Washington Nat. Arena Ltd. Partnership v. Comptroller of Treasury

• Decision Date: 01 September 1986
• Docket Number: No. 45,45
• Parties: WASHINGTON NATIONAL ARENA LIMITED PARTNERSHIP t/a The Capital Centre v. COMPTROLLER OF the TREASURY. ,
• Court: Maryland Court of Appeals

Page 370

308 Md. 370

519 A.2d 1277

WASHINGTON NATIONAL ARENA LIMITED PARTNERSHIP t/a The Capital Centre v. COMPTROLLER OF the TREASURY.

No. 45, Sept. Term, 1986.

Court of Appeals of Maryland.

Jan. 27, 1987.

Peter F. O'Malley, Upper Marlboro (Leslie F. Moore and O'Malley, Miles, McCarthy & Harrell, Upper Marlboro and Michael Evan Jaffe, Alan S. Dubin and Arent, Fox, Kintner, Plotkin & Kahn, Washington, D.C., on the brief), for appellant.

Andrew H. Baida, Asst. Atty. Gen. (Stephen H. Sachs, Atty. Gen., Linda Koerber Boyd and Gaylin Soponis, Asst. Attys. Gen., on the brief), Baltimore, for appellee.

Argued before MURPHY, C.J., and ELDRIDGE, COLE, RODOWSKY, COUCH, McAULIFFE and ADKINS, JJ.

ADKINS, Judge.

This case presents the question of whether under Code, Art. 81, § 402, a single charge covering admission to events, parking, and club membership may be allocated, for admission tax purposes, between the sum apportionable to admission and the sums apportionable to the other items. Intertwined with this question are issues regarding the standards for review of decisions of the Maryland Tax Court. That agency concluded that § 402 does not permit allocation. We shall hold that the statute permits allocation as a matter of law, and shall remand for a determination of whether allocation is appropriate on the facts of this case.

I. Factual and Procedural Background

The facts are essentially undisputed. Appellee, Comptroller of the Treasury (the Comptroller), assessed appellant, Washington National Arena Limited Partnership, t/a The Capital Centre (WNA) for $185,646.23 in admissions taxes for the period January 1978 through August 1981. He did so pursuant to the provisions of Art. 81, § 402(a), which in pertinent part read as follows:

"(1) Except as otherwise provided in this subtitle, any county by resolution may levy a tax on the gross receipts of every person, firm or corporation obtained from sources within the county derived from the amounts charged for:

"(i) Admission to any place, whether the admission be by single ticket, season ticket or subscription, including a cover charge for seats or tables at any roof garden, cabaret or other similar place where there is furnished a performance, if payment of the amounts entitles the patron thereof to be present during any portion of the performance...." ¹

The circumstances under which the Comptroller applied this statute to WNA are these:

The Capital Centre is a large sports and entertainment arena in Prince George's County. There the Washington Bullets basketball team and the Washington Capitals ice hockey team engage in athletic contests. Additionally, the Capital Centre hosts numerous other sports events, fairs, rodeos, conventions and other productions. WNA operates the Centre. Abe Pollin Sports, Incorporated, is the general partner in WNA.

In the Tax Court, Abe Pollin testified that in developing the Capital Centre he conceived the idea of transmuting "the worst seats in the house" into the most desirable seats. This objective was achieved through the creation of sky suites, loges, and portal boxes. The sky suites are located at the very top of the arena seating area. They are luxurious, enclosed, apartment-style rooms, each with its own liquor cabinet, wet bar, bathroom, closed circuit television, stereo facilities, telephone service, living room furniture, and a large window through which the event in progress can be viewed. Loges are located below the sky suites and contain slightly fewer amenities. Portal boxes, which are glass enclosures fitted with plush, moveable seats, are located at the entrances to the arena.

Use of each of these facilities may be obtained via a fixed-term lease, with the cost extending up to $30,000 annually for a sky suite. In addition to the amenities we have described, the single-sum charge for a sky suite, loge, or portal box includes parking in a reserved section of the Capital Centre's parking area and membership in the Capital Club, a restaurant and bar located within the confines of the Capital Centre. The lease for any of the special seating areas we have described is a package arrangement, covering admission and all of the amenities, including parking and club membership. A lessee is not permitted to negotiate a lease covering some, but not all, of the amenities.

