Goldstein v. Time-Out Family Amusement Centers, Inc.

COUCH, Judge. In this appeal we are principally concerned with whether the Circuit Court for Anne Arundel County erred in overruling appellant’s demurrer to appellee’s Bill of Complaint for Declaratory Judgment. We conclude that it did and thus reverse. The appellee, Time-Out Family Amusement Centers, Inc. (Time-Out), owns and operates family amusement centers in various Maryland locations.

In doing so it derives funds from amounts charged for the use of coin operated games and amusement devices. By sections 402 through 411 of Article 81, Annotated Code of Maryland, entitled “Admissions and Amusement Tax,” the General Assembly has provided a comprehensive scheme, should any county so resolve, for the levy and collection of taxes on the admission to certain specified places where performances are furnished (cabaret); for the use of sporting or recreational facilities or equipment; and for games of entertainment. The maximum rate is spelled out in § 403. Section 404 requires that any such tax levied is to be collected by the Comptroller of the State.

Section 405 requires anyone subject to the tax to make a return to the Comptroller. What gives rise to the present controversy is § 406, which provides for certain exemptions, to be discussed later. Section 407A provides the mechanism for assessment of taxes due and for relief to the taxpayer in the form of revision of the assessment, refund application, formal hearing before the Comptroller, and appeal to the Maryland Tax Court. The remaining sections are not pertinent to this appeal. ⁵⁸⁶ Time-Out, aggrieved by its assessment, 1 filed a declaratory judgment action (later amended) against the Comptroller, in the Circuit Court for Anne Arundel County, seeking to have the court declare Section 406 and one of the Comptroller’s implementing regulations, COMAR 03.01.01.01, unconstitutional as violating the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution and Article 24 of the Maryland Declaration of Rights.

The Bill also sought a declaration that the statute and regulations violated the provisions of Article 15 of the Maryland Declaration of Rights regarding uniformity of taxation; we understand this contention to have been abandoned and thus do not address it. The appellant demurred to the Amended Bill, specifically raising the failure of appellee to “exhaust all statutory procedures provided by law for administrative and judicial review of admissions and amusement tax assessments.. ,fl” The court passed an order, after hearing counsel and considering memoranda, by which the demurrer was overruled and dismissed; no reason therefor was given in the order, nor was the hearing transcribed, and we are thus unable to discern from the record the court’s reasoning. In any event, the appellant duly answered the Bill and subsequently moved for a summary judgment; this was denied and the matter proceeded to hearing on the merits. The trial judge ultimately rendered a written declaration which essentially held that exemption sub-sections 406(3), (5), and (6) of Article 81 were unconstitutional.

It was further found that these exemption sub-sections were to be severed from “the rest of the Admissions and Amusement tax law in Article 81, Section 402 et seq.” Finally, the court declared “the regulation in COMAR 03.01.01.01 allowing a particular class of persons charging admissions to pay the tax on a ‘tax includéd’ basis is unconstitutional as it is in violation of the equal protection clause of the Fourteenth Amendment to ⁵⁸⁷ the United States Constitution and Article 24 of the Maryland Declaration of Rights.” Thereafter, the appellant appealed and a cross-appeal was noted by Time-Out. We granted certiorari before consideration by the Court of Special Appeals in order to determine questions of public importance. The Comptroller’s brief presents the following questions: “I. Should the Circuit Court have dismissed the declaratory judgment action brought to challenge a taxation statute for which the General Assembly has provided a specific statutory remedy?

II

Did the Circuit Court, in finding certain exemptions to the Admissions and Amusement Tax Act to be unconstitutional, ignore the well-established principle of avoidance of unnecessary constitutional adjudications?

III

Do the exemptions to the Admissions and Amusement Tax Act set forth in § 406(3), (5) and (6) of Article 81 of the Maryland Annotated Code violate the Equal Protection Clause or Article 24 of the Maryland Declaration of Rights? Did the Circuit Court incorrectly place the burden on the State to defend the classifications contrary to the well-established standard set forth by the Supreme Court and the Maryland Court of Appeals.

IV

Does COMAR 03.01.01.01 which permits certain vendors which charge admission to a place to operate on a “tax included basis”, violate the Equal Protection Clause or Article 24 of the Maryland Declaration of Rights?” Time-Out raises two issues by its cross-appeal: “I. Did the Circuit Court, having found § 406(3), (5), and (6) and COMAR 03.01.01.01 to be unconstitutional, correctly sever those provisions from the remainder of the Admissions and Amusement Tax Act and regulations?

II

Did the Circuit Court, having found portions of § 406 to be unconstitutional, correctly sever the allegedly unconstitutional portions and uphold the remaining por ⁵⁸⁸ tion of § 406 and the Admissions and Amusement Tax Act?” The Comptroller’s first issue addresses the trial court’s denial of its demurrer to Time-Out’s declaration. The Comptroller may properly argue against that ruling on appeal. Former Rule 345(d) 2 ; Inter-City Co. v. Baltimore County, 218 Md. 80, 85 , 145 A.2d 263, 265 (1958). In the view we take as to the Comptroller’s first issue we need not consider his remaining issues nor those raised by Time-Out; this is so because we hold that the trial court erred in overruling the Comptroller’s demurrer.

We explain. In State Dep’t of Assessments & Taxation v. Clark, 281 Md. 385, 403-04 , 380 A.2d 28, 39 (1977) [footnotes omitted], Judge Orth wrote for the Court: “We have indicated, supra, that when an administrative remedy is provided by statute, relief provided under those statutory provisions must be exhausted before a litigant may resort to the courts. That is, such a remedy is exclusive, and the administrative body must not be by-passed by pursuing other remedies. Du Bois v. City of College Park, supra [ 280 Md. 525, 533 , 375 A.2d 1098, 1104 (1977)], and cases therein cited.

However, ‘[t]here are few absolutes in the law, and the rule that an administrative remedy must be exhausted before recourse is had to the courts is not one of them.’ Poe v. Baltimore City, 241 Md. 303, 308 , 216 A.2d 707 (1966). There are general statements in past opinions of this Court, which taken apart from the actual decisions involved, appear to support the claim that even though