*1 189 Company of America vs.
Ernest H. Tax Assessor May 10, Opinion, Cumberland.
Berman, Flaherty, Berman, Wernick, and Flaherty,
by Sidney W. Wernick and John J.
for Plaintiff. Sr., Ralph Farris, W. Attys. Benoit, Geni.,
John Asst. W. for Defendant. Sitting: J., Sullivan, Siddall, Du- Williamson, JJ. C.
bord, J., argument, retired before rendition sat at but Webber, JJ., dissenting. Tapley, of decision. appeal from a Williamson, C. J. This use tax assessed report from the the State Tax Assessor is before us 17, Superior La,w, 4, S., & Use Tax R. c. Court. Sales §§ 33; (a) (d) 80 B Maine Rules of Procedure. Rule Civil penalties and interest
The tax assessed amounted with 1, covering period May $14,896.87, 1955 to April 30, pertinent provisions S., 1961. The of R. c. 17 are: *2 imposed “Sec. 4. Use Tax.—A tax is on the
storage, consumption use or other in this state tangible personal property, purchased of sale ...” at retail “Sec. 2. Definitions. —. . . the ‘Use’ includes any power exercise in this state of over or tangible personal property incident owner- its ship purchased by when the user at retail sale.” appellant The main issue is whether the exercised has any right vending within the State ma- over its ownership. so, imposed chines incident If tax to its is “storage” such use. We no concern with or “other consumption” Further, appellant, under 4. Sec. the purchaser State, paid of the machines outside the has any jurisdiction. sales or use tax thereon in other 12. Sec. appellant The unconstitutionality also asserts statute. appellant engaged selling, is the business of as a
wholesaler, chewing gum, candy, merchandise such as cigarettes, drinks, dispensed soft etc. be automatic vending machines known canteens. as ma- dispense chines which the merchandise are owned appellant and purchase are leased to distributors who appellant dispensed by merchandise which is appellant own,
Within Maine does not lease or main- place any office, any type tain distribution or of other of regular place any employees agents. or have of business by entering It conducts an interstate business into fran- agreements creating independent and lease chises con- tractor distributors. appellant affidavit of the filed stating under Sec. 33 appeal, part, reads in
its reasons as follows: plaintiff, Auto- appeal “That the reasons of are, Company America which matic Canteen bringing time, the com- at the same reasons appeal, plaint follows: to initiate said as law, as Tax A. Maine Use Under the Sales kind, amended, use Canteen circumstances of tax or whether sales no tax of petitioner, imposed Automatic tax, is America, by Company virtue of regard- petitioner’s activities ing ing, Maine, be- said circumstances distributors essentially, following: America, 1. corporation, a called The hereinafter sometimes Delaware engaged business, Company, leasing coin-operated alia, ma- inter chines. operate operators, franchised who Certain *3 Maine, herein
within the of and who are Distributors, vending which called are leased to them use machines by Company. The agreements lease Under the terms of their Distributors, Company, with The for the the in return payment rentals, are to use of entitled vending operation said trade, machines in the of their through selling goods at to wit: the of retail vending machines. vending (4) The machines leased The Com- purchased by by pany to Maine Distributors are shipped Company from without Maine and The (sic.) Company in The to the Distributors of Maine. for agreements (5) The aforesaid lease are en- Company’s and executed in The home tered into Chicago, payments Illinois. Rental are re- office in Chicago by directly to The Distributors. mitted vending (6) di- Once the machines been Company, the rected to Distributors place free said Distributors any are location, subject only geographic limita- tions, choosing, of their without the direction or part Company. action other of operation (7) The ma- of the leased complete chines is under tributor, control Dis- of responsible only who is loss or damage (over ordinary tear) wear and (8) exercises over the State of machines within the Maine. substantially (9) facts as Under the same above, it held Trimount Machine was Coin 753, vs. 124 A. 2d the lessor Co. not tax was liable for the use operators Hence, pres- Maine. leased case, liability tax and, there ent is no above tax, penalties use interest and are not mentioned validly illegal. properly and assessed B, C, D, stating first and after that “under all and the facts circumstances that are relevant applicable operations and the Automatic America, Company of to the extent that Canteen tax, they interest, (the relate to the State Maine use penalties) against (the ap- and assessed pellant) In . . .” the is stated in reason these words: illegal, B “are and unauthorized unwarranted by any provisions In of “are not authorized C are, law, the Maine and Use Tax Sales therefore, illegal invalid”; In D “constitute a violation of the Constitution and, in particular, of the United States the Com- Constitution, merce Clause of the United States in that the Tax the State Assessor of Maine is *4 impose purporting state upon and a tax assess inter- commerce, exercising prerogative thus the Federal which reserves Constitution exclusive- Congress ly ous and the Federal to the vari- denies States.” provides: The lease Additional The initial “11. Consideration. and charges provided
