Opinion ID: 1957370
Heading Depth: 1
Heading Rank: 1

Heading: Taxability Prior to January, 1957.

Text: The Comptroller contends that the dominant purpose of Martin in making the purchases in question was to build up its own production facilities and that no purpose of the purchaser to resell the property was shown. This contention is rested heavily on the absence from the facilities contracts of the words for resale to the Government, on the absence of any profit to Martin on sales of the facilities to the Government and on the claim that Martin could, for at least a taxable moment, use the facilities before title passed to the Government. The Sales Tax and Use Tax Acts are included as sub-titles in Article 81 of the Code (1951), and references below to pertinent portions of those Acts as in force during the years 1951-1954, inclusive, will be made simply by section numbers. Section 320 (d), a part of the Sales Tax Act, defines sale as including any transaction whereby title or possession, or both, of tangible personal property is    transferred    for a consideration by a vendor to a purchaser   . Section 320 (f) defines a retail sale or a sale at retail as including the sale in any quantity or quantities of any tangible personal property and states that [S]aid term shall mean all sales of tangible personal property to any person for any purpose other than those in which the purpose of the purchaser is to resell the property so transferred in the form in which the same is, or is to be received by him,   . The Use Tax Act is complementary to the Sales Tax Act ( Comptroller v. Crofton Co., 198 Md. 398, 84 A.2d 86, Comptroller v. Thompson Trailer Corp., 209 Md. 490, 121 A.2d 850). Judge Raine, in his comprehensive opinion in the Circuit Court, said in part: The language of the Use Tax sections differs from the Sales Tax provisions, but there is nothing in the record before this Court to indicate what, if any, portion of the taxes paid are `Use' Taxes and not `Sales' Taxes.    The Comptroller concedes, and it is well established by administrative interpretation that the taxes are complementary and that the Use Tax only applies to those transactions subject to a Sales Tax, but on which no tax has been paid. Consequently, if the transactions are not subject to the Sales Tax, they are not subject to the Use Tax. To this we add the following passage from Judge Collins' opinion in the Aerial Products case (210 Md. 631-632): At the argument in this Court the appellant [Comptroller] admitted that there was no evidence under which the Maryland Use Tax could be collected. The question here, therefore, involves only the Maryland Retail Sales Act. In the present case both sales taxes and use taxes are involved, but they have been dealt with throughout the proceedings on the basis that the exclusion stated in Section 320 (f) was as applicable to use taxes as to sales taxes. This is shown by the absence of any breakdown between the two types of taxes, by the stipulation above mentioned as to the amount, if any, which Martin would be entitled to recover, by the Opinion of the Comptroller (signed by the Hearing Officer), in which it is said that [e]xactly this same test [whether Martin purchased the property for resale or for manufacturing its own products] should be used in determining whether or not the facilities purchased outside the State of Maryland were subject to the use tax, by the concession in the trial court above referred to, and by the absence of any argument for separate treatment in the appellant's brief. [1] On this state of the record we think that no question as to possibly different treatment for the two taxes is before us for decision. Rules 831 c 2 and 4 (relating to Contents of Briefs) and Rule 885 (relating to Scope of Review) of the Maryland Rules; Comptroller v. Aerial Products, Inc., supra , and cases therein cited at 210 Md. 645. We think that the Aerial Products case, supra, and Baltimore Foundry & Machinery Corp. v. Comptroller, 211 Md. 316, 127 A.2d 368, are conclusive in establishing the sufficiency of Martin's purpose to resell the facilities purchased by it to the Government to obtain the benefit of the exclusion under Section 320 (f), as in force in 1951-1954, since these cases establish the rule that under that Section the purpose of the purchaser to resell the property need not be his sole purpose in making the purchase in order to make the exclusion operative. The absence from the facilities contracts here involved of the words for resale to the Government is not controlling. The contracts made it perfectly clear that title to facilities purchased by Martin was to be transferred to the Government immediately upon delivery of the equipment to Martin, and the Government became obligated to reimburse Martin for the cost thereof. The right of rejection reserved under the Navy contracts, the precise scope of which is somewhat obscure, still would not detract from Martin's purpose to resell to the Government, nor would it prevent the passage of title to the Government when the equipment was delivered to Martin. Likewise, in view of this provision for the immediate passage of title to the Government upon delivery of the equipment to Martin, there was no moment at which Martin could use the equipment prior to the passage of title. Even if there had been such an interval of time, the result would not have been altered. See Baltimore Foundry & Machinery Corp. v. Comptroller, supra , where the fact that some time might elapse between the purchase of a pattern by the foundry and its resale to the customer did not change the result. The appellant urges that the absence of any profit to Martin on the resale of equipment to the Government manifests a lack of genuine purpose to resell. We think that this does not follow. In the Baltimore Foundry case, the expectation or realization of a profit on resale was regarded as a factor indicating that a genuine resale was intended, but there was no possibility of a profit to the contractor on resale under the Army contract in the Aerial Products case. In the latter case, as in this, the contract provided for resale to the Government at cost.