Ridgewood Log Homes, Inc. v. Comptroller of Treasury, 368
| Decision Date | 01 September 1988 |
| Docket Number | No. 368,368 |
| Parties | RIDGEWOOD LOG HOMES, INC. v. COMPTROLLER OF the TREASURY. , |
| Court | Court of Special Appeals of Maryland |
Paula M. Junghans (Melnicove, Kaufman, Weiner, Smouse & Garbis, P.A., on the brief), Baltimore, for appellant.
Gaylin Soponis, Asst. Atty. Gen. , Baltimore, for appellee.
Argued before BISHOP, ALPERT and ROBERT M. BELL, JJ.
Ridgewood Log Homes, Inc. (Ridgewood) is a Maryland corporation operated by a husband and wife team, Jack and Alice Leishear. They act as representatives for Lok-N-Logs, Inc., a New York corporation that manufactures stock and custom designed pre-cut log home kits. After the Leishears purchased a Lok-N-Logs home themselves in 1980, Lok-N-Logs asked the couple if they would be interested in acting as its dealer in Maryland and indicated they would receive a 10 to 12 percent commission on any home they sold. The Leishear's agreed and, under the name of Ridgewood Log Homes, Inc., began to represent Lok-N-Logs in Maryland. Previously, they were operating a small land developing company called Ridgewood Developers. They advertised in newspapers, participated in trade shows, and distributed brochures. They used their own Lok-N-Logs home as a model for customers. When a customer desired to purchase a log cabin, Ridgewood developed a worksheet of costs and materials, then based on this information filled out a Lok-N-Logs contract form that was sent to Lok-N-Logs. The form contained a line for completion: "sales tax ____ county ___ state ___." At Lok-N-Logs' direction, this section was marked N/A, and no amount was ever filled in, either by Ridgewood or Lok-N-Logs. Although Ridgewood prepared the contract, it was never a party to the contract. Lok-N-Logs required that Ridgewood send the contract to Lok-N-Logs, along with the customer's check for twenty percent of the contract price, made payable to Lok-N-Logs. Lok-N-Logs then reviewed the contract and the prices, signed the contract, and sent it directly to the customer. Ridgewood would then receive a copy of the fully executed contract.
Lok-N-Logs notified Ridgewood and the buyer when to expect delivery of the home kit, and that the customer must have a certified check for the balance of the purchase price, payable to Lok-N-Logs, at the delivery site. When the log home kit has been delivered, Ridgewood generally met the shipment with the customer, and pursuant to its contract with Lok-N-Logs, provided the customer with eight hours of technical assistance. Ridgewood received its 10 to 12 percent commission approximately six weeks after delivery.
The Comptroller levied, jointly and severally, an assessment against Lok-N-Logs and Ridgewood of approximately $46,000, plus interest and penalties, for unpaid use taxes during the period of December 18, 1980 through November 8, 1984. 1 Ridgewood, upon receiving this assessment, notified the customers of Lok-N-Logs homes to remit to them the amount calculated for use tax. Some of the buyers complied with this request, and Ridgewood in turn transmitted the money to the Comptroller, who then reduced the assessment. The remaining buyers, however, refused to comply, leaving the rest of the assessment unpaid. Unable to collect the tax from Lok-N-Logs, the Comptroller, pursuant to the authority reposed in him by section 372(b) of Article 81 of the Annotated Code of Maryland, 2 sought to collect the tax from Ridgewood.
Ridgewood protested this assessment. After formal administrative hearings before the Comptroller, the assessment was affirmed. It appealed that decision to the Maryland Tax Court, which affirmed the assessment but reversed the assessment of penalties. Ridgewood appealed that decision to the Circuit Court for Frederick County, which affirmed the decision of the Maryland Tax Court. This appeal followed, raising the following issues:
I. Whether the trial court erred in finding appellant to be a vendor or representative for Lok-N-Logs within the meaning of Article 81, Section 372(b) of the Maryland Annotated Code?
II. Whether the Comptroller of the Treasury abused his discretion by seeking to recover the use tax from appellant rather than from Lok-N-Logs, the manufacturer, or from the past consumers of the log homes?
The scope of appellate review in these matters has been succinctly stated [J]udicial review of decisions of the Maryland Tax Court is severely limited. Maryland Code (1957, 1987 Cum.Supp.), Art. 81, § 229(o), provides that on appeal "[t]he circuit court shall affirm the Tax Court order if it is not erroneous as a matter of law and if it is supported by substantial evidence appearing in the record." When this Court reviews a Tax Court decision, the narrow scope of review set forth in § 229(o) is equally applicable. See, e.g., Ramsay, Scarlett & Co. v. Comptroller, 302 Md. 825, 834, 490 A.2d 1296, 1303 (1985); Comptroller v. Haskin), 298 Md. 681, 689-90, 472 A.2d 70, 76-77 (1984); Comptroller v. Diebold, Inc., 279 Md. 401, 407, 369 A.2d 77, 81 (1977).
