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affirming the Comptroller's order adverse to the taxpayer where the Comptroller's interpretation was based upon a rule promulgated when the law was enacted, stating that "we are not prepared to hold that the Comptroller exceeded his interpretive authority"
Summary of this case from Comptroller of Md. v. FC-GEN Operations Invs.Opinion
[No. 194, September Term, 1963.]
Decided February 7, 1964.
TAXATION — Retail Sales And Use Tax Law — Administrative Interpretation Acquiesced In By Legislature Entitled To Great Weight. p. 493
TAXATION — Retail Sales And Use Tax Law — Tax Collectible Upon Cash Discounts Granted For Payment Of Purchase Price Of Personal Property Within Stated Period Of Time — Comptroller's Rule 16 Not Invalid. The Comptroller was held in this case not to have acted beyond the scope of the statutory plan for the Maryland Retail Sales and Use Tax Law when he promulgated Rule 16, imposing the tax upon the total selling price of tangible personal property without any allowance for a cash discount, except where the discount is deducted from the selling price in a cash sale and the net amount due is paid at the time of the sale. In the instant case the taxpayer was allowed a discount from the invoice price if payment was made within thirty days from the date of purchase. The Maryland Act creates a true sales tax imposed upon the purchaser and required to be collected at the time the sale is made, which, in this case, was when the goods were delivered. The taxable event took place before payment was received, and the measure of the tax was the amount then promised to be paid. The purchaser's option of remitting within thirty days lesser sums than those shown upon the invoices was a condition subsequent to the consummation of the sales, and an inducement offered to obtain a more prompt payment than might otherwise have been the case. The Court distinguished an out-of-State decision involving a gross receipts or occupational type of tax upon the vendor, computed upon the "amount received", rather than upon the price promised to be paid. pp. 491-494
J.E.B.
Decided February 7, 1964.
Appeal from the Baltimore City Court (CARTER, J.).
Petition by Frank J. Klein Sons, Inc., for appeal from the decision of the Comptroller of the Treasury ruling that the retail sales and use tax is collectible upon certain cash discounts. From a decision of the Baltimore City Court affirming the ruling of the Comptroller, the petitioner appeals.
Affirmed, with costs.
The cause was argued before BRUNE, C.J., and HENDERSON, PRESCOTT, HORNEY and SYBERT, JJ.
Edward Pierson and Robert F. Fischer, with whom were Pierson Pierson on the brief, for the appellant.
Russell R. Reno, Jr., Assistant Attorney General, and Edward F. Engelbert, Chief, Retail Sales Tax Division, with whom was Thomas B. Finan, Attorney General, on the brief, for the appellee.
This case presents the narrow question whether under the Maryland sales and use tax law, the tax is properly collectible upon "cash discounts" granted to the taxpayer by its suppliers for payment of the purchase price of various articles of personal property within a stated period of time.
The appellant is engaged in business as a contractor supplying and installing heating and plumbing equipment in newly constructed residential and commercial buildings within the State of Maryland. Under Code (1957), Art. 81, § 324(f)(3) the appellant is the taxpayer. It is clear that title to the items in question passed to the appellant upon delivery, but that a 2% discount from the invoice price was allowed if paid within thirty days from the date of purchase.
Code (1957), Art. 81, § 325 provides: "For the privilege of selling certain tangible personal property at retail as defined above and for the privilege of dispensing certain selected services defined as sales at retail by § 324 (f) of this subtitle, a vendor shall collect from the purchaser a tax at the rate specified in this section on the price of each separate retail sale made in this State on or after the date of this act. The tax imposed by this section shall be paid by the purchaser and shall be computed subject to the terms and conditions of § 334 of this subtitle as follows: * * *." For a parallel provision with respect to the use tax, see sections 373 and 372. Section 327 of Art. 81 provides that "[u]pon each taxable sale or service the tax to be collected as provided in this subtitle shall be stated and charged separately * * *. The tax shall be paid by the purchaser to the vendor as trustee * * *." See also sec. 379, relating to use tax.
Code (1957), Art. 81, § 324(d) defines a "sale" as "* * * any transaction whereby title or possession, or both * * * is or is to be transferred by any means whatsoever for a consideration * * *. Such consideration may be either in the form of a price in money, rights or property or by exchange or barter, and may be payable immediately, in the future, or by installments. * * *." Cf. sec. 372 (d) defining "use." Sec. 329 provides that "[t]he tax hereby imposed shall apply and be collected by the vendor from the purchaser at the time the sale is made regardless of the time when the purchase price is paid * * *." Cf. sec. 381 as to the use tax.
Code (1957), Art. 81, § 324(i) defines "price" to mean: "* * * the aggregate value in money of any thing or things paid or delivered, or promised to be paid or delivered by a purchaser to a vendor in the consummation and complete performance of a retail sale without any deduction therefrom on account of the cost of the property sold, cost of materials used, labor or service cost, or any other expense whatsoever. * * *." This section further provides that price "* * * shall be deemed to be the amount received exclusive of the tax hereby imposed provided the vendor shall establish to the satisfaction of the Comptroller that the tax was added to the price. * * *." Cf. sec. 372 (g) as to the use tax.
Pursuant to the rule-making authority granted by sec. 365 (a), the Comptroller in 1947, when the Act was first adopted, promulgated Rule 16, reading in pertinent part as follows: "Where tangible personal property is sold subject to a cash discount, the tax applies to the total selling price of the property without any allowance for said cash discount, except in cases of cash sales, where the discount is deducted from the selling price and the net amount due thereon is paid at the time of the sale."
The appellant contends that the rule is invalid, in that it seeks to impose a tax not levied by the Legislature, citing Comptroller v. Rockhill, Inc., 205 Md. 226. We recognize in that case, however, that an interpretation placed upon the Act is entitled to great weight as an administrative interpretation acquiesced in by the Legislature. Cf. Liss v. Goodman, 224 Md. 173. In the instant case we are not prepared to hold that the Comptroller exceeded his interpretive authority.
It is perfectly clear that the Maryland Act is a true sales tax and imposes the tax upon the purchaser. See Comptroller v. Kaiser Corp., 223 Md. 384, 392. The tax is required to be collected at the time the sale is made, which in the instant case was when the goods were delivered. This taxable event took place before payment was received. The measure of the tax was the amount then promised to be paid. Sections 385 and 387 of Art. 81, require returns to be filed by the vendor on the 21st day of the month following the month within which the sale occurred, unless otherwise specified by the Comptroller. It is true that the purchaser had the option of remitting within 30 days lesser sums than those shown upon the invoices, but in our view that was a condition subsequent to the consummation of the sales, and an inducement offered to obtain a more prompt payment than might otherwise have been the case. It might fairly be considered as an "expense" of doing business. In any event, we think the Comptroller's rule is not beyond the scope of the statutory plan. We have long recognized that taxation is a practical affair. See Lane Corp. v. Comptroller, 228 Md. 90, 97.
The appellant relies strongly upon the case of Standard Oil Co. v. State, 276 N.W. 908 (Mich. 1937). It was there held that only the net amount received by a vendor was subject to the Michigan tax. It is important to observe, however, that the Michigan tax was imposed upon the privilege of making retail sales, measured by the gross proceeds of such sales, less deductions allowed by statute. See sec. 205.52 of the Michigan Occupational Retail Tax. It was a gross receipts or occupational type of tax upon the vendor, computed upon the "amount received," rather than the price promised to be paid. There seem to be no other cases dealing with cash discounts. See Note, 90 A.L.R.2d 338. We think the Michigan case is distinguishable.
Order affirmed, with costs.