Can a Maryland county give one sport a much lower amusement tax rate than every other sport without violating equal protection?

Plain-English summary

Delegate Charles S. Blumenthal asked the Attorney General whether a proposed Prince George's County ordinance, Council Bill 143-1982, would survive an equal protection challenge. The bill would temporarily cut the county's admissions and amusement tax on professional ice hockey games to just half of one percent through June 1985, phasing back up to the county's standard 10% rate by 1988, while every other admission subject to the tax, including other professional sports like basketball, would keep paying the full 10% rate.

The opinion concluded the differential tax rate would most likely be upheld. It applied the well-established, highly deferential rational-basis standard courts use for tax classifications, under which a classification survives an equal protection challenge unless it is entirely arbitrary, and any conceivable set of facts supporting the distinction must be assumed to exist, with the burden on the challenger to disprove every possible rational basis. The opinion reviewed Maryland and out-of-state cases upholding a wide range of similarly narrow tax distinctions, including different tax rates for skating rinks versus ballrooms, roller skating versus bowling, and harness racing versus flat racing, and found the proposed bill's detailed legislative preamble, which cited hockey's high operating costs, its economic spillover benefits to local restaurants and hotels, and the county's interest in retaining the sport, supplied a plausible rational basis sufficient to survive the deferential review tax classifications receive.

Currency note

This opinion was issued in 1982. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The opinion applied Article 81 of the Maryland Code (the admissions and amusement tax statute in effect in 1982) and Fourteenth Amendment equal protection case law current through 1982. Maryland's tax code has since been substantially recodified, and equal protection doctrine for economic and tax classifications has continued to develop. Anyone researching whether a current Maryland county tax classification would survive constitutional scrutiny should consult current tax statutes and case law rather than relying on this 1982 analysis of a specific, now-expired hockey tax provision.

Common questions

Isn't it obviously unfair to tax one sport so much less than every other sport?
The opinion explained that "unfair" and "unconstitutional" are different questions when it comes to tax classifications. Courts apply an extremely deferential standard to legislative tax choices, upholding a classification unless it has no reasonable basis whatsoever, and require the party challenging the tax to rule out every conceivable justification the legislature might have had, a very heavy burden. The opinion cited numerous cases upholding comparably narrow classifications, including different tax rates for skating rinks versus ballrooms and for roller skating versus bowling.

Does it matter that the county wrote out its reasons for the tax break in the bill itself?
The opinion treated the bill's detailed preamble, citing hockey's high operating costs relative to other sports, its economic benefits to local businesses, and the county's interest in retaining the team, as meaningful evidence that the county council had turned its mind to the equal protection requirement and identified a rational basis for the classification, even though a preamble's presence or absence is not by itself decisive of constitutionality.

Could a similarly narrow tax break for a different single business or activity also survive this kind of challenge?
Based on the opinion's reasoning, quite possibly, since the analysis turns on whether some conceivable rational basis supports the distinction, not on whether the classification is narrow or unusual. The opinion pointed to precedents upholding classifications distinguishing motion picture rentals to TV stations from rentals to theaters, and alcoholic beverage taxes on airlines versus other retailers, as examples of how far this deference extends.

Did the Attorney General guarantee that this specific tax break was constitutional?
No. The opinion was explicitly qualified: given only the information available at the time, the opinion stated it could not say "unequivocally" that the proposal was clearly constitutional, but concluded that, given the county's broad discretion and the heavy burden on any challenger, the proposed reduction would "most likely" be upheld if it were ever challenged in court.

Background and statutory framework

Article 81, §402(a) of the Maryland Code authorizes counties to levy a tax on gross receipts from admissions and certain other specified activities, and §403(b) allows a county's legislative body to classify different types of admissions and set different tax rates for each, so long as constitutional limits are respected. This Office had previously interpreted these provisions as giving counties broad authority to set any rate up to the statutory maximum, including a zero rate, while cautioning that any exemptions or rate differences must have a rational basis to satisfy equal protection.

Prince George's County had already imposed its admissions and amusement tax at a general 10% rate, with two narrow existing exceptions (a 2% rate for coin-operated amusement devices and a 0.5% rate for cabaret-style entertainment with food or merchandise service). Council Bill 143-1982 would add a third exception specifically for professional hockey admissions, cutting the rate to 0.5% through mid-1985, then phasing it up through 3% and 6% before returning to the standard 10% rate by mid-1988, while leaving every other admission, including other professional sports like basketball, at the standard rate. The bill was framed as an emergency measure tied to the start of the 1982-83 hockey season and included statutory notice to the State Comptroller as required for county tax-rate changes.

