Comptroller of Treasury v. Smith

Henderson, J., delivered the opinion of the Court. This appeal is from a judgment of the Circuit Court for Prince George’s County reversing an assessment of use tax by the Comptroller upon the price, or aggregate value, of an asphalt plant purchased by the appellee, for use in Maryland, from The Simplicity System Company of Chattanooga, Tennessee. The question presented is whether the Comptroller’s assessment is supportable, upon the facts before him, by a true construction of the Maryland statute. Code (1951), Art. 81, sec. 369, imposes a tax on the use in Maryland of tangible personal property purchased within or without the State, but sec. 370 (a) exempts from the use tax property upon which a retail sales tax has been paid to the State of Maryland.

It is thus complementary to the retail sales tax, and one of its chief functions is “to remove the temptation of buyers to place their orders in other States in the effort to escape payment of the tax on local sales”. Miller Brothers Company v. State, 201 Md. 535, 546 , reversed on other grounds in Miller Bros. Co. v. Maryland, 347 U. S. 340 . See also Compt. of Treasury v. Crofton Co., 198 Md. 398 .

Section 370 (f) exempts from the use tax “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 ⁴¹² product or service which is manufactured, compounded or furnished * * To aid in the administration of the use tax law, the Comptroller promulgated Rule 62, which provides in part: “If a retail dealer, factory representative, distributor or agent located in this State sells substantially the same kind of tangible personal property which is used for the same purpose, then other like property will be deemed readily obtainable within this State without regard to its name, trademark, patent or copyright.” For the purposes of this case, it is conceded that an asphalt plant, if readily obtainable in Maryland, would be subject to the tax, and that it would be exempt from the tax if not readily obtainable here. It also seems to be conceded that Rule 62 was within the Comptroller’s power of definition. Cf. John McShain, Inc. v. Comptroller, 202 Md. 68, 73 , Suburban Propane Gas Corp. v. Tawes, 205 Md. 83, 87 , and Comptroller of Treasury v. M. E. Rockhill, Inc., 205 Md. 226, 232-233 .

We think the Comptroller’s definition is not beyond the intent and purpose of the statutory language. In Peoples Gas and Elec. Co. v. State Tax Comm., 238 Iowa 1369 , 28 N. W. 2d 799, 806 , in dealing with a similar rule promulgated under a similar statute, the court said: “It is clear this provision of the rule is designed to effectuate the purpose of the statute to protect Iowa retailers. Protection of Iowa dealers means full protection, which includes protection from arming out-of-state sellers of competitive equipment with a two per cent advantage. “We determined the converse of this proposition in Dain Mfg.

Co. v. Iowa State Tax Comm., supra, 237 Iowa 531 , 22 N. W. 2d 786 , aside from the rule. In that case the goods readily obtainable in Iowa were not of equal quality or were not of equal precision standard. We there stated an article is not readily obtainable in Iowa unless it can be procured in kind and quality fairly equivalent to the article purchased outside.” At the hearing before the Comptroller in the instant case, the appellee testified that he was in the business ⁴¹³ of mixing and selling asphalt and decided to purchase a “batch-type” plant. He had previously used a “continuous mix” plant, but specifications of the District of Columbia (since changed) called for a batch-type