Pierce & Hebner, Inc. v. State Tax Commission

Collins, J., delivered the opinion of the Court. This is an appeal by Pierce & Hebner, Inc., a dealer at wholesale in wines and distilled spirits, appellant, ²⁵⁷ from a decree of Circuit Court No. 2 of Baltimore City, affirming the action of the State Tax Commission of Maryland in assessing for the year 1947 its tangible personal property at $571,380. Of this amount the sum of $347,420.75 represents the Federal Excise Tax on distilled spirits paid by the distiller. This merchandise was purchased by the appellant from the distiller with the federal stamps affixed to the bottles.

The question before us is whether this $347,420.75, the Federal Excise Tax represented by federal stamps purchased by the distiller and affixed to each bottle of distilled spirits, should be excluded from the assessment of appellant’s “stock in business” as made by the State Tax Commission. The appellant so contends. This assessment was made pursuant to the provisions of Code (1947 Supplement) Article 81, Section 6 (6), providing for the assessment of “the stock in business of every * * * corporation engaged in any * * * commercial business in this State * * *” and Article 81, supra, Section 10(b) (5), providing for the assessment of “Tangible personal property belonging to any [ordinary business] corporation, domestic or foreign.” By the provisions of Article 81, (1939 Code), Section 11, this property should be assessed “at the full cash value thereof”. By Title 26 U. S. C. A. § 2800(a) (1) and by the War Tax Act, Title 26 U. S. C. A. § 1650, a tax of $9 is levied on each approved gallon of distilled spirits produced in the United States.

By Title 26 U. S. C. A. § 2800 (b), this tax is to be paid by the distiller when the spirits are withdrawn from bond. Without the federal stamps the distilled spirts could not be sold, and the stamps remain on the bottles until the spirits reach the ultimate consumer. The appellant relies strongly on the case of F. Strauss & Son, Inc., v. Coverdale, Assessor, et al., 205 La. 903 , 18 So. 2d 496 , (Louisiana) (decided May 22, 1944), which is in point and which holds with appellant’s contention that the Federal Excise Tax here in question should be excluded in the assessment of the liquor at ²⁵⁸ “the actual cash value”. That Court, with one judge dissenting, disagreed with the Supreme Court of Georgia in the case of Consolidated Distributors, Inc. v. City of Atlanta, 193 Ga. 853 , 20 S. E. 2d 421 , decided April 16, 1942, which involved the identical question before the Louisiana Court.

In so holding the Louisiana Supreme Court said, 18 So. 2d at page 498 : “The federal revenue statute does not state that there shall be á tax on the distillation or manufacture of liquor; no license for the privilege of distilling or manufacturing that product, predicated on the gross receipts of the distiller’s business, is thereby imposed. Rather, the statute provides that there shall be a tax levied and collected on all distilled spirits. This, in our opinion, clearly is in effect the imposition of a purchase or use tax on liquor, with the burden of paying it being placed solely on the ultimate consumer.” One of the grounds on which this opinion was based was that the tax was to be paid only when the liquor was taken from bond, not immediately upon its being manufactured or distilled. With the conclusion of the Louisiana Court we do not agree.

The case of Lash’s Products Co. v. U. S., 278 U. S. 175, 176 , 49 S. Ct. 100 , 73 L. Ed. 251 , involved a tax on soft drinks equivalent to ten percentum of the price for which they were sold by the manufacturer. (Act of February 24, 1919, Chap. 18, Paragraph 628, 40 Stat. 1057 , 1116.) The manufacturer notified its customers beforehand that he paid this 10% tax and therefore contended that in this way it passed the tax on and the true price of the goods was the sum received less the tax. Justice Holmes in that case pointed out that the price is the total sum paid for the goods and that the amount added, because of the tax, is paid to get the goods and for nothing else, and therefore, it was a part of the price. He said: “The phrase ‘passed the tax on’ is inaccurate, as obviously the tax is laid and remains on the manufacturer and on him alone.

Heckman & Co. v. I. S. Dawes & Son Co., 56 App. D. C. 213, 12 F. 2d 154 . The purchaser does not pay the .tax. He pays - or may pay the seller moré ²⁵⁹ for the goods because of the seller’s obligation, but that is all.” See also Los Angles Warehouses Co. v. American Distilling Co., 139 P. 2d (Cal.) 641. In the case of Gruen Watch Co. v. Evatt, Tax Commissioner, 143 Ohio St. 461 , 55 N. E. 2d 794, 795 , (decided June 21, 1944), the tax assessment included import duties paid on watch movements.

The claim was made that the amount of these duties should be excluded from the assessment for the purpose of taxes. The Ohio statute, Gen. Code, § 5389, fixed the standard of assessment as “the then true value of such property in money.” The Ohio Supreme Court there held that the watch movements having been brought from Switzerland to Ohio their value was affected by the expenses of transportation, customs duties and other incidental charges which were not deductible from the assessment. The case of Consolidated Distributors, Inc., v. City of Atlanta, 193 Ga. 853 , 20 S. E. 2d 421 , supra, decided April 16, 1942, is directly in point.

In that case the Georgia Supreme Court pointed out that the federal tax here in question was payable before the liquor could legally pass