The opinion's equal protection analysis rested on the well-settled, highly deferential rational-basis standard Maryland and federal courts apply to legislative tax classifications: a classification is unconstitutional only if it is "without any reasonable basis" and "entirely arbitrary," courts will assume any conceivable set of facts that would sustain the classification, and the burden falls on whoever challenges the classification to negate every possible justification. The opinion traced this standard through Maryland cases upholding differential admissions tax treatment for cabarets versus other places of amusement, and reviewed a series of out-of-state cases sustaining comparably narrow tax distinctions, including different rates for skating rinks versus ballrooms, roller skating versus bowling, motion picture rentals to television stations versus theaters, and alcoholic beverages served on airlines versus other retailers, as well as two closely analogous New York cases upholding different tax treatment for harness racing tracks versus flat (thoroughbred) racing tracks.

Applying this framework, the opinion found significant that Council Bill 143-1982 included a detailed preamble with specific legislative findings: professional hockey's regional cultural roots, its unusually high operating costs compared to other professional sports in the county, its demonstrated ability to draw enthusiastic crowds, and its economic spillover benefits to local restaurants, motels, and gas stations, along with the county's interest in retaining the sport through a temporary tax incentive. While acknowledging that a preamble's presence is not conclusive proof of constitutionality by itself, the opinion treated it as evidence that the County Council had specifically considered the equal protection requirement and articulated a plausible basis for treating hockey differently from other admissions. Given the deference courts extend to tax classifications and the heavy burden on any future challenger, the opinion concluded the proposed reduction would most likely be upheld as constitutional, while stopping short of an unequivocal guarantee given the limited information available to the Attorney General's office at the time.

Citations

Statutes:

• Article 81, §402(a) of the Maryland Code
• Article 81, §403(b) of the Maryland Code
• §10-207 of the Prince George's County Code (1980 Supp.)
• §10-209 of the Prince George's County Code
• Article 81, §404(b) of the Maryland Code
• Article 24 of the Maryland Declaration of Rights
• Chapter 429, Laws of Maryland 1971

Cases:

• Attorney General v. Waldron, 289 Md. 683 (1981)
• Allied American Co. v. Commissioner, 219 Md. 607, 623 (1959)
• City of New Orleans v. Dukes, 427 U.S. 297, 303 (1976)
• Allied Stores of Ohio, Inc. v. Bowers, 358 U.S. 522 (1959)
• Villa Nova Night Club, Inc. v. Comptroller of the Treasury, 256 Md. 381 (1970)
• Lane Construction Corp. v. Comptroller of the Treasury, 228 Md. 90 (1962)
• Bullock v. Texas Skating Association, 583 S.W.2d 888 (Tex. Civ. App. 1979)
• Carmichael v. Southern Coal & Coke Company, 301 U.S. 495, 509 (1937)
• Hemphill v. Washington State Tax Commission, 400 P.2d 297 (Wash. 1965), appeal dismissed, 383 U.S. 123 (1966)
• Bullock v. ABC Interstate Theaters, 557 S.W.2d 337 (Tex. Civ. App. 1977)
• Fairmont Dallas Restaurants, Inc. v. McBeath, 618 S.W.2d 931 (Tex. Civ. App. 1981)
• Clark v. Dwyer, 353 P.2d 941 (Wash. 1960)
• Sonitrol Northwest, Inc. v. Seattle, 528 P.2d 474, 477 (Wash. 1975)
• Roosevelt Raceway, Inc. v. County of Nassau, 218 N.E.2d 539 (N.Y. 1966), appeal dismissed, 385 U.S. 453 (1967)
• National Association of Harness Drivers v. New York State Racing Commission, 291 N.Y.S.2d 475 (Sup. Ct. 1968)
• Madden v. Kentucky, 309 U.S. 83, 88 (1940)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1982/Volume67_1982.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

TAXATION

Admissions and Amusement Tax—Constitutional Law—Equal Protection—Authority of Political Subdivisions to Enact Exemptions

August 13, 1982

The Honorable Charles S. Blumenthal
Maryland House of Delegates

You have requested our opinion on the legality of legislation being considered by Prince George's County that would temporarily lower the admissions tax on gross receipts from professional ice hockey games to Vi of 1%, while retaining a 10% rate for virtually all other admissions. The specific legal issue is whether this differential tax rate would violate the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution.

