Tawes v. Thompson Trailer Corp., 133

• Decision Date: 06 April 1956
• Docket Number: No. 133,133
• Citation: 121 A.2d 850,209 Md. 490
• Parties: J. Millard TAWES, Comptroller of the State of Maryland, v. THOMPSON TRAILER CORPORATION, a body corporate. *
• Court: Maryland Court of Appeals

Page 490

209 Md. 490

121 A.2d 850

J. Millard TAWES, Comptroller of the State of Maryland, v. THOMPSON TRAILER CORPORATION, a body corporate. ^* No. 133.

Court of Appeals of Maryland.

April 6, 1956.

Edward F. Engelbert, Staff Atty., Baltimore (C. Ferdinand Sybert, Atty. Gen., and Stedman Prescott, Jr., Asst. Atty. Gen., on the brief), for Retail Sales Tax Div., etc.

H. Warren Buckler, Jr., and William H. Gorman, II., Baltimore (Niles, Barton, Yost & Dankmeyer, Baltimore, on the brief), for appellee.

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

HAMMOND, Judge.

The Comptroller appeals from an order of the Circuit Court for Baltimore County directing him to cancel a use tax assessment and a sales tax assessment against Thompson Trailer Corporation, the appellee. The questions presented are three: (1) Is personal property manufactured in another State, and brought into Maryland by the manufacturer subject to the use tax? (2) Is personal property purchased for use in, and for years used in, another State subject to the use tax in Maryland when fortunitously and unexpectedly it is brought here for use? (3) Is the sale to Thompson by the Maryland Engineering Company of its plant and all its machinery and equipment therein a casual and isolated sale of the personal property, exempt from sales tax?

The testimony before the Comptroller showed the facts to be as follows. Thompson was incorporated in 1946 in Virginia and there began the manufacture of trailer and truck bodies in rented space at Bailey's Crossroads, Fairfax County. Its business grew and in 1949 it bought the plant it was renting. Then it obtained an Air Force contract and needed additional space urgently and immediately. It inspected available plants from Richmond to Boston, looking as far west as Pittsburgh. By chance it heard of a plant in Pikesville, inspected it and on February 1, 1951, bought it, with all its machinery and equipment, from its owners, Mr. and Mrs. William F. McBride, a partnership doing business as the Maryland Engineering Company. Thompson then moved its entire operation to Pikesville, bringing with it for use there a hydraulic press it had manufactured in Virginia, and machinery which it had purchased in Virginia, having a total original cost of $48,782.25. In the contract of sale Maryland Engineering Company bargained and sold to Thompson '* * * the following fee simply property * * * together with all the structures, sidings and improvements thereon and the chattels described in Exhibit 'A' attached hereto * * * At and for the price of Two Hundred and Fifty Thousand Dollars ($250,000.00) * * *.' Exhibit 'A' listed all of the tangible assets of Maryland Engineering Company, with the exception of raw materials, work in progress, and finished products. A subsequent appraisal assigned to the personal property bought by Thompson a value of $49,999.98 of the total purchase price. Mr. McBride testified that his reason for selling was to retire. He said: 'I didn't even want to take a monkeywrench or screwdriver, because I intended to quit. * * * I had no intention of going further into business of any kind.' The Sales in Bulk Law, Code 1951, art. 83, § 97 et seq., was complied with. After the sale to Thompson, McBride completed the liquidation in 1951, disposing of the inventory on hand and completing a contract, half finished at the time of sale, for wooden cabinets for houses, making delivery as called for by the buyer as the houses were ready. He did this only after he had offered the cabinet contract to a half dozen firms and found no takers. The McBrides' business was entirely woodworking--mainly making wooden doors for houses. Three or four months before the sale of the business, Maryland Engineering Company and a Mr. McConnel, trading as Southern Industries, of Randallstown, had bid on a Government contract for antennae masts, partly of metal and partly of wood, at a price of $368,000. The plan was for the Maryland Engineering Company to do the woodworking and to sub-contract the metal parts. Although it had been thought that some one else got the job, in May of 1951 the Government accepted the joint bid. Mr. McBride said that 'When you bid on a Government contract, if they offer it to you, you take it or you pay the difference. This contract was $368,000, and the difference could have been very substantial. Mr. McConnel did not have the cash to handle the job, so I was duty-bound to get in and help him, and I did. * * * To save our own necks, because they would have bought from the next lower bidder, or any way they could get it, and charge us up with the difference.' Mr. McBride rented space in Randallstown about the first of July and some time in August began to do part of the metal work on the Government contract. Some of the details of, and difficulties in, the execution of the Government contract are related in Velte v. McBride, Md., 118 A.2d 640. After the sale to Thompson, Maryland Engineering Company reported monthly taxable sales to the Comptroller totalling $150,000--some $75,000 under the cabinet contract, $40,000 of inventory and $35,000, in the latter months, of metal sales under the Government contract. Mr. McBride testified that the capital resulting from the 1951 liquidation was divided between him and his wife, since they were partners, although there had not been a formal dissolution of partnership. They had been equal partners in business since 1931 and had engaged in half a dozen different kinds of business. The woodworking business had been started in 1942 and it was then that the name Maryland Engineering Company was used for the first time. The metal working business, started in August, 1951, was a completely different operation from the woodworking business. None of the employees in the metal working business at the Randallstown plant had been employed at Pikesville, and none of them were woodcutting people, the two businesses being entirely different.

