Comptroller of the Treasury v. Burn Brae Dinner Theatre Co.

ALPERT, Judge. Appellant, Comptroller of the Treasury (the Comptroller), has taken this appeal from a judgment of the Circuit Court for Montgomery County affirming a decision of the Maryland Tax Court. The tax court had reversed an assessment against appellee, Bum Brae Dinner Theatre Company, Inc. (Bum Brae). The single issue presented is whether receipts derived from the sale of refreshments during intermission at a dinner theatre are subject to an admissions and amusement tax.

For the reasons that follow, we affirm the holding of the circuit court that Bum Brae’s intermission refreshment receipts are not subject to that tax. Pursuant to Article 81, Section 402(a)(4), Annotated Code of Maryland, counties may levy a tax on gross receipts derived from amounts charged for: refreshment, service or merchandise at any roof garden, cabaret or similar place where there is furnished a performance. ³¹⁷ Md.Ann.Code Art. 81, § 402(a)(4) (1980 Repl. Vol.). 1 Montgomery County taxes such receipts obtained from sources within its boundaries. The Bum Brae Dinner Theatre first opened in 1968.

Since that time it has offered the same fare: patrons purchase a ticket upon entering which entitles them to a dinner and to be present during a performance. 2 Dinner is served before the show at tables surrounding the stage. During intermission, guests may order refreshments paid for separately from the ticket purchased upon entering. It is possible to enter at intermission and purchase a refreshment, but buying refreshments does not entitle one to see the show. Drink prices during the break are not inflated to cover the cost of the performance.

Once the show resumes, no refreshments are sold, though drinks bought during intermission are frequently consumed after the show continues. Burn Brae has always remitted an admissions and amusement tax on receipts derived from tickets sold at its door. The dinner theatre, however, has never remitted such a tax from receipts derived from the sale of refreshments during intermission. In February, 1983, the Comptroller levied an $8,054 3 assessment against Burn Brae for failing to pay an admissions and amusement tax on the intermission refreshment receipts.

This assessment included the period from January 1, 1979 through October 31, 1982. Burn Brae applied for a revision of the assessment, which application the Comptroller denied. The Maryland Tax Court reversed ³¹⁸ that denial and the circuit court affirmed the decision of the tax court. This appeal followed.

The scope of appellate review in these matters has been succinctly stated: [J] udicial review of decisions of the Maryland Tax Court is severely limited. Maryland Code (1957, 1980 Repl.Vol., 1986 Cum.Supp.), Art. 81, § 229(o), provides that on appeal “[tjhe circuit court shall affirm the Tax Court order if it is not erroneous as a matter of law and if it is supported by substantial evidence appearing in the record.” When this Court reviews a Tax Court decision, the narrow scope of review set forth in § 229(o) is equally applicable. See, e.g., Ramsay, Scarlett & Co. v. Comptroller, 302 Md. 825, 834 , 490 A.2d 1296, 1303 (1985); Comptroller v. Haskin, 298 Md. 681, 689-90 , 472 A.2d 70, 76-77 (1984); Comptroller v. Diebold, Inc., 279 Md. 401, 407 , 369 A.2d 77, 81 (1977). Supervisor of Assess. v. Group Health Ass’n, 308 Md. 151, 156 , 517 A.2d 1076 (1986).

Like the Court of Appeals, we, too, are limited by the narrow scope of review set forth in § 229(o). See Comptroller v. Shell Oil Co., 65 Md.App. 252, 259 , 500 A.2d 315 (1985). First, we visit the tax court’s decision to ensure that its order was not premised upon an erroneous conclusion of law. See Ramsay, Scarlett and Co., 302 Md. at 834 , 490 A.2d 1296 .