Comptroller v. Burn Brae Dinner Theatre, 72 Md.App. 314, 318, 528 A.2d 546 (1987).
This court has, on numerous occasions, applied the principles of section 229(o) as delineated by the Court of Appeals in Ramsay, Scarlett. E.g., Disclosure Information Group v. Comptroller, 72 Md.App. 381, 384-85, 530 A.2d 8 (1987); Comptroller v. NCR Corp., 71 Md.App. 116, 125-26, 524 A.2d 93 (1987), affirmed in part, reversed in part, 313 Md. 118, 544 A.2d 764 (1988); Pinder v. Dean, 70 Md.App. 252, 256, 520 A.2d 1119 (1987), aff'd, 312 Md. 154, 538 A.2d 1184 (1988); UPS v. Comptroller, 69 Md.App. 458, 464-65, 518 A.2d 164 (1986); Comptroller v. World Book Childcraft International, Inc., 67 Md.App. 424, 436-42, 508 A.2d 148 (1986). In each instance, we followed a three-step analysis in our review of the tax court's findings:
1. First, the reviewing court must determine whether the agency recognized and applied the correct principles of law governing the case. The reviewing court is not constrained to affirm the agency where its order "is premised solely upon an erroneous conclusion of law." Ramsay, Scarlett & Co. v. Comptroller, 302 Md. at 834, 490 A.2d 1296.
2. Once it is determined that the agency did not err in its determination or interpretation of the applicable law, the reviewing court next examines the agency's factual findings to determine if they are supported by substantial evidence, i.e., by such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Id. At this juncture, the Ramsay, Scarlett court reminds us 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 inference." Id. at 835, 490 A.2d 1296.
3. Finally, the reviewing court must examine how the agency applied the law to the facts. This, of course, is a judgmental process involving a mixed question of law and fact, and great deference must be accorded to the agency. The test of appellate review of this function is "whether, ... a reasoning mind could reasonably have reached the conclusion reached by the [agency], consistent with a proper application of the [controlling legal principles." Ramsay, Scarlett & Co. v. Comptroller, 302 Md. at 838, 490 A.2d 1296.
On appeal, this court will first determine whether the tax court applied the correct principles of law to the case. Ramsay, supra, 302 Md. at 834, 490 A.2d 1296. Section 376 in Article 81 of the Annotated Code of Maryland imposes a use tax on "[e]very vendor engaging in business in this State and making sales of tangible personal property for use, storage or consumption in this State."
Ridgewood does not challenge the fact that the use tax is due and payable on Lok-N-Logs homes purchased in Maryland; rather, it challenges only the imposition of this tax on it. Thus, it is clear, perhaps without dispute, that the tax court recognized and applied the correct principles of law.
Having determined that the Comptroller has the power to assess a use tax on the subject transaction, we now examine the findings of fact in this case to determine if they are supported by substantial evidence. As there is no dispute of fact, we move to the third step of our analysis.
The final step in our analysis is determining whether the court properly applied the law in this case to the facts. Ramsay, supra, at 838, 490 A.2d 1296. The tax court found that both Lok-N-Logs and Ridgewood are liable for this tax. Lok-N-Logs, Inc. is primarily liable for the use tax because it is a vendor engaged in business in this state within the meaning of § 372(b), 376 and 372(k) 3 and because it sells homes that are used in this state, upon which the use tax is payable. Thus, we hold that the tax court did not err in imposing a use tax assessment against Lok-N-Logs. See, e.g., Tyler Pipe Industries, Inc. v. Washington State Dept. of Revenue, 483 U.S. 232, 107 S.Ct. 2810, 2821, 97 L.Ed.2d 199 (1987); Scripto, Inc. v. Carson, 362 U.S. 207, 80 S.Ct. 619, 4 L.Ed.2d 660 (1960); Good's Furniture v. Iowa State Bd. of Tax, 382 N.W.2d 145 (Iowa 1986); Allemed, Inc. v. Dept. of Revenue, 101 Ill.App.3d 746, 57 Ill.Dec. 164, 428 N.E.2d 714 (1981); Quality School Plan v. State, 53 Ala.App. 418, 301 So.2d 183 (1974); Ex Parte Newbern, 286 Ala. 348, 239 So.2d 792 (1979); Topps Garment Manufacturing Corporation v. State, 212 Md. 23, 128 A.2d 595 (1956); Johnston v. Gill, 224 N.C. 638, 32 S.E.2d 30 (1944).
Next, we must determine whether the Comptroller possessed the requisite authority to assess a use tax against Ridgewood. A review of the Maryland Code indicates that the...
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Vulcan Blazers of Baltimore City, Inc. v. Comptroller of Treasury
...controlling legal principles.' Ramsay, Scarlett & Co. v. Comptroller, 302 Md. at 838, 490 A.2d 1296." Ridgewood Log Homes v. Comptroller, 77 Md.App. 382, 386-87, 550 A.2d 707 (1988). We agree with the Circuit Court that the Tax Court erred in the first step of the analysis. Therefore we nee......