Act, authorized the Comptroller to adopt such rules and regulations as he shall deem necessary to carry out the provisions of the Act and to define any terms used therein. It is universally recognized that it would be impossible for the Legislature to deal directly with the multitude of details in the complex conditions upon which it legislates, and so it has become customary for the Legislature to delegate to each administrative agency the power to make rules and regulations to carry legislation into effect. Unless an administrative officer or department is permitted to make reasonable rules and regulations, it would be impossible in many instances to apply and enforce the legislative enactments, and the...