The tax court quoted Villa Nova Night Club, Inc. v. Comptroller, 256 Md. 381 , 260 A.2d 307 (1970), to support its view that: “[t]he issue here boils down to whether the sale of refreshments by [Burn Brae] was integral to the entertainment it provided and thus subject to admissions and amusement tax or whether such sales were discrete from the provision of entertainment and thus not within the purview of Section 402(a).” Unfortunately, the passage lifted by the tax court from Villa Nova to support its analysis was a recital of the taxpayer’s argument. The Court of Appeals, however, did not adopt the quoted argument in reaching its decision. Additionally, the version of ³¹⁹ § 402(a)(4) construed by the court in Villa Nova levied a tax upon: admission, cover charge for seats or tables, refreshment, service or merchandise at any roof garden, cabaret or other similar place where there is furnished a public performance when payment of such amounts entitles the patron thereof to be present during any portion of such performance. 256 Md. at 385 , 260 A.2d 307 (emphasis added). The language emphasized above invited the taxpayer to argue that refreshments were subject to the tax only if their purchase entitled the patron to see the show.

These words, however, were deleted from § 402(a)(4) by a 1971 revision to the statute. 1971 Md.Laws ch. 429. Thus, the decision of the tax court in the case at bar was premised on an erroneous legal analysis. Consequently, we are under no statutory constraints in reviewing that order. Ramsay, Scarlett and Co., 302 Md. at 834 , 490 A.2d 1296 .

During the period relevant to this appeal, 1979 to 1982, Section 402(a) read in pertinent part: Admissions and Amusement Tax § 402. Levy and amount. (a) Counties.—Effective July 1, 1972, 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 (1) 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; ... and (4) refreshment, service or merchandise at any roof garden, cabaret or similar place where there is furnished a performance. ³²⁰ The term “roof garden or other similar place” shall include any room in any hotel, restaurant, hall or other place where music or dancing privileges or other entertainment, except mechanical music, radio or television, alone, and where no dancing is permitted, are afforded the members, guests, or patrons in connection with the serving or selling of food, refreshment or merchandise. Md.Ann.Code Art. 81 § 402(a) (1980 RepLVol.).

To resolve this appeal, we have only to apply § 402(a) to the facts before us, so as to give effect to the purpose and intention of the legislature. Kaczorowski v. Mayor and City Council of Baltimore, 309 Md. 505, 512-13 , 525 A.2d 628 (1987); College Park v. Cotter, 309 Md. 573, 587 , 525 A.2d 1059 (1987); Comptroller v. Mandel Re-Election Comm., 280 Md. 575, 578-79 , 374 A.2d 1130 (1977) [construing Art. 81, § 402(a)]. Where there is no ambiguity or obscurity in the language of a statute, there is usually no need to look elsewhere to ascertain the intention of the Legislature____ On the other hand, as stated in Maguire v. State, 192 Md. 615, 623 , 65 A.2d 299, 302 (1949), “[a]dherence to the meaning of words does not require or permit isolation of words from their context ‘ * * * [since] the meaning of the plainest words in a statute may be controlled by the context____’” In construing statutes, therefore, results that are unreasonable, illogical or inconsistent with common sense should be avoided whenever possible consistent with the statutory language, with the real legislative intention prevailing over the intention indicated by the literal meaning. Mandel Re-Election Comm., 280 Md. at 579-80 , 374 A.2d 1130 , quoting State v. Fabritz, 276 Md. 416 , 348 A.2d 275 (1975) (Citations omitted).

Further, [i]n interpreting tax statutes a court must not extend their provisions by implications beyond the clear import of the language employed and where there is doubt as to such a statute’s scope, it should be construed most strongly in favor of the citizen and against the state. ³²¹ Fair Lanes v. Comptroller, 239 Md. 157, 162 , 210 A.2d 821 (1965). The Comptroller contends that Burn Brae is a “cabaret or similar place where there is furnished a performance” and consequently, refreshments sold there are subject to a section 402(a)(4) tax. Burn Brae contends that it is akin to a traditional theatre, like Center Stage or the Lyric Opera House and that its intermission refreshments, like those sold at Center Stage and the Lyric, are not subject to the tax. These divergent contentions point to an ambiguity in § 402(a): the meaning of “roof garden, cabaret or similar place.” Attention is immediately attracted to the statute’s definition of that phrase only to be frustrated by its failure to include the term “cabaret.” Further, the definition provided only adds to the confusion: the places to be taxed are those places where entertainment is afforded “in connection with” the serving or selling of food, refreshments or merchandise.