period rental herein for Can- here- teens, ‘A’ attached forth in Exhibit as set to, adequate consideration do not constitute Distributor, by and the use it in a such Canteens dependent Company is that is understood may large it receive income which measure on through its Can- from the teens.” of merchandise sale Operations. The “23. for Inefficient Cancellation agrees operate herein the business Distributor described within the territory in an efficient above manner and to use and lease from within such territory number of that Canteens territory which should be within that under used management aggressive efficient and ...” Arnold, Assistant Treasurer of Automatic Canteen Mr. through Company, person testified both affidavit. part quote in from the affidavit: We representatives it “That while is true dis- Automatic Canteen have visited its franchised tributors, located within the of Maine occasions, diverse of such visits was inspection not by leased machines a review of the Automatic Canteen but rather operation fran- entire method of chised conducted said offering distributors and the of construc- increasing the view of the ef- tive criticism with distributors, ficiency total business would they to the end that their thereby and be increased additional therefore wish to lease would Spe- machines Automatic Canteen. representatives cifically, such items as his review with the frequency keeping, me- record his methods of pro- administrative chanical service his operate way do not cedures. These visits respon- primary his to relieve the distributor of sibility and care of the vend- for the maintenance ing leased to him Automatic Can- teen.” in substance The witness also testified carrier; usually by shipped common into the State were *5 194 Chicago; paid by that check to the rentals were sent was used the machines or-
the merchandise which was Chicago, letter or by the dered Chicago form; Automatic that the office of of an order use suppliers to or manu- then sent the orders Canteen shipped directly products which were then facturers of distributors, relationship that the from them the Company to its distributors is appel- candy cigarette for the wholesaler. a Counsel appellant’s lant, speaking the visits mentioned affidavit, asked: frequent those How “MR. WERNICK: your affidavit been? mentioned
visits Ordinarily year. a “THE about once WITNESS: “Q. “THE I believe. Do WITNESS: you know [*] :¡: how i'fi I don’t [*] many [*] :¡; know for sure. [*] men have [*] [*] come in? Two, Is that each of the “MR. two on WERNICK: yearly visits? of the “A. Two on each visits. “Q. Now, you those men familiar with what are they Maine? into
do when come general way, yes. a “A. any “Q. particularly Directing your attention explain make, you please they would records what purpose of and what the those records them is? particular operations They a “A. distributor review service, respect to his his stock- methods, prepares recommen- room, his business might have that he faults correct dations operations, in the distributor’s business observed submits an official the recommendations generally and send write to the company will distrib- who copy him of the indi- involved utor report. vidual’s report? “Q. purpose of this And what is see that the distributor is to “A. maintaining good practices that his so business *6 and, consequently, improve Auto- will business through products the dis- to matic’s its sale will increase. tributor also “Q. you products,’ re- you say ‘sale of When selling ?
ferring merchandise to the business of merchandise, yes. “A. The “Q. “A. In the machines? In the
“Q. do with the anything to come in have Do these men who repair of machines? No, they “A. do not. “Q. repairs the machines handles all to Who ? themselves employees. “A. The distributor’s “Q. men who come in behalf Are these way any concerned with location “A. No. the machines? “Q. they prepare any which Are the records ascertaining way are, those machines where directed to them? that immaterial to is “A. That immaterial them. is to “Q. way any concerned with Are the records in repair is work the information done chines? ‘No’ first. to how much as regard the ma- to the distributor ‘Yes’ or I think that can be answered “A. No. “Q. you explain to that further? Do wish in observe “A. The individuals who come Yes. to the machines and recommend
the condition of keep them particular that he should inoperative shape, them are or if some of in better report puts the effect his to he his something sloppy, like maintenance has been that.
