H. M. Rowe Co. v. State Tax Commission

Obbutt, J., delivered the opinion of the Court. Acting under the authority conferred by chapter 528 of the Acts of 1914, on February 13th, 1915, the Mayor and City Council of Baltimore, by Ordinance Xo. 571, exempted from taxation all mechanical tools, whether worked by hand ■or steam or other motive power, and any machinery, manufacturing apparatus, or engines owned, as is required by said Act of 1914, chapter 528, and which are actually employed and used in the business of manufacturing* in the city of Baltimore” owned by “persons, firms and corporations actually engaged in manufacturing within the City of Baltimore,” who complied with the terms of said act by furnishing trae statements and making returns of their personal property as required by it. On Alarch 6th, 1919, it passed Ordinance Xo. 462, which exempted from taxation for “all ordinary municipal purposes * * * all personal property of every description owned by any person, firm or corporation and used entirely or chiefly in connection with manufacturing in Baltimore Oity, including mechanical tools, or implements, whether worked by hand or steam or other motive power machinery, manufacturing apparatus or engines, raw material on hand, manufactured products in the hands of the manufacturer, bills receivable and business credits of every kind, due to the manufacturer, for goods manufactured in Baltimore Oity.” That ordinance also' provided: “In case any person, firm •or corporation engaged in manufacturing in Baltimore Oity ■shall also be engaged in the business of a jobber, or wholesaler or retail merchant, in Baltimore Oity, nothing in this •ordinance shall be construed to exempt the personal prop* ²⁵⁴ erty, other than goods of his own manufacture, used in connection with said business of jobber or wholesale or retail merchant.” Having furnished the statements and returns required by chapter 528 of the Acts of 1914 and the two ordinances, the H. M. Rowe Company, a corporation, claiming to be engaged in the business of manufacturing, made seasonable application to the Appeal Tax Court of Baltimore City “for the exemption from taxation for the year 1920 for ordinary municipal purposes of certain property used in connection: with that business, valued at $76,507.22.” The Appeal Tax, Court refused to allow the exemption, whereupon the appellant appealed to the State Tax Commission for the purpose - of having it review and reverse the action of the Appeal Tax Court. After a hearing the order appealed from was -affirmed, and the appellant then filed its petition and appeal' in the Baltimore City Court against the State Tax Commission, the Appeal T-ax Court, and the Mayor and City Council of Baltimore, praying that the several acts of the Appeal Tax Court and The State Tax Commission in respect to its ■ claim for exemption might be reviewed.

On May 5th, 1925, the matter was submitted to that court for determination -and on May 7th it affirmed the order of' the State Tax Commission, and from that order this appeal', was taken. The only question presented by the appeal is whether the - business with respect to which the appellant claims exemption is a manufacturing business within the meaning of the • statute and the two ordinances referred to. The facts relating to that issue are- not disputed and may be thus summarized : The “H. M. Rowe Company” was incorporated for “publishing, maniifacturing, dealing in and selling of books, stationery and miscellaneous materials and supplies for office and school purposes and to do whatever may be necessary appertaining to the book, stationery and publishing business.”' “Its principal office is in Baltimore City, and it maintains- ²⁵⁵ offices in New York, Boston, Chicago, San Francisco- and other large cities, and sells to schools and educational institutions miscellaneous and complete sets of text books, treatises, books of instructions, pamphlets, and practice forms for commercial courses of instruction in stenography, typewriting, bookkeeping, English, spelling, arithmetic, banking, •commercial law, etc., and it also gets up, as hereinafter outlined, a monthly magazine known as the ‘Budget,’ which deals with educational matters. The company does not buy ready made any of the books, pamphlets, treatises, magazines, practice forms, or other articles which it sells.

As to some of these articles, the manuscript is composed and written by the company itself and is then sent to- a printer in typewritten form. The printer, who is an independent contractor, with a separate place of business-, sets it up in type -on galley sheets. It is then proof read, corrected, amended, and divided into- pages by the appellant. It is' then sent back to the printer, who rearranges the- type and prints another proof in page form.