The sky suite form of lease contains language typical of that used in all the leases. The "Suiteholder shall use and occupy the Suite solely for the observation of Events at the Centre" and the "Suiteholder's right of access to the Suite for any Event shall be solely by presentation of tickets for each Event...." Each lessee is furnished an appropriate number of tickets for events, parking coupons which are stamped with the dates of particular events, and membership "chits," each chit permitting access to the Capital Club in connection with a specific event.

WNA appealed the Comptroller's admissions tax assessment to the Tax Court. It argued there that the value or cost of amenities apart from bare admission should be determined, and that only the cost of admission should be taxed. The Tax Court affirmed the Comptroller. WNA brought the same argument to the Circuit Court for Prince George's County (Ahalt, J.). That court viewed the allocation question (with respect to parking and club membership) as a pure question of law, observing that § 402 was silent as to allocation, and that "[i]f the legislature intended to not allocate then it would expressly state so in the statute." Judge Ahalt concluded that allocation was permissible. Relying on Scoville Service, Inc. v. Comptroller, 269 Md. 390, 306 A.2d 534 (1973), and Twinbrook Swimming Pool Corp. v. Comptroller, 274 Md. 88, 333 A.2d 49 (1975), he reversed and remanded to the Tax Court so that it could properly allocate between admission on the one hand and parking and club membership on the other. ²

The Comptroller appealed to the Court of Special Appeals. That Court viewed the issue as a mixed question of fact and law. Employing the more deferential standard of review appropriate in those circumstances, it concluded in an unreported opinion "that the evidence before the Tax Court was more than sufficient to support its decision that the entire lease price, including parking and Club membership, constituted a single taxable admissions fee" and that the Tax Court "decision, therefore, was not erroneous as a matter of law." Comptroller v. Washington National Arena, No. 931, Sept. Term, 1985, slip op. at 8-9 (Md.App. Feb. 21, 1986). We granted certiorari, 306 Md. 369, 509 A.2d 133 (1986).

II. Allocation

As Judge Ahalt correctly observed, Art. 81, § 402, which imposes a tax on the gross receipts from admissions, is silent on the question of allocation. Specifically, it is silent as to whether the proceeds of a package arrangement, like the one before us, may be allocated between the part of the package price that relates to admissions to a facility or event and the part, if any, that is not so related. We disagree with his view, however, that legislative failure to proscribe allocation automatically permits it. That omission does no more than render the statute ambiguous or unclear on that point.

In determining whether the legislature intended to permit allocation, it is necessary to determine exactly what the legislature intended to tax. To do that it is necessary to construe the phrase found in § 402 imposing a tax on "gross receipts ... charged for ... [a]dmission." The primary source of legislative intent is, of course, the language of the statute itself. Tucker v. Fireman's Fund Ins. Co., 308 Md. 69, 517 A.2d 730 (1986); Auto. Trade Ass'n v. Harold Folk Enter., 301 Md. 642, 484 A.2d 612 (1984). When the legislature has not defined a term, it should be given its ordinary and natural meaning. Tucker, supra; DeJarnette v. Federal Kemper Ins. Co., 299 Md. 708, 475 A.2d 454 (1984).

In Scoville Service, Inc. v. Comptroller, supra, we applied these considerations to the word "admission" in § 402 as it then stood and found that the clear import of the word was that it referred to "charges paid to enter the place itself." 269 Md. at 394-95, 306 A.2d at 537. In Scoville the Comptroller favored an interpretation that essentially would have taxed payments incident to admission as well as the cost of admission itself. In rejecting the Comptroller's interpretation, we held that § 402 did not apply to charges for services (in that case, parking at a lot adjacent to a racetrack) provided for one's convenience prior to entering the place.

The Comptroller attempts to distinguish Scoville based on the method of payment. In Scoville the parking lot, although on land owned by the same party that owned the racetrack, was independently managed and payment for parking was wholly separate from payment for admission. In the present case payment for services other than admission is included in an admission package. The Comptroller takes the position that when a lump sum is charged for a package that undoubtedly includes admission to an event, then that entire sum is taxable, regardless of what else the package contains. For example, if WNA, to encourage people from distant parts of the state to attend events at the Capital Centre, set up a single-price package that included admission to the arena, a night's lodging at a hotel in New Carrollton, and two meals at the hotel, the Comptroller would tax the entire cost of the package under § 402.

We do not see it that way. In Scoville we looked to the plain meaning of the word "admission" to determine legislative intent. ³ We cannot extend a legislative intent to tax admissions to an intent to tax things only remotely or tangentially related to admissions. In short, we think that when a package includes the price of admission and the price of largely unrelated amenities, the legislature intended there to be an allocation of the charge between that portion relating to...