Tax Commission v. Melvale Distillery Co.

Boyd, C. J., delivered the opinion of the Court. As the appeals of the State Tax Commission of Maryland in the cases against the Melvale Distillery Company of Baltimore County and Morris Sehapiro and others, co-partners trading as the Stewart Distilling Company, involve the same questions and were argued together, they will be disposed of in one opinion. On the 14th of March, 1921, after hearing, the State Tax Commission assessed the Melvale Distillery Company for purposes of taxation for the year 1921 with 5,312 barrels of distilled spirits at $20 per barrel, and the Stewart Distilling Company with 12,110 barrels at the same rate, under the provisions of sections 218, etc., of article 81 of the Code. The office of State Tax Commissioner was abolished and the duties imposed, upon and powers given him by existing law devolved upon the State Tax Commission, which was created by the Act of 1914, ch. 841.

By what is now section 218 of article 81 of the Code, it was enacted that there should be levied and collected upon all distilled spirits in'this State as personal property the same rate of taxation which is imposed by the laws of the State on other property for State and county purposes. By section 219, for the purpose of assessment and collection, it was made the duty of each distiller' and of every owner or pro ²³³ prietor of a bonded or other warehouse, in which distilled spirits are stored, and of every person or corporation having custody of such spirits, to make report to the State Tax Commissioner on the 1st day of January of each and every year of all the distilled spirits on hand at such date, and the tax for the ensuing year from the said first of January shall he levied and paid on the assessment of distilled spirits so in hand as representing the taxable distilled spirits for such year; provided, however, that the same distilled spirits shall not be taxed twice for the same year. Sections 220 to 228 provide for the method of taxation, for ah appeal, for a lien upon the distilled spirits for which taxes have been paid by the warehouseman, custodian or agent, etc. It was shown at the hearing before the State Tax Commission on March 11th, 1921, that the number of barrels of whiskey above stated were in the respective bonded warehouses and belonged to other parties. The eases now before us are appeals from the Baltimore City Court, which reversed the finding of the State Tax Commission and held the tax to he inoperative.

The validity of the law tiras taxing distilled spirits was sustained by this Court and tlie Supreme Court of the United States by a number of decisions. Monticello Co. v. Baltimore, 90 Md. 416 ; Fowble v. Kemp, 92 Md. 630 ; Carstairs v. Cochran, 95 Md. 488 (affirmed in 193 U. S. 10 ); Hannis Distilling Company v. Baltimore, 114 Md. 618 ( 216 U. S. 285 ). See also Thompson v. Kentucky, 209 U. S. 340 ; Selliger v. Kentucky, 213 U. S. 200 . We will, therefore, not- discuss that question, excepting in so far as it may be necessary in considering the points now raised, owing to the adoption of the Eighteenth Amendment to the Constitution of the United States, the Act of Congress of October 28th, 1919, commonly known as the “Volstead Act,” and regulations, etc., of the Commissioner of Internal Revenue and the Prohibition Commissioner.

