Miller Bros. Co. v. State, 93

• Decision Date: 11 March 1953
• Docket Number: No. 93,93
• Citation: 95 A.2d 286,201 Md. 535
• Parties: MILLER BROS. CO. v. STATE.
• Court: Maryland Court of Appeals

Page 535

201 Md. 535

95 A.2d 286

MILLER BROS. CO. v. STATE.

No. 93.

Court of Appeals of Maryland.

March 11, 1953.

William L. Marbury, Baltimore (James Piper and Piper & Marbury, Baltimore, Wm. Poole, James L. Latchum and Berl, Potter & Anderson, all of Wilmington, Del., on the brief), for appellant.

Francis D. Murnaghan, Jr., Asst. Atty. Gen. (Edward D. E. Rollins, Atty. Gen. and Edward F. Engelbert, Asst. Director Retail Sales Tax Division, office of Comptroller, Baltimore, on the brief), for appellee.

Before DELAPLAINE, COLLINS and HENDERSON, JJ.

DELAPLAINE, Judge.

These two appeals test the constitutionality of the Maryland Use Tax Act, Code 1951, art. 81, secs. 368-396, as applied to furniture sold by appellant, Miller Brothers Company, a Delaware corporation, at its store in Delaware and delivered to purchasers residing in Maryland.

The tax is an excise imposed by the Legislature on 'the use, storage or consumption in this State of tangible personal property purchased from a vendor within or without this State * * * for use, storage or consumption within this State.' The Act expressly provides in Sec. 369 that the tax shall be paid by the purchaser and shall 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. The tax is paid by the purchaser to the vendor, as trustee for the State, and the vendor is liable for the collection for the State.

The State entered suit against appellant on March 19, 1952, to recover $356.40 assessed by the State Comptroller as deficiency in use tax in the period from July 1, 1947, to December 31, 1951. The State also filed a nonresident attachment suit against appellant and attached a station wagon owned by it. Appellant, appearing specially, filed a petition to quash the writ of attachment on the ground that the assessment was unconstitutional. The State answered that appellant had neither applied for a revision of the assessment nor paid the tax and applied for a refund, and prayed that the petition to quash be dismissed because (1) the collection of use taxes may be contested only by the proceeding set forth in the statute, and (2) the assessment was authorized by atatute and was constitutional.

In the short note case the Court entered judgment in favor of the State for $363, and in the attachment case it passed an order denying the petition to quash. We have been asked to review both the judgment and the order.

At the outset the State made the objection that if appellant desired to contest the assessment, it should have applied to the State Comptroller for a revision of the assessment; and that, having failed to do so, it was precluded from contesting it in the attachment case. It is entirely true that the courts do not favor the by-passing of administrative agencies, except where there is a clear necessity for a prior judicial decision. We have accordingly held that where a special form of remedy is provided by statute, the litigant should resort to that form rather than pursue other remedies, although where a constitutional issue is raised, and there is no danger of by-passing administrative action, the question may properly be decided in a suit for injunction or declaratory decree before the time has arrived for invoking the statutory remedy. Kahl v. Consolidated Gas, Electric Light & Power Co., 191 Md. 249, 258, 60 A.2d 754; Commissioners of Cambridge v. Eastern Shore Public Service Co., 192 Md. 333, 64 A.2d 151; Francis v. MacGill, Md., 75 A.2d 91; Kracke v. Weinberg, Md., 79 A.2d 387; Schneider v. Pullen, Md., 81 A.2d 226; Reiling v. State Comptroller, Md., 94 A.2d 261.

The Retail Sales Tax Act, art. 81, secs. 320-367, and the Use Tax Act provide that any taxpayer may apply to the Comptroller for revision of the tax assessed against him, and the Comptroller shall act promptly upon the application and notify the taxpayer of his action. Any taxpayer dissatisfied with the final determination of the Comptroller may appeal therefrom 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. The taxpayer, or the Attorney General on behalf of the State, or the Comptroller, may, within 30 days from the final order entered by the Court, appeal to the Court of Appeals of Maryland. Code 1951, art. 81, secs. 347, 348, 394.