What “connection” must exist between the entertainment and the sale of refreshments is not clear. The Comptroller argues that a place which allows refreshments to be consumed in an entertainment area is a roof garden or similar place. Burn Brae, on the other hand, argues that the cost of the entertainment must be included in the price of the refreshments and that the drinks must be served during the show. Both arguments are well taken, and invite a review of legislative history in order to find the intent of the General Assembly.

Howard County v. Carroll, 71 Md.App. 635, 644 , 526 A.2d 996 (1987). Maryland’s admissions tax was adopted in 1936. It levied a tax upon gross receipts from: any admission or cover charge for seats and tables, reserved or otherwise, at any restaurant, hotel, cafe, night club, cabaret, roof garden or similar place furnishing a floor show or similar entertainment. In cases where there is no charge for admission or cover charge to such place of entertainment, furnishing a floor show or similar entertainment, but a charge for admission is wholly or in part included in the price paid for refreshments, ³²² service or merchandise, an equivalent tax shall be levied and collected upon twenty per cent of the gross receipts from refreshments, service and merchandise. 1936 Md.Laws, ch. 10, § 3.

Clearly, the thing taxed was the admissions receipt, that is, the charge for permission to enter the building. See Scoville Serv. Inc. v. Comptroller, 269 Md. 390, 395 , 306 A.2d 534 (1973). Appropriately, the statute was entitled “admissions” tax.

If an establishment charged no admissions but, instead, included the charge for entering in the price paid for refreshments, the tax was levied upon the refreshment receipts. In this regard, the Maryland admissions tax was strikingly similar to its contemporary federal counterpart, § 500 of the Revenue Act of 1927, as amended, 26 U.S.C. § 500 . The legislative history of the federal admissions tax reveals that its drafters intended to levy a tax upon “all places to which admissions is charged.” Geer v. Birmingham, 88 F.Supp. 189, 196 (D.Iowa 1950), rev’d, 185 F.2d 82 (8th Cir.1950), quoting H.R. Report No. 45, 65th Congress; 1st Sess., 1917-18. The tax bill, however, was amended to include “cabarets” which charged no admissions but included the price of admissions in refreshments, services or merchandise.

Id., 88 F.Supp. at 196 . Thus, as adopted in 1917, the federal admissions tax statute charged, (a) a tax of 1 cent for each 10 cents or fraction thereof of the amount paid for admission to any place, including admission by season ticket or subscription, to be paid by the person paying for such admission * * *. (c) a tax of 1 cent for each 10 cents or fraction thereof paid for admission to any public performance for profit at any cabaret or other similar entertainment to which the charge for admission is wholly or in part included in the price paid for refreshment, service, or merchandise. 26 U.S.C. § 700 (a) and (c) (1917) (emphasis added). In 1918 the term “roof garden” was added to the statute to “delineate more precisely the term cabaret—” Geer, 88 F.Supp. 198 .

With that exception, the federal law under ³²³ went no significant change from 1917 to 1936, the year Maryland adopted its counterpart. See Id. Interestingly, in 1934 and 1935, the Treasury Department adopted regulations to account for cabarets that imposed a minimal admission charge and inflated refreshment prices during performances. Id. at 202 ; see also, Lethert v. Culbertson’s Cafe, Inc., 313 F.2d 506, 510 (8th Cir.1963).

Thus, by the time Maryland adopted its admissions tax, federal law reflected a policy of imposing a tax “upon what would be a fair and reasonable admission in comparison with other charges ..., whether such amount was charged to their patrons as an ordinary admission or was disguised in the price patrons had to pay for refreshment, service or merchandise.” See Geer, 88 F.Supp. at 201 . That very policy was echoed in the language of the Maryland statute. A 1949 revision to the Maryland admissions tax reshaped the law into a configuration more closely resembling that which currently exists. By Chapter 255, Section 2 of the Acts of