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testimony

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Hearst Consol. Publications, Inc. v. State Dept. of Assessments and Taxation, 1965 WL 109

Facts

The State Department assessed Hearst for 15 days' supply of newsprint, which constituted 100% of its inventory in Baltimore. Hearst imports a significant portion of its newsprint from Finland and Canada. Edward Schnackenberg, Hearst's Chief Accountant, testified that only 7 or 8 days' supply was necessary for operational needs, and the excess was intended to cover emergencies. The court noted that the actual inventory did not reflect current needs due to various factors, including changes in publication and supplier shipping practices.

Edward Schnackenberg, Chief Accountant of Hearst, testified that 7 or 8 days' supply of newsprint was necessary for current operational needs; that the actual shipping time from Canadian sources averaged 7 days from the mill to the Mt. Clair yards of the B. & O. Railroad, Baltimore, Maryland; and that it takes an additional day for newsprint to reach Hearst's plant.

Issue

Whether the State Department of Assessments and Taxation could assess taxes on Hearst's inventory of newsprint that exceeded the necessary supply for current operational needs.

Rule

The court applied the principle that inventory necessary for current operational needs is entitled to constitutional immunity from taxation under the United States Constitution, Article 1, Section 10, Clause 2.

The Department believed that 15 days' supply was essential for current operational needs and not entitled to constitutional immunity as an import under United State Constitution, Article 1, Section 10, Clause 2.

Analysis

The court analyzed the testimony provided by Hearst's Chief Accountant, which indicated that only 7 days' supply of newsprint was necessary for operational needs. The court found that the State offered no evidence to contradict this testimony. It concluded that the excess inventory was not necessary for current operations and therefore did not qualify for constitutional immunity from taxation.

For the reasons stated the Court finds that 7 days' supply is sufficient for current operational needs and loses the constitutional immunity.

Conclusion

The court ruled that only the portion of Hearst's inventory exceeding 7 days' supply was subject to taxation, and the remainder was not taxable by the State of Maryland.

The remainder of the Hearst inventory is not subject to tax by the State of Maryland.

Who won?

Hearst prevailed in the case because the court found that the excess inventory was not necessary for current operational needs and thus not subject to taxation.

For the reasons stated the Court finds that 7 days' supply is sufficient for current operational needs and loses the constitutional immunity.

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