For the reasons stated below, particularly, the broad discretion usually afforded legislative bodies in making this type of decision, we believe that such a tax would most likely be upheld as constitutional.

I
Statutory Background

Article 81, §402(a) of the Maryland Code authorizes any county to "levy a tax on the gross receipts of every person, firm or corporation obtained from sources within the county derived from the amounts charged for" each of four enumerated activities, the first of which is "admission to any place". Section 403(b), in turn, grants to the legislative body of the county "the authority to classify the different types of activities defined under §402 and the rate of tax levied need not be the same for each type of activity".

This Office previously has held that these sections confer on the counties broad authority to "impose any rate of tax below the maximum, including a zero rate". 63 Opinions of the Attorney General 612, 614 (1978). That Opinion also identified the issue that we consider in detail below: "[I]n enacting any exemptions, the subdivisions must have a rational basis for the classifications that they establish so that the constitutional guarantees of equal protection of the law are not violated." Id. at 616.

II
The Prince George's County Proposal

Pursuant to the authority conferred by §402(a), Prince George's County has imposed an admissions and amusement tax on all categories of admissions authorized by that section. See §10-207 of the Prince George's County Code (1980 Supp.). With two exceptions, the tax is imposed at the rate of 10%.1

On July 27, 1982, Council Bill 143-1982 was introduced in the Prince George's County Council "FOR the purpose of decreasing the amusement tax on professional hockey events for a period of years." The bill would amend §10-207 of the Prince George's County Code to provide for a third exception to the general tax rate of 10%:

"Provided further, that the tax on the gross receipts for admissions to professional hockey games shall be at the rate of one-half of one percentum (½%) until June 30, 1985. From July 1, 1985 to June 30, 1986, the tax shall be three percent (3%). From July 1, 1986 to June 30, 1988, the tax shall be six percent (6%). After July 1, 1988, the tax shall be ten percent (10%)."

Council Bill 143-1982 would also amend §10-209 to provide that the separately stated tax imposed on "an admission without charge or at reduced rates . . . shall not apply to gross receipts from professional hockey games until July 1, 1988." The bill declares the existence of an emergency "affecting the health, safety, or welfare of the citizens of Prince George's County, Maryland, said emergency being the need to reduce this tax prior to the start of the 1982-83 hockey season and give as much notice as possible to the State Comptroller of the Treasury of this change in tax rate".2

The classification that would be established by enactment of Council Bill 143-1982 is one that distinguishes between admissions to professional hockey games, on the one hand, and all other admissions, including other professional sporting exhibitions, such as basketball, on the other. This classification calls into question the application of the Equal Protection Clause of the Fourteenth Amendment.3

III
Equal Protection Considerations

A. Introduction

The Court of Appeals has summarized the principles of equal protection analysis, as applied to state choices involving the burden of taxation, as follows:

"The constitutional need for equal protection does not shackle the legislature. It has the widest discretion in classifying those who are to be regulated and taxed. Only if the grouping is without any reasonable basis, and so entirely arbitrary is it forbidden. Abstract symmetry or mathematical nicety are not requisites. . . . If any state of facts reasonably can be conceived that would sustain a classification, the existence of that state of facts as a basis for the passage of the law must be assumed. The burden is on him who assails a classification to show that it does not rest on any reasonable basis." Allied American Co. v. Commissioner, 219 Md. 607, 623 (1959) (emphasis added).

This view of the applicable legal principles reflects an extensive body of United States Supreme Court decisions to the same effect. See, e.g., City of New Orleans v. Dukes, 427 U.S. 297, 303 (1976) ("[T]he judiciary may not sit as a super-legislature to judge the wisdom or desirability of legislative policy determinations made in areas that neither affect fundamental rights nor proceed along suspect lines . . . ; in the local economic sphere, it is only the invidious discrimination, the wholly arbitrary act, which cannot stand consistently with the Fourteenth Amendment."). See also Allied Stores of Ohio, Inc. v. Bowers, 358 U.S. 522 (1959).

