Canton Co. v. Comptroller of the Treasury

Henderson, J., delivered the opinion of the Court. This appeal is from an order affirming an assessment by the Comptroller of sales taxes upon rentals paid to the appellant ²⁹⁶ company by its wholly owned subsidiary, Cottman Company, for bulk unloading facilities located on a pier in the Baltimore harbor. The assessment concerns taxes for the period from June 1955 to June 1960 which the Comptroller claims should have been paid by Cottman, the stevedoring company, the tax collecting duty resting upon Canton. The lease to Cottman from Canton was entered into on October 31, 1931, at which time Canton had only a minority interest in the lessee.

The lease included bridge cranes located on an ore pier owned by Canton. On that date the cranes were purchased from Cottman by Canton, and simultaneously leased to Cottman. Canton Railroad Company joined in the lease, having certain operating rights for the pier under a separate agreement. The primary rental was 12 cents per ton on cargo handled by Cottman through use of the cranes.

The appellant raises three questions on this appeal : 1. Are bulk commodity unloading cranes, and related facilities located on Canton’s ore pier, tangible personal property within the meaning of the Maryland Retail Sales Tax Act ? 2. Does the Act reach transactions that are genuine rentals of personal property and not sales of personal property disguised as lease transactions ? 3. Is the attempted imposition of the tax a burden on foreign and interstate commerce prohibited by the Federal Constitution?

As to one, a number of supplemental agreements continued the lease in effect through the assessment period. None of these agreements was recorded, nor was any instrument governing title to the cranes recorded among the land records. Two of the cranes were located on the pier in 1931, and a third was installed by Canton in 1953. A fourth crane was installed in 1957.

Crane No. 1 was dismantled and removed in 1960, and the parts sold for scrap. Crane No. 2 weighs approximately 800 tons, No. 3 and No. 4 weigh about 1150 tons each. The ore pier is used entirely for unloading vessels by Cottman Company, nearly 98% being foreign commerce, 2% interstate commerce. The cranes were mounted on rails, but could not leave the pier.

They were specially designed for that location, and not suitable for use elsewhere. ²⁹⁷ The appellant argues that the cranes must be regarded as fixtures, and hence not subject to the tax on sales of tangible personal property. We do not agree. It may well be that if the question were whether they were subject to the terms of a mortgage, they could be regarded as constructively annexed to the real estate. See Anderson v. Bldg. & Loan Ass’n, 172 Md. 94 .

For present purposes, we would agree that they are an integral part of the pier operation, cannot be moved without dismantling by cutting the metal, and are not well adapted to general use elsewhere, if, indeed, they would be salable except for scrap. Nevertheless, we think the case of Comptroller v. Kaiser Corp., 223 Md. 384, 391 , is controlling. While the decision in that case was rested, in part, on the fact that the presses, compressors and cranes could be removed and installed at another location, the holding was also rested upon a construction of the statute that imposed the tax upon machinery and equipment, without regard to the doctrine of constructive annexation. We also stressed the fact that in that case, as in this, there had been a course of conduct by the parties, whereby the property had been treated as personalty.

We also cited the common law rule, applicable to the