“Q. of that informa- And what tion? working clean, machines on loca- want “A. We cigarettes candy, the sale of tion increase on, protect the name Can- of Automatic so to have America. We don’t like
teen dirty, unsightly vendors out. “Q. it, way pertains, itBut I understand as you repairing machines? have in interest No. “A. “Q. primary responsibility That dis- is the tributor, is that correct? “A. Yes. “Q. nothing repair you And do with machines, them? or the maintenance of None. “A. “Q. I think is all.” appellant urges that the instant cannot be case dis- tinguished from Trimount Coin Machine Co. v. *7 109, (2nd) we do not 152 Me. 124 753. With this view A. agree. said, p In Trimount the court at 113: agreed appears that “From the it statement nothing respect
petitioner machine within the to the has done before of Maine either State therefore, conclude, making or lease. since We petitioner that not State has exercised this any right power property or over the within statutory definition of ‘use.’ strictly upon “Our and limited decision is based agreed At to the facts what forth in the statement. set point right a a owner exercise lessor or does power not we do this State under the statute determine, except has here been no there consider or in this on the facts such exercise before us.” appellant Here we have acts within evidence of present South not in Trimount or in Shoe Maine —facts Co., Johnson, Assessor, State Tax 158 Me. Machine Inc. v. appellant 74, employees (2nd) 188 A. 353. coming of America into had Maine were in and connection with interested duties therein. the canteens as well as the merchandise sold
197 operation appellant vital interest efficient has employees in Maine the silent The acts salesmen. carrying bore whether lessee or distributor was out the the lease. terms appellant
We conclude has exercised such incident owner- over its to its ship subject it is the use tax. light of the use within
State, the tax not does violate the Federal Constitution. Johnson, Trucking, Assessor, Hunnewell Inc. v. State Tax 338, Me. (2nd) 172 A. 732. lawfully entry The tax was assessed. The bewill entry
Remanded decision denying appeal. Tapley, J.
Dissenting Opinion
I do
reasoning
not concur with the
result
majority opinion.
agree, however,
I
principles
do
that the
applicable
of law
to the
case
instant
are set
in Tri-
forth
mount Coin
Johnson,
Machine Co. v.
“The Automatic Can- coming America and of into Maine teen were interested in had duties connection the merchandise sold as well as with canteens appellant interest in the has a vital therein. operation salesmen. the silent efficient acts employees Maine bore whether its carrying was out the lessee or distributor terms of the lease.” majority Thus the conclude: appellant such inci- has exercised “----that right and over its ownership subject to use it is dent
tax.” property in Maine possession of the “The and use been, entirety times has is, and at all in its by lease.----- virtue of the lessee or customer arising is, course, tax under There no use purchase the ma- from the theory of the Act lease ivritten chine outside of Maine or from reached the machine in Massachusetts. Until the whatsoever there was action State of Maine respect property to the within the State (Emphasis supplied.) petitioner.” owned supra. Johnson, Machine v. Trimount Co. Coin bar, According at the lease in case the terms of repair, install, inspect, oper- required to the distributor He has control ate maintain the respon- he his contractual the machines until breaches over rights sibility seeks to enforce its under and the lessor lease. powers rights or mere of certain
“The existence lease the owner-lessor reserved would subject him taxation he failed not to power v. if suffice exercising any such or refrained Co., Shoe Inc. in Maine.” South Machine supra. according company, representatives of the to the un- present prime evidence, in Maine for the disputed were reviewing reporting the overall canteen products. sale of of the distributor business *9 they the condition be- here observed While sloppy could affect sale merchan- cause maintenance dise. my opinion, representatives company when merchandising to Maine
came to review business con- products and, ducted sale of present Maine, they, pur- incidental to the main while pose visit, their made visual observation machines, they right doing did not so exercise power over them.
According my light facts, appli- view of the of the language, statutory cable I am led to the conclusion Legislature never intended that mere visual observation machines, unaccompanied by some affirmative act lease, taken accordance with the terms of the would be an exercise of ownership. incident their appeal. I would sustain the
Webber, J., joins opinion. in this