In Villa Nova Night Club, Inc. v. Comptroller of the Treasury, 256 Md. 381 (1970), the Court of Appeals sustained the constitutionality of the then applicable State admissions tax, Article 81, §402 of the Maryland Code (1970 Supp.). The taxpayer, a cabaret owner, was subject to a higher rate of tax than the rate applicable to other places of amusement, like theaters. In rejecting the taxpayer's claim that the higher tax was a denial of equal protection, the Court wrote:

"The point is that the Legislature, when it passes a revenue measure, has the power to classify, and may impose varying tax burdens on different groups. It is only when the attempted classification has no reasonable basis in the nature of the businesses classified and burdens are imposed unequally on taxpayers between whom there is no real difference that the courts will interfere." 256 Md. at 391.4

See also Lane Construction Corp. v. Comptroller of the Treasury, 228 Md. 90 (1962).

B. Illustrative Cases

Although we have found no Maryland cases dealing specifically with the distinction proposed here, cases from other jurisdictions illustrate the broad latitude that courts will extend to the legislative branch in making classifications for tax purposes.

For example, in Bullock v. Texas Skating Association, 583 S.W.2d 888 (Tex. Civ. App. 1979), a lower admissions tax rate imposed on skating rinks than on ballrooms was held not to violate the Equal Protection Clause. Quoting from the Supreme Court of the United States [Carmichael v. Southern Coal & Coke Company, 301 U.S. 495, 509 (1937)], the Texas Court noted that "'A legislature is not bound to tax every member of a class or none.'" 583 S.W.2d at 892. See also Hemphill v. Washington State Tax Commission, 400 P.2d 297 (Wash. 1965), appeal dismissed, 383 U.S. 123 (1966) (no violation of Equal Protection Clause in statute taxing gross receipts from roller skating and exempting gross receipts from bowling); Bullock v. ABC Interstate Theaters, 557 S.W.2d 337 (Tex. Civ. App. 1977) (statutory scheme exempting rental of motion picture films to television stations but imposing sales tax on rental of motion picture films to theaters sustained); Fairmont Dallas Restaurants, Inc. v. McBeath, 618 S.W.2d 931 (Tex. Civ. App. 1981) (statute imposing a 5% tax on alcoholic beverages served by airlines and a 10% tax on mixed drinks sold by all other retailers held constitutional); Clark v. Dwyer, 353 P.2d 941 (Wash. 1960) (regulatory scheme classifying apples based on color sustained).5

Perhaps the two cases most analogous to our present inquiry involve certain New York tax provisions, applicable to horse racing, that were more favorable to flat tracks than to harness tracks. In Roosevelt Raceway, Inc. v. County of Nassau, 218 N.E.2d 539 (N.Y. 1966), appeal dismissed, 385 U.S. 453 (1967), the New York Court of Appeals upheld the constitutionality of a state statute that imposed higher local admissions taxes at harness tracks than at flat tracks. In a later case, National Association of Harness Drivers v. New York State Racing Commission, 291 N.Y.S.2d 475 (Sup. Ct. 1968), the issue was a law that required harness tracks to pay one-half of an increase in the track's share of the betting pool to the state as a tax, even though it permitted the flat tracks to retain the new revenue for purse enrichment; on the authority of Roosevelt Raceway, the Court sustained the different tax treatment against the challenge that there was "no rational basis for diversity of tax treatment between flat tracks and harness tracks". 291 N.Y.S.2d at 477.

IV
Application

Because "in taxation, even more than in other fields, legislatures possess the greatest freedom in classification, . . . [t]he burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it." Madden v. Kentucky, 309 U.S. 83, 88 (1940). We doubt that such a burden could be sustained in this matter.

Prince George's Council Bill 143-1982 contains a detailed preamble, setting forth legislative findings in support of the need for the proposed legislation. The preamble reads as follows:

"WHEREAS, the council finds that professional hockey is a sport which has been indigenous to Canada and the northeast United States for many years.

"WHEREAS, the Council finds that recreation is a valid public purpose, and that the attendance of spectators at professional hockey games is a valid recreational purpose to be encouraged in the interests of the public welfare.

"WHEREAS, the Council finds that despite the recent introduction of professional hockey as a spectator sport into the Washington Metropolitan Area, it has attracted enthusiastic crowds of spectators who have derived recreation from attending hockey games.

