Comptroller v. Citicorp International Communications, Inc.
Decision Date | 04 October 2005 |
Docket Number | No. 147,147 |
Citation | 389 Md. 156,884 A.2d 112 |
Parties | COMPTROLLER OF THE TREASURY v. CITICORP INTERNATIONAL COMMUNICATIONS, INC. |
Court | Maryland Court of Appeals |
Leslie Moore Romine, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., on brief), for appellant.
Michael A. Pearl (Morrison & Foerster LLP, New York City, Stuart Levine, Fisher & Winner, LLP, Baltimore, on brief), for appellee.
Argued before BELL, C.J., RAKER, WILNER, CATHELL, HARRELL, BATTAGLIA and GREENE, JJ.
This case involves the termination of a lease for computer equipment. We are asked to decide whether a fee paid by the lessee to terminate the lease is taxable. Two preliminary questions reside within this question: (1) whether the payment was made pursuant to a transaction that can be defined as a "sale," within the meaning of the relevant Tax General Article sections, and (2) if the payment was made pursuant to a "sale," whether the amount paid constituted part of the "taxable price" of the lease transaction. We hold that the fee paid to terminate the lease was not a "sale" and, therefore, is not subject to sales tax.
On May 30, 1990, Citicorp International Communications, Inc. ("CICI") entered into a lease agreement ("Master Lease") with IBM Credit ("IBM") for computer equipment that CICI used in its data center in Silver Spring, MD. In January 1997, the parties extended the lease for an additional term. On September 3, 1998, CICI decided to upgrade its computer equipment and sought a release from the obligations of its lease with IBM.
On October 20, 1998, CICI and IBM negotiated a termination agreement ("Termination Agreement") which released CICI from its Master Lease obligations, as of November 1, 1998. Pursuant to the Termination Agreement, CICI returned the old computer equipment to IBM and paid a termination fee of $7,219,998. In addition, CICI purchased replacement equipment from IBM at a cost of $7,387,800, plus sales tax of $369,390.
On September 5, 2000, CICI filed a Sales and Use Tax Refund Application with the Comptroller seeking a refund of the sales tax paid on the termination fee. The Comptroller's Refund Superviser requested that CICI file additional documents with its application, and on January 29, 2001, CICI refiled its Refund Application along with those documents. By letter dated July 30, 2001, the Refund Supervisor denied CICI's request. On September 28, 2001, the Comptroller held an informal hearing on the matter. On January 4, 2002, the Comptroller issued a Notice of Final Determination, denying the refund.
CICI appealed to the Maryland Tax Court and on November 6, 2002, the court heard oral arguments on the matter. The parties stipulated to the relevant facts and presented argument to the court. On February 23, 2004, the Tax Court reversed the Comptroller. The Tax Court found that, under the lease termination agreement, CICI "released its interest in the leased equipment and was relieved of all obligations with respect to such property after November 1, 1998." The court concluded that "the clear and unambiguous provisions of the Master Lease and the Lease Termination Agreement and the lack of any transfer of title of the leased property to the Petitioner establish that the lease termination payment was not made pursuant to a transaction that is a `sale' as defined by § 11-101(g)."
The Comptroller appealed to the Circuit Court for Baltimore City. That court held a hearing on the matter and on August 24, 2004, affirmed the Tax Court's decision. The Comptroller filed a Motion for Reconsideration that was later denied by the Circuit Court. Subsequently, the Comptroller noted a timely appeal. While the case was pending in the Court of Special Appeals, but before a decision there, we granted certiorari on our own initiative. Comptroller v. Citicorp, 385 Md. 511, 869 A.2d 864 (2005).
As stated in CBS v. Comptroller, 319 Md. 687, 697-98, 575 A.2d 324, 329 (1990), "[a] reviewing court must affirm [the decision of] the Tax Court if its order `is not erroneous as a matter of law,' and if the order `is supported by substantial evidence appearing in the record'" (quoting Ramsay, Scarlett & Co. v. Comptroller, 302 Md. 825, 834, 490 A.2d 1296, 1300-01 (1985)). We explained in Ramsay, Scarlett & Co. that, "the Tax Court's decision is based on a factual determination, and there is no error of law, the reviewing court may not reverse the Tax Court's order if substantial evidence of record supports the agency's decision." Ramsay, Scarlett & Co., 302 Md. at 834, 490 A.2d at 1301 (internal citations omitted).
We are not at liberty to substitute our judgment for the expertise of the agency. Our role is to accord deference to an agency's interpretation of a statute which it administers. Charles County Department of Social Services v. Vann, 382 Md. 286, 295-96, 855 A.2d 313, 319 (2004)(a court gives deference to an agency's legal interpretation of its own statute or regulations) that ; Board of Physician Quality Assurance v. Banks, 354 Md. 59, 69, 729 A.2d 376 (1999)("an administrative agency's interpretation and application of the statute which the agency administers should ordinarily be given considerable weight by reviewing courts.") that, (citations omitted).
Furthermore, recognizing that the agency's decision is "prima facie correct and presumed valid," "we must review the agency's decision in the light most favorable to it." Ramsay, Scarlett & Co., 302 Md. at 835, 490 A.2d at 1301. We also note that "it is the agency's province to resolve conflicting evidence and where inconsistent inferences can be drawn from the same evidence it is for the agency to draw the inferences." Id.
Unless the Tax Court's decision was erroneous as a matter of law, or its conclusion was not supported by substantial evidence, we must affirm that decision. See CBS, 319 Md. at 697-98,
575 A.2d at 329 (internal quotations and citations omitted).
In the instant case, the issue of whether the termination fee is part of the "taxable price" of the Master Lease is a question of law that hinges on two factual issues: (1) was the termination fee part of a sale, and (2) was the Lease Termination Agreement part of the Master Lease. Therefore, whether the termination fee is subject to sales tax is a mixed question of law and fact and compels a certain deference to the Tax Court's decision.
The resolution of the question in this case depends on the interpretation and application of sections...
To continue reading
Request your trial-
Brown v. Handgun Permit Review Bd.
...decision is presumed prima facie correct, we review the evidence in the light most favorable to the agency. Comptroller v. Citicorp, 389 Md. 156, 163, 884 A.2d 112, 116 (2005). Indeed, "it is the agency's province to resolve conflicting evidence and where inconsistent inferences can be draw......
-
Frey v. Comptroller
...presumed valid,' `we must review the agency's decision in the light most favorable to it.'" Comptroller of the Treasury v. Citicorp Int'l Commc'ns, Inc., 389 Md. 156, 163, 884 A.2d 112 (2005) (quoting Ramsay, Scarlett & Co. v. Comptroller of the Treasury, 302 Md. 825, 835, 490 A.2d 1296 (19......
-
Comptroller of Treasury v. Taylor
...and not to enlarge the statute's operation so as to embrace matters not specifically pointed out." Comptroller v. Citicorp Intern. Commc'ns, Inc. , 389 Md. 156, 170, 884 A.2d 112 (2005) (quoting Comptroller v. Gannett , 356 Md. 699, 707-08, 741 A.2d 1130 (1999) ). Under the plain language o......
-
Classics Chicago v. Comptroller
...presumed valid,' `we must review the agency's decision in the light most favorable to it.'" Comptroller of the Treasury v. Citicorp Int'l Commc'ns, Inc., 389 Md. 156, 163, 884 A.2d 112 (2005) (quoting Ramsay, Scarlett & Co. v. Comptroller of the Treasury, 302 Md. 825, 835, 490 A.2d 1296 (19......