Strescon Industries, Inc. v. Cohen

• Decision Date: 23 November 1981
• Docket Number: No. 81-1255,81-1255
• Citation: 664 F.2d 929
• Parties: STRESCON INDUSTRIES, INC., Appellant, v. Howard A. COHEN, Secretary of Revenue, Commonwealth of Pennsylvania; and Louis L. Goldstein, Comptroller of the Maryland Treasury, Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 929

664 F.2d 929

STRESCON INDUSTRIES, INC., Appellant, v. Howard A. COHEN, Secretary of Revenue, Commonwealth of Pennsylvania; and Louis L. Goldstein, Comptroller of the Maryland Treasury, Appellees.

No. 81-1255.

United States Court of Appeals Fourth Circuit.

Argued Oct. 6, 1981.

Decided Nov. 23, 1981.

Gerard F. Miles, Baltimore, Md. (William P. Baker, Baker & Baker, P.A., Baltimore, Md., on brief), for appellant.

Mary Ellen Krober, Deputy Atty. Gen., Harrisburg, Pa., Commonwealth of Pennsylvania, Paul Sugar, Asst. Atty. Gen., Baltimore, Md., for the Comptroller of the Treasury, State of Maryland, for appellees.

Before BRYAN, Senior Circuit Judge, RUSSELL and WIDENER, Circuit Judges.

ALBERT V. BRYAN, Senior Circuit Judge:

The issue in this appeal is whether the District Court properly concluded that the Tax Injunction Act, 28 U.S.C. § 1341 (1976), ¹ ousted it of jurisdiction over appellant's challenge to the constitutionality of taxing schemes administered by the States of Maryland and Pennsylvania. We affirm, 508 F.Supp. 786, concluding as did the District Court, that appellant has a "plain, speedy, and efficient" remedy in both Maryland and Pennsylvania.

I

Appellant Strescon Industries, Inc. is a Maryland corporation engaged in various aspects of the construction business. In particular, it manufactures and installs building materials. Its activities are pursued not only in Maryland, where it has its principal place of business, but also in Pennsylvania and other jurisdictions in the Middle Atlantic area.

Because of its interstate operations, appellant is potentially liable for sales and/or use taxes in each of the States in which it conducts business. The gravamen of its grievance which prompted this action is that either Maryland or Pennsylvania, or both, are unconstitutionally subjecting it to double taxation.

Between January 1, 1975 and September 30, 1977, appellant performed work on a series of contracts for the erection of buildings in Pennsylvania. Raw materials were delivered in Maryland and used by appellant to make pre-cast concrete and related structures. These component parts then were shipped to Pennsylvania where they were assembled by appellant. No sales or use taxes were paid to Maryland on these commodities. ² Appellant did pay $17,803.44 in sales or use taxes to the Commonwealth of Pennsylvania for its building projects there during this period.

On November 25, 1977, Goldstein, the Comptroller of the Maryland Treasury, notified appellant that it was liable for sales and/or use taxes for materials assembled in Maryland but installed elsewhere. Ultimately, appellant was assessed $11,868.76, plus interest and penalty, for its construction activities in Pennsylvania between January 1976 and September 1977.

Upon receipt of the Maryland levy, appellant initiated administrative proceedings in both Maryland and Pennsylvania. It sought recovery of the sums already paid to Pennsylvania and a revision of Maryland's assessment. The Pennsylvania Sales and Use Tax Board of Review and Board of Finance and Review each rejected appellant's refund claim. Suit then was brought in the Commonwealth Court of Pennsylvania seeking review of the administrative determinations. Apparently no further action has been taken in the Commonwealth Court, however.

Similarly, appellant has petitioned unsuccessfully for administrative revision of the Maryland levy. The Maryland Comptroller of the Treasury rejected appellant's claim for a revision and an appeal of that decision has been filed with the Maryland Tax Court. Except for the filing of a motion to stay proceedings pending resolution of this suit, no further action seems to have been taken in the Maryland courts.

While the State proceedings were pending, appellant brought suit in the Federal District Court for the District of Maryland alleging that the State tax assessments, taken together, are unconstitutional in that they unlawfully burden interstate commerce in violation of article 1, section 8 of the U. S. Constitution and invidiously prefer intrastate business in contravention of the equal protection clause of the Fourteenth Amendment. The District Court, however, did not reach the underlying constitutional claims. Instead, it found that the Tax Injunction Act barred it from interfering with the States' procedures for resolving tax controversies.

II

In enacting the Tax Injunction Act, Congress was motivated by a variety of concerns. As has been pointed out, this statute "has its roots in equity practice, in principles of federalism, and in recognition of the imperative need of a State to administer its own fiscal operations." Tully v. Griffin, Inc., 429 U.S. 68, 73, 97 S.Ct. 219, 222, 50 L.Ed.2d 227 (1976). Thus the Federal courts, as a general rule, are not to interfere with the States' mechanisms for resolving tax controversies. The only exception contemplated by Congress relates to State remedies which are not plain, speedy, or efficient.

In light of Rosewell v. LaSalle National Bank, 450 U.S. 503, 101 S.Ct. 1221, 67 L.Ed.2d 464 (1981), it is now clear that the inquiry demanded of a Federal court considering the applicability of § 1341 is whether the State remedies are procedurally adequate. Provided a taxpayer is offered a fair opportunity to present his claims in the State courts, § 1341 insulates the States from Federal court interference. Thus a State remedy which does not permit the recovery of interest on a refund obtained through otherwise adequate State procedures does not remove the bar to Federal jurisdiction because an asserted substantive defect in the State remedy, even if found to exist, is an insufficient basis upon which Federal jurisdiction may be grounded. Id. Likewise, the mere fact that a taxpayer may have to cross a State line to seek redress does not render the State procedures inadequate. Tully v....