Our recent decision in Comptroller of the Treasury of Maryland v. American Can Co., Md., 117 A.2d 559, which held that personal property manufactured without the State and brought in by the manufacturer is not subject to the use tax, disposes of the first question. Thompson need not pay the use tax on the value of the hydraulic press manufactured by it in Virginia and brought by it to Maryland.

The Comptroller contends that all tangible personal property is subject to the use tax when brought into Maryland, no matter how long this may be after purchase, and without regard to whether the purpose was to use it here, unless it is brought in for the purpose of resale. We think the language of the statute clearly discloses that the Legislature did not go this far. The imposition section of the use tax statute, Code 1951, art. 81, Sec. 369, provides that: 'An excise tax is hereby levied and imposed on the use, storage or consumption in this State of tangible personal property purchased from a vendor within or without this State on or after the effective date of this Act * * *. The tax imposed by this section shall be paid by the purchaser and shall be computed as follows: * * * on * * * the price * * *.' Sec. 368(d) of art. 81 defines 'use' to be 'the exercise by any person within this State of any right or power over tangible personal property purchased either within or without this State by a purchaser from a vendor * * *.' Sec. 368(c) defines a 'purchaser' as any person '* * * who shall have purchased tangible personal property for use, storage or other consumption in this State upon which a tax is imposed under Section 369 * * *.' Sec. 368(b) defines a 'vendor' as 'every person engaging in the business of making sales * * * for use, storage or consumption within this State.' (All emphasis supplied.) Sec. 373(e) of art. 81 requires a vendor to collect the use tax although the property is delivered directly to the purchaser outside of Maryland 'if it is intended to be brought to this State for use, storage or consumption in this State.'

As has often been noted--see, for example, Comptroller of the Treasury v. Crofton Co., 198 Md. 398, 84 A.2d 86, 30 A.L.R.2d 1434, and Miller Brothers Co. v. Maryland, 347 U.S. 340, 74 S.Ct. 535, 98 L.Ed. 744--the use tax is a complement to the sales tax, designed to prevent Maryland residents from purchasing in other States and avoiding the sales tax here, and injuring local merchants. The words of the statute lead us to conclude that the Legislature intended the use tax to be collected only when personal property was purchased with the intention of using it in Maryland. The definition sections clearly and explicitly say that the purchase must be for use within the State and spell out that the use which is taxed is that within the State of property purchased by one who intended to use it in the State. The imposition of the tax is upon the purchaser--by definition, one who had the intent at the time of purchase to use the property purchased within the State. Further evidence of the legislative will is found in the fact that the measure of the the tax is the purchase price. Obviously, this normally would be the current value of the property purchased. It must be inferred that the law-makers contemplated that the article bought would be taxed at, or reasonably near, the time of purchase, for it this were not so, the depreciation in value which time usually brings, would result in the tax being measured by a value bearing little relation to reality. Under the Comptroller's contentions, an article brought into the State twenty years after it was bought would be taxed at cost price, although its actual value might well be but a fraction of cost. The Legislature has had no difficulty in clearly making taxable the use of property in the State, regardless of the place or time of purchase or the intent at that time. Code 1951, art. 66 1/2, Sec. 28, imposes an excise tax on the issuance of ...