Appellant is a foreign corporation. It has never qualified or registered to do business in Maryland and has no resident agent in this State. It is engaged in the retail household furniture business. It has only one store, which is located in Wilmington. It does not maintain any office, branch store, warehouse or other place of business in Maryland. It has no salesman or other employee in Maryland. It does not maintain a mail-order business or accept orders by telephone, as most of the merchandise sold by it requires personal inspection and selection. It has, however, mailed from time to time advertising matter to its customers, including those who reside in Maryland. If merchandise purchased by a resident of Maryland is not taken away by the purchaser, the seller delivers it by its own motor vehicle or by common carrier. As appellant has not been regularly conducting its business in any County of the State or in Baltimore City, within the meaning of Section 348, it could not have followed the statutory procedure. Therefore, appellant was not precluded from challenging the validity of the assessment in the attachment case.

Appellant urged that it was not the intention of the Legislature to put the burden of collecting use taxes upon a foreign corporation which does not engage in any activity in Maryland except delivery of merchandise. It is true that even the solicitation of business in Maryland by an agent of a foreign corporation, without other substantial activities within the State, does not constitute 'doing business' in the State within the meaning of the Foreign Corporation Law so as to subject itself to the State forum. Code 1951, art. 23, sec. 88; M. J. Grove Lime Co. v. Wolfenden, 171 Md. 299, 303, 188 A. 794; Shaughnessy v. Linguistic Society of America, Md., 84 A.2d 68, 71. But here we are dealing with a statute which is far broader in its application.

Section 371 of the Act provides: 'Every vendor engaging in business in this State and making sales of tangible personal property for use, storage or consumption in this State which are taxable under the provisions of this sub-title, at the time of making such sales, or if the use, storage or consumption is not then taxable hereunder, at the time when such use, storage or consumption becomes taxable hereunder, shall collect the tax imposed by this subtitle from the purchaser.'

Section 368(k) defines the term 'Engaged in business in this State' as the selling or delivering in this State, or any activity in this State in connection with the selling or delivering in this State, of tangible personal property for use, storage or consumption within this State.

In view of this unusually broad definition of 'engaged in business', we must hold that the statute is applicable to appellant, because it delivered merchandise to purchasers in Maryland.

We now consider the basic question whether the Maryland use tax infringes Article I, Section 8, of the Constitution of the United States, which vests in Congress the power to regulate commerce with foreign nations and among the several States. This provision of the Constitution was designed by the framers to eliminate the barriers which had been erected by the States to the freedom of movement across State borders. While the Constitution grants to Congress the power to regulate commerce among the States, it does not say what the States can do or cannot do in the absence of Congressional action. It may be generally stated, however, that while the Commerce Clause forbids a State to impose taxes directly on interstate commerce, it does not absolutely prevent the imposition of State taxes which, under certain circumstances, may have some incidental effect upon such commerce. The State cannot use its taxing or police power with the aim and effect of establishing an economic barrier against competition with the products of another State. The importer must be free from taxes which are imposed for the purpose of suppressing competition from outside the State and which lead to the suppression intended. It has been said that no formula can be devised for determining in all cases whether or not a State tax is prohibited by the Commerce Clause, and that the question is inherently a practical one depending for its decision on the facts of each particular case. J. D. Adams Mfg. Co. v. Storen, 304 U.S. 307, 58 S.Ct. 913, 924, 82 L.Ed. 1365, 117 A.L.R. 429.

Taxes on sales of personal property have been upheld by the United States Supreme Court in decisions extending back to 1869, when the Court, speaking through Justice Miller in Woodruff v. Parham, 8 Wall. (U.S.) 123, 19 L.Ed. 382, held that an ordinance of the City of Mobile, Alabama, authorizing the collection of a tax on sales at auction was valid as applied to goods which were products of other States. Since that time the Court has uniformly sustained a tax imposed by the State of the buyer upon a sale of goods effected by delivery to the purchaser upon arrival at destination after an interstate journey. In referring to that ruling, Justice Stone said in McGoldrick v. Berwind-White Coal Mining Co., 309 U.S. 33, 60 S.Ct. 388, 394, 395, 84 L.Ed. 565: 'It has the support of reason and of a due regard for the just balance between national and state power. In sustaining these taxes on sales emphasis was placed on the circumstances that they were not so laid, measured or conditioned as to afford a means of obstruction to the commerce or of...