"WHEREAS, the Council finds that the expenses associated with professional hockey are high and greater than any other professional team sport present in Prince George's County.6

"WHEREAS, the Council finds that professional hockey has been of great economic benefit to Prince George's County in that the restaurants, motels, and gasoline service stations have received great amounts of revenue from the spectators who attend hockey games.

"WHEREAS, the Council finds that the aforementioned economic benefits have generated tax revenues for the benefit of Prince George's County and the State of Maryland.

"WHEREAS, the Council finds that professional hockey has attracted spectators from beyond the borders of Prince George's County who have made expenditures in Prince George's County generating additional State and County taxes.

"WHEREAS, the Council finds that it is beneficial to the public welfare to provide an economic incentive to the sport of professional hockey thereby assisting in its retention in Prince George's County.

"WHEREAS, the Council finds that tax incentives to induce and retain industry within the geographic borders of a political subdivision has been recognized as a valid exercise of the police power.

"WHEREAS, the Council finds that it is a benefit to the public welfare to encourage professional hockey within Prince George's County.

"WHEREAS, the Council finds that a reduction in the amusement tax will act to encourage professional hockey within Prince George's County."

Although the contents of a preamble, or, indeed, its absence, will not generally prove conclusive of the constitutionality of the legislation itself, here the preamble evidences attention to the requirement that professional ice hockey be distinguished from other professional sports in the County on some rational basis.7 In light of the broad scope of discretionary authority that has been afforded legislative bodies in establishing classifications for tax purposes, we are inclined to believe that a rational basis, as suggested by the preamble, might well be present to support this particular legislation.

V
Conclusion

With the obviously limited information now available to us, we cannot say unequivocally that the proposed decrease in the amusement tax on professional hockey in Prince George's County for a period of years is clearly constitutional. On the other hand, given the broad discretion afforded the County Council regarding this kind of tax classification, coupled with the heavy burden placed on one who seeks to demonstrate that such a classification is without rational basis, we certainly are unable to conclude that the proposed reduction is unconstitutional.

On balance, given the County Council's broad discretion and the consequent presumption of constitutionality, we believe that the proposed reduction would most likely be upheld as constitutional if ever challenged.

Stephen H. Sachs, Attorney General
Gerald Langbaum, Assistant Attorney General
Avery Aisenstark
Chief Counsel,
Opinions and Advice

1 The two exceptions are gross receipts from "coin-operated amusement devices" (2%) and gross receipts derived from charges for "refreshment, service or merchandise at any . . . cabaret or other similar place where there is furnished a performance" (½ of 1%).

2 Article 81, §404(b) of the Maryland Code requires local officials to give the Comptroller at least 60 days' notice in advance of the date on which any change in the tax rate takes place.

3 In Attorney General v. Waldron, 289 Md. 683 (1981), the Court of Appeals noted the possibility that evaluation of an issue under Article 24 of the Maryland Declaration of Rights might lead to a different result than under the Fourteenth Amendment:

"Although the equal protection clause of the fourteenth amendment and the equal protection principle embodied in Article 24 are 'in pari materia,' and decisions applying one provision are persuasive authority in cases involving the other, we reiterate that each provision is independent, and a violation of one is not necessarily a violation of the other." 289 Md. at 714.

However, at least with regard to economic regulation like that in question here, Waldron strongly suggests that the analytical approach developed under the Fourteenth Amendment governs application of Article 24. 289 Md. at 713, 717.

4 Section 402 was amended in 1971 to repeal the State tax and to authorize the counties instead to levy such a tax. Chapter 429, Laws of Maryland 1971. The reasoning of Villa Nova applies as much to county admission taxes as to State taxes. 56 Opinions of the Attorney General 430, 431 (1971).

5 In Sonitrol Northwest, Inc. v. Seattle, 528 P.2d 474, 477 (Wash. 1975), the Supreme Court of Washington cited Clark v. Dwyer and then observed that a "legislature has even broader discretion and greater power in making classifications for taxation than it has for regulation."

6 Cf. Hemphill v. Washington State Tax Commission, 400 P.2d 297, 299 (Wash. 1965) (noting that "bowling requires a high initial capitalization" in upholding an exemption for bowling alleys from a generally applicable admissions tax).

7 The County Council might perceive a justification for the tax reduction not only from the factors cited in the preamble but also from testimony at hearings on the bill and from other sources of information.