Mayor of Baltimore v. State Tax Commission

Sloan, J., delivered the opinion of the Court. The question, and only question, involved in this appeal is whether the machinery, tools, and materials of the Union Shipbuilding Company, one of the appellees, are “used entirely or chiefly in connection with manufacturing” and as such, entitled to exemption “from taxation for all ordinary municipal purposes” under the provisions of section 10, ch. 82, of the Acts of 3918. The Union Shipbuilding Company had applied to the Appeal Tax Court of Baltimore for an exemption from taxation for the year 3930 on machinery valued at $250,000 and raw material, $600,000, under the Act of 1938, chapter 82, and an order was passed deducting as exempt $82,730, representing the value of a plant manufacturing acetylene and oxygen gases used in connection with its operations, and declaring the balaxice of the items claimed were subject to taxation. Brem this order, an appeal was taken by the applicant, as to the property held taxable, to the State Tax Commission of Maryland, which reversed the order of the Appeal Tax Court.

The City of Baltimore then appealed to the Baltimore City Court, which sustained the action of the State Tax Commission, holding that the Union Ship ²³⁶ building Company should be “classed as a manufacturer” and entitled to1 the exemption on the property scheduled, except certain machinery and equipment scheduled at a value of $23,419.39, which the parties agreed was assessable, and it is from the order of the City. Court that this appeal is taken by the City of Baltimore. The Union Shipbuilding Company had been for many years engaged at Fairfield, Curtis Bay, in the City of Baltimore, on a large scale in the business of shipbuilding. After the World War, that line of business disappeared, leaving the company with a large plant on its hands.

Since 1921, it has been engaged in the purchase and dismantling of steel vessels, and the transformation or cutting of the metal parts of such vessels into sizes suitable for use in the manufacture of steel and other metallic products. Practically all of the vessels so cut to pieces are bought from the government of the United States mider agreements whereby they must be dismantled and every usable part rendered unfit for use as installed on the vessel so purchased. According to the statement of one of the company’s witnesses read in evidence: “Upon arrival at our plant the vessels are placed alongside piers and stripped of all wood and miscellaneous equipment, after which they are cut into sections approximately twenty-four feet long by five feet wide, by use of acetylene torches, and the sections are then removed by locomotive cranes, placed in railroad cars, and transferred to shears, where they are cut into sections five feet long by eighteen inches wide, the prescribed open hearth large box size. Material so cut is then loaded by overhead magnetic cranes into cars and shipped to steel mill furnaces, where, in connection with a certain percentage of pig iron, it is converted into steel ingots, which in turn are rolled into various shapes.” The conversion is not done by the company, but by its customers. “Non-ferrous material (brass, copper and bronze) is removed from vessels, transferred to shears, where it is cut into small pieces for melting into' ingots.” “The Union Shipbuilding Company is now engaged in the production of approximately 12,000 tons of heavy melting steel per month, ²³⁷ and. it is employing from 600 to 650 men continuously, with a pay roll averaging $75,000 per month, and also about $40,000 per month for operating supplies.” The electric current hill runs about $3,000 per month.

All this represents what the appellant contends amounts to no more than a junk yard run on a large scale, while the appellees contend that it is a manufacturing plant, the machinery, tools, and raw material of which are “used entirely or chiefly in connection with manufacturing,” and therefore entitled to exemption from assessment and taxation. Acts 1918, eh. 82, sec. 10. The city asserts that the test is in the product of the plant or operations, and that unless what it produces is a, marketable commodity, ready for use, it cannot be considered a manufacturing plant within the meaning of the