This is again proof read, corrected and amended by the appellant. The makemp- type of the manuscript in page form is then sent to an electrotyper, who is also an independent contractor, with a separate place of business, and he makes up electrotype plates, from which the pages o-f the book are printed. These pages, as to- certain books, are then sent to a bindery, which is an independent contractor, with a separate place- of business. The book is then cop-y-righted and is ready to be marketed.” It also makes and sells the “Bowe Budget Systems” of Bookkeeping, “there being three separate- systems, all of which are copy-righted and -owned by the appellant.

Each ■ of these bookkeeping systems is composed of a text book; anywhere from three to five printed ‘budgets,’ which are p-ads of printed pages ‘and other printed sheets fastened at tho four corners with brass staples and washers; anywhere from three to five sets of miniature- blank books of account; anywhere from three to five packages of blank forms for checks, notes, drafts, bills, receipts and other business papers and ²⁵⁶ documents used in bookkeeping and accounting offices; and anywhere from three to. five sets of envelopes which represent files for the purpose of filing incoming business, papers such as are named above which are contained in the ‘budget’ before mentioned after the student has recorded them in his. books of accounts. In addition to. the budget systems of bookkeeping just described, the appellant makes up and markets, other case-bound text books on the subject of commercial arithmetic, commercial law, shorthand, typewriting, business English, rhetoric, spelling and kindred subjects; also, various, blank books and pieces of stationery that are used in commercial. and business schools, public and private. No printing or electrotyping is done by the appellant, but all such work required by the appellants is done by independent contractors. “The appellant assembles and fastens together its bookkeeping ‘budgets’ on its own premises. In the several bookkeeping systems named, there are 15 or 16 ‘budgets.’ Each ‘budget’ contains from 100 to- 150 printed sheets; between these printed sheets are placed other loose printed sheets representing business papers such as checks., notes, drafts, bills, invoices etc. There are probably on an average of 200 such printed sheets included between the instruction sheets in each budget.

The appellant sells approximately 175,000 of these' bookkeeping budgets a year. * * * “The printed white instruction sheets and the incoming' business papers are placed in piles of 1,000 each in their proper order on racks. The appellant’s, employees then pick a sheet off each pile and, place it in a tray which they hold' in the hand. When the employee makes a complete circle around the rack, she .will have gathered one complete budget. Before the white instruction sheets are placed on the racks,, they are punched at the comers on a punching machine operated by an electric motor. * * * After a budget is gathered, holes are punched in the four comers by a punching machine operated by foot power, brass staples are inserted in these holes, and the budget is then taken to another machine where' ²⁵⁷ by foot power a washer is fastened to the staple by a crushing or punching process which fastens the four corners of the budget tightly.

The budgets are then ready for delivery and are placed in stock. The value of the 'appliances above described used in assembling and fastening the budget sheets together is approximately $750. * * * The electrotype plates constitute a valuable part of the assets of the appellant, and are used from time to time in making1 up new supplies of books in the manner above set forth.” All the printing, electrotyping and binding required to produce the books and bookkeeping systems sold by the appellant is done by independent contractors in their respective plants and with their own tools and machinery and the only work of any kind performed by the appellant in connection with them is to furnish the manuscript, read, correct aud amend the proof, supervise the printing and assemble the bookkeeping systems. The appellant contends that this business, which (largely in the language of the agreed statement of facts) we have described with perhaps needless detail, is manufacturing, and in support of that contention its counsel has filed elaborate briefs prepared with commendable eare and industry. We have examined and carefully considered the briefs and the cases cited, but are not able to. reach the conclusion that the business which we have described is manufacturing within the meaning of the letter or the spirit of the statute and the ordinances referred to, regardless of whether they be strictly or liberally construed.

The purpose' and intent of such statutes as. those under consideration is to augment the wealth and prosperity of the state by inducing the establishment, expansion and development of industries, which will produce by hand or mechanical labor, in commercial quantities, articles suitable or desirable for the necessities, comfort, convenience or pleasure of the public; afford employment to its own citizens, and attract others whose skill and industry will add its wealth and resources. ²⁵⁸ “Manufacture” as used in those statutes is a plain word in every day use, and as ordinarily understood means the process of converting some material into a different form adapted to uses to which in its original form it could not be so readily applied, and is associated nearly always with the use of manual or mechanical energy, and it is not ordinarily used to describe the creation of products by labor entirely or mainly intellectual, literary, or clerical in