CITY COUNCIL OF BALTIMORE v. AS Abell Co.

145 A.2d 111, 218 Md. 273
CourtCourt of Appeals of Maryland
DecidedNovember 13, 1958
Docket[No. 123, September Term, 1958.]
StatusPublished
Cited by43 cases

This text of 145 A.2d 111 (CITY COUNCIL OF BALTIMORE v. AS Abell Co.) is published on Counsel Stack Legal Research, covering Court of Appeals of Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
CITY COUNCIL OF BALTIMORE v. AS Abell Co., 145 A.2d 111, 218 Md. 273 (Md. 1958).

Opinion

Prescott, J.,

delivered the opinion of the Court.

These appeals involve the validity vel non of Ordinances 1097 and 1098 approved by the Mayor and City Council of Baltimore on November 15, 1957. At the conclusion of the trial below, a final order was passed which declared that both ordinances were unconstitutional and void except insofar as they provided for a refund of the taxes paid thereunder, and enjoined the Mayor and City Council of Baltimore and the City Treasurer from enforcing the provisions of said ordinances except insofar as they provided for a refund of the taxes already paid. From this order, the City and the City Treasurer have appealed.

Ordinance No. 1097 levied and imposed, upon the purchasers, a tax at the rate of 4% upon the gross sales price, if used for or in connection with advertising or advertising purposes, of the following: every sale of space in all newspapers, magazines, periodicals, programs, directories and other printed matter published in Baltimore; in, on or upon or attached to any vehicle or airbourne device by any person whose principal operations are in the City of Baltimore; each and every sale of time on, or in connection with, any intrastate radio or television broadcast originating in the City of Baltimore and directed to persons in the State of Maryland or any part thereof. The ordinance then provided for certain exemptions, the manner of collecting the tax and other matters with which we are not immediately concerned.

Ordinance No. 1098 levied and imposed, upon the sellers *278 of the same space and time named in Ordinance 1097, a 2 °/o gross receipts tax.

Both of the ordinances in question have been repealed, effective December 31, 1958; so the taxes in question involve only impositions for the calendar year 1958.

The appellees may be divided into four general classifications: (1) newspaper publishers; (2) radio and television broadcasters; (3) bill-board operators; and (4) the purchasers of advertising, both out-of-state and local. They were the complainants below, and all of their cases having been consolidated resulted in the final order mentioned above.

The evidence discloses that in the fall of 1957 the Mayor and City Council of Baltimore met to consider the budget for the fiscal year 1958. Ordinance No. 1097 as originally introduced provided for a 7j4% tax upon the gross sales of advertising space and time. As finally passed and approved, it imposed a tax of 4% upon the gross sales price of every sale of space for advertising as noted above; and Ordinance 1098 imposed an additional 2% on the gross receipts from the sale of advertising space and time. The Budget Director of Baltimore City estimated that these taxes combined would produce the sum of $2,653,000 for the year 1958.

On January 28, 1958, the City Treasurer, charged with the enforcement of the ordinances and the collection of the taxes thereunder, issued a regulation prepared by his legal adviser, the City Solicitor of Baltimore. This regulation, apparently based on the interstate character of most radio and television broadcasting, had the effect of exempting the major portion of such business from the two taxes.

Pursuant to the ordinances and the regulations promulgated thereunder, the various advertisers and media filed their reports and paid the taxes. The three television stations in Baltimore City, which are also complainants in the case, collected gross receipts for the first three months of 1958 totaling $1,636,701.44. However, the total tax paid by their advertisers at the rate of 4% on sales was only $5,005.27. The reason for this great disparity between gross receipts and taxes paid lies in the fact that exempt sales amounted to $1,560,772.66, thus leaving taxable sales of only $75,928.78. *279 The gross receipts of the radio stations for this period were $733,001.49, with exempt sales of $499,933.64, leaving taxable sales of $224,110.01. The taxes paid by the advertisers on radio stations at the rate of 4% of the gross sales subject to the tax were $11,298.51.

With respect to the newspapers, however, the picture is strikingly different. Their gross receipts for the same three-month period were $5,985,784.85 and their taxable sales were $5,393,442.13, their exempt sales being only $630,309.41. The taxes paid at the rate of 4% on these sales were $216,243.58.

Under Ordinance 1098, which imposed the 2% gross receipts tax, the newspapers, for the same period paid $114,334.12, the radio stations $5,423.99 and the television stations $2,502.62.

In paying these taxes, the Bureau of Receipts of Baltimore City computed that with reference to the 4% sales tax the radio and television stations had 26.5% of the gross receipts of the media whose advertising was subject to said tax, but paid only 6.5% of the actual tax paid. The newspapers received only 66.9% of the gross receipts, but their advertising was required to pay 86.2% of the tax paid.

The gross receipts tax of 2% discloses a similar situation according to the Bureau of Receipts. The radio and television stations received 27.7% of the gross receipts of the advertising of the media siibject to the tax, but paid only 6.1% of the tax paid, while the newspapers paid 88.6% of the tax, but received only 66.1% of the gross receipts.

The newspapers offered evidence to show they paid all of the ordinary and usual taxes to the Federal government, the State of Maryland and to the City of Baltimore.

An illustration of the impact of the advertising tax is shown by the following facts: On the 2% gross receipts received by the Sunpapers, they paid in the first quarter of 1958 the sum of $78,646. Since the average Baltimore newspaper experience is that the first quarter represents 22J4% of the entire year, this would indicate a total payment for 1958 of $349,541. Assuming that the ordinary City taxes will remain the same in 1958, the Sunpapers’ total City tax *280 bill will soar from $212,734 paid in 1957 to $562,602 in 1958. (This includes the negligible tax of $326.76 paid by WMARTV, owned by the same company, virtually all of whose revenues are exempt from taxation under the regulations.) Therefore, this one concern would pay an increase in City taxes of $349,868 attributable to this one tax, alone. This is vastly greater than the entire 1957 total of all of its ordinary taxes paid to the City and State. Comparable percentages and figures are applicable to the Baltimore News-Post and Sunday American.

An exhibit offered by the appellees discloses that based upon the 1957 advertising dollar volume, 41.47% of the advertising done in the Baltimore Metropolitan Area is not taxed by the ordinances. The excluded items are such as direct mail advertising, point-of-purchase advertising and advertising in consumer magazines. At this same time, the newspapers alone carried 39.23% of the total volume of advertising.

The appellees assert that these taxes injured the advertising media as well as the advertiser.

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Bluebook (online)
145 A.2d 111, 218 Md. 273, Counsel Stack Legal Research, https://law.counselstack.com/opinion/city-council-of-baltimore-v-as-abell-co-md-1958.