The appellees contend, (a) that by the action of the State Tax Commission they are deprived of their property with ²³⁴ out due process of law guaranteed to them by the Fourteenth Amendment to the Constitution of the United States, by reason of the fact that they are compelled to pay taxes on property belonging- to others without having power to reimburse themselves for the taxes on the whiskey stored in their warehouses — that by reason of the control and prohibition of the Federal Government, the State cannot give them the meáns to enforce the lien conferred by the State statute to reimburse themselves; (b) that the action of the State Tax Commission denies to them the equal protection of the law they are entitled to under the laws of the State and under the Fourteenth Amendment; (c) that it violates Articles 15 and 23 of the Declaration of Rights of Maryland, in that it requires one person to pay the taxes due by another, without furnishing any means to the one paying the tax by which he may reimburse himself for what he has paid. It will be well to examine the Act of Congress referred to, and see just what it does provide for. The Eighteenth Amendment does not seem to leave any doubt as to what was meant by its section 1, which is: “After one year from the ratification of this article the manufacture, sale or transportation of intoxicating liquors within, the importation thereof into, or the exportation thereof from the United States and all territory subject to the jurisdiction thereof for beverage purposes is- hereby prohibited.” The prohibition was thus to begin one year from the ratification of the amendment, and was limited to the manufacture, sale, etc., “for beverage purposesSection 2 provides that: “The Congress and the several states shall have concurrent power to enforce this article by appropriate legislation.” Congress promptly passed an act under that section, but some of the states, including Maryland, have moved very slowly in taking advantage of the right to legislate on the subject, causing them to be dependent on such laws as they had on the subject of intoxicating liquors prior to the Eighteenth Amendment and were still enforceable. ²³⁵ In Ulman v. State, 137 Md. 642 , the defendants were indicted for selling liquor in Baltimore City without a license. They filed pleas in which they admitted that they had sold whiskey to the parties named “for non-beverage purposes, to wit, for medicinal purposes,” and alleged that at the time of the sale they had a permit, issued by the United States Commissioner of Prohibition, to sell liquor for other than beverage purposes to others holding permits to purchase and use intoxicating liquor for those purposes, and alleged that the parties to whom they sold had such permits.

They contended that the liquor laws applicable to Baltimore City had been abrogated or nullified by the Eighteenth ^Amendment and the Volstead Act, hut we held that there was nothing in the liquor laws applicable to Baltimore City which were repugnant to the Eighteenth Amendment or the Act of Congress, and sustained the conviction of the traverser in the lower court. The opinion concluded by saying: “We hold that the law in question has not been abrogated so far as it prohibits in Baltimore City the sale of intoxicating liquor without a license, regardless of the purpose for which the liquor is sold.” In these cases it is not denied that the law imposing the tax on distilled spirits was valid prior to the adoption of the Eighteenth Amendment and the act of congress referred to, hut it was contended that the appellees, who are ware-housemen and do not own the whiskey, are prevented from reimbursing themselves for taxes paid by them for the holders of the warehouse certificates by reason of the amendment, act of congress and regulations adopted by the Commissioner of Internal Revenue and instructions given by him and the Prohibition Commissioner. But it seems to us, as suggested by the Attorney General and his assistant, that their position rests, in the language of Mr. Justice McKexka in Thompson v. Kentucky, 209 U. S. 340 , “upon an exaggerated view of the control of the Federal Government.” The Eighteenth Amendment in terms only prohibits the manufacture, sale, etc., of intoxicating liquors for “bever ²³⁶ age purposes,” and. the Volstead. Act, as shown by its title, was, “An act to prohibit intoxicating beverages, and to regulate the manufacture, production, use and sale of high-proof spirits for other than beverage purposes, and to insure an ample supply of alcohol and promote its use in scientific research and in the development of fuel, dye and other lawful industries.” An examination of the act will show that provisions are made for the manufacture, purchase, and sale óf liquor for non-beverage purposes, and for the issuing of permits therefor.

Without attempting to quote or discuss them, reference to sections 3, 4, 6, and 37 of that act will show that such liquors can still be manufactured, purchased, and sold for medicinal and scientific purposes, and it is said that the uses of them for non-beverage purposes are on the increase. Unless there be much illicit manufacturing and importation of them, the quantity of liquors that were in the country when the Eighteenth Amendment was adopted must already be decreased considerably in the amount on hand; and that must from year to year decrease, unless the demand for it for purposes allowed by this act will cause distillers to make more. Of course, the manufacture and the use-of them are controlled'by the law, and many regulations, some of which are inconvenient and very strict, but it is not unusual for honest people to be put to inconvenience or extra expense by reason of the necessity of having laws and regulations to try to afford protection against dishonest people and those who will violate the law, if opportunity is offered, and they think they can escape conviction. The ■ appellees complain'particularly of the letters of January 27th and February 1st, 1921, sent by the Prohibition Commissioner to owners óf 'distilleries and general bonded warehouses.

By the one of January 27th, 1921, the owners were “notified not to honor any 1410’s presented to you for the withdrawal of whiskey and purporting to-be issued by the directors of the following states,” naming them and