Comptroller of the Treasury v. Fairland Market, Inc.

SONNER, Judge. In 1992, Maryland experienced a sobering budget deficit. The General Assembly responded to the crisis by calling a special session to consider and approve one piece of legislation, the Budget Financing Act. See 1992 Md. Laws, Spec.

Sess., ch. 1. Among its many changes, the bill narrowed or repealed certain tax exemptions and credits, expanded the list of taxable items and income, and implemented or increased certain licensing fees. As Senator Laurence Levitan, chairman of the Senate Budget and Taxation Committee, explained, these changes were intended to increase the State’s revenue and close the burgeoning budget gap. Senator Laurence Levitan, Memorandum to House Comm, on Ways and Means and the Sen.

Budget and Taxation Comm. (Jan. 29, 1992). The bill’s revised fiscal note projected a $32 million increase of State general fund revenues in 1992 and $322.7 million in 1993. Consistent with this revenue-raising purpose, the legislation amended § 11-105 of the Tax-General Article, which allows a retailer to recoup, in the form of a tax credit, a percentage of the sales and use tax that it has collected on behalf of the State.

Md.Code (1957, 1997 Repl.Vol.) Tax-Gen., § 11-105(a). Before 1992, a retailer could receive a tax credit equaling 1.2% of its total taxable sales. Md.Code (1957, 1988 Repl.Vol.) Tax-Gen., § 11-105. The 1992 legislation reduced the overall credit to .6% of total taxable sales, although section (b)(1) of the bill retained the 1.2 percentage rate for the first $4,200.00 in sales.

The bill also inserted section (b)(2) to § 11-105, to provide that a retailer -with multiple locations, who filed, or was eligible to file, a consolidated return, could take advantage of the 1.2% rate for only the first $4,200.00 in total sales across ⁴⁵⁵ its locations, not at each location. Thus, the legislation reduced the tax credit overall, and specifically curtailed the tax credit for retailers with multiple locations by treating the businesses as one entity, whether or not the retailers filed a consolidated return. Appellee, Fairland Market, Inc. (“Fairland”), tested the enforcement of amended § 11-105 in 1998, following the Comptroller of the Treasury’s audit of its accounts for the period of March 1, 1994 through January 31, 1998. During that time, Fairland operated between six and seven retail stores, each of which had a separate sales and use tax account with the State.

It never sought to file a consolidated return, and treated each store as a separate entity when it computed its collection credit. In 1998, the Comptroller assessed Fair-land for unpaid taxes in the amount of $2,188.62, 1 claiming it was eligible to file a consolidated return, even if it did not do so, and was therefore subject to a smaller credit rate by operation of § 11-105(b)(2). The Maryland Tax Court reversed the Comptroller’s assessment on July 20, 1999. It looked to § 11-502(c) of the Tax-General Article, which states: Consolidated return.—If the Comptroller approves, a vendor engaging in more than 1 business in which the vendor makes retail sales or sales for use may file a consolidated return covering the activities of the businesses.

Md.Code (1957, 1997 Repl.Vol.) Tax-Gen., § 11-502(c). The tax court held that 502(c) created a preliminary step for application of 105(b)(2). That is, a retailer must apply to submit a consolidated return, which the Comptroller may either approve or disapprove. If the Comptroller approves the application, the retailer “is eligible to file a consolidated return” under § 11-105(b)(2), and must compute its tax credit based on the total sales of all its businesses.

The court reasoned that the Comptroller’s approval triggers the applica ⁴⁵⁶ bility of § 11—502(b)(2), regardless of whether the retailer follows through with its application and actually files a consolidated return. Under the court’s reasoning, when a retailer does not apply to file a consolidated return or when the Comptroller denies a retailer’s filing request, § 11—502(b)(2) is inapplicable. The Circuit Court for Baltimore City affirmed the tax court in December 1999. While confident that the General Assembly amended § 11-105 “to gather and receive its share of the taxpaying dollars to the coffers of the treasury,” it agreed with the tax court that § 11-502(c), particularly the word “may,” set forth a condition precedent for the triggering of § 11-105(b)(2).

The Comptroller appealed and was the only party to brief this Court and present argument. Discussion The issue here is a question of statutory construction, which requires us to ascertain and effectuate the intent of the Legislature. Chesapeake Charter, Inc. v. Anne Arundel County Bd. Of Educ., 358 Md. 129, 135 , 747 A.2d 625 (2000).

Where the language at issue is clear, unambiguous, and consistent