Comptroller of Treasury v. Crofton Co.

Markell, J., delivered the opinion of the Court. This is an appeal from a judgment for refund, with interest, of $182.48, collected as use tax with interest. The only question presented is whether the use, by a construction company in the construction of houses, of slate which is not readily obtainable in Maryland, is exempted from the use tax under section 810 (f)' of the Use Tax Act. Article 81, secs. 308-337, Code, 1947 Supp. ; Acts of 1947, ch. 681; 1947, Sp.

Session, ch. 3; as subsequently amended. An obvious purpose and effect of the use tax is to complement the retail sales tax (Article 81, secs. 259-307,'Code, 1947 Supp.; Acts of 1947, ch. 281; 1947 Sp. Session, ch. 2; as subsequently amended) by imposing, in respect of purchases made outside Maryland (and therefore not subject to the sales tax) for use in Maryland, a compensating use tax and thereby avoiding unfair discrimination and promoting equality between Maryland dealers and dealers in other states, and between- purchasers in Maryland and purchasers outside Maryland for use in Maryland. The sales tax is imposed on the price of each retail sale (as defined, including certain selected services) made -in this state.

Section 260. The use tax is- imposed “on the use, storage or consumption in this State of tangible personal, property purchased from a vendor within or without this State * * * for use, storage or consumption within this State”. Section ⁴⁰¹ 309. “Sale at retail” expressly includes “(2) The sale of building materials to contractors, builders or landowners for use or resale in the form of real estate”. Section 308 (h) (2).

The Retail Sales Tax Act contains a provision in identical terms. Section 259 (f) (3). In State v. Christhilf, 170 Md. 586 , 185 A. 456 , this court in effect held that “selling tangible personal property at retail”, without definition, includes what is expressly included by sections 308 (h) (2) and 259 (f) (3). On that question decisions in other states are in conflict, some in accord with the Christhilf case, some to the contrary.

Since in terms the sales tax is imposed on retail sales and the use tax on the use of property purchased, the pertinence of a definition of “sale at retail” in the Use Tax Act is not apparent. However, other provisions of the Use Tax Act make it clear that in effect the use tax is imposed only on the use of property purchased at retail. The definition of “sale at retail” is thus in effect a definition of a purchase in respect of which the use tax is imposed. “Use” shall not include “the incorporation of tangible personal property as a material or part of other tangible personal property to be produced for sale by manufacturing, assembling, processing or refining.” “Storage” shall not include “the keeping or retention of possession in this State of tangible personal property for the purpose of incorporating said property as a material or part of other tangible personal property to be produced for sale by manufacturing, assembling, processing or refining.” Section 308 (d) (2) and (e) (2). Under the Retail Sales Tax Act “sale at retail” shall mean “all sales of tangible personal property * * * for any purpose other than those in which the purpose of the purchaser is to resell the property * * *, or to use or incorporate the property so transferred, as a material or part, of other tangible personal property to be produced for sale by manufacturing, assembling, processing or refining.” Section 259 (f). ⁴⁰² Scetion 310 provides, “The use, storage or consumption in this State of the following tangible personal property is hereby specifically exempted from the tax imposed by this subtitle: (a) Tangible personal property upon which a retail sales tax has been paid to this State under, the terms and provisions of Section 260 of this Article, (b) Tangible personal property expressly exempted from the retail sales tax imposed by this State under the terms and provisions of Section 261 of this Article, (c) Tangible personal property sold by any non-resident vendor to a purchaser, a resident of this State, if the sale thereof would have been exempt from the retail sales tax imposed by this State under Section 261 of this Article had said sale been made in this State. * * * (f) Tangible personal property not readily obtainable in Maryland which is stored, used or consumed in this State by a person engaged in the business of rendering services, or manufacturing, compounding for sale, profit, or use of any article, substance or commodity, if such tangible personal property enters into the processing of or becomes an ingredient or component part of the product or service which is manufactured, compounded or furnished and the container, label or the furnished shipping case thereof.” Section 310 (a) (b) (c) restrict the use tax, in application, to a compensating tax, complementary to the retail sales tax.

The question now presented is a question of construction of section 310 (f). Is a builder of houses “engaged in the business of * * * manufacturing, compounding for sale, profit or use of any article, substance or commodity”? Is a house a “product * * * which is manufactured [or] compounded * * *”? Judge Tucker in a well-reasoned opinion answers both of these questions in the affirmative.

He holds that the dictionary meanings of “manufacture”, “article”, “product” and other words are broad enough to warrant these answers. He adds, “Moreover, it would have