Gwozdz v. Healthport Technologies LLC (Lawyers Weekly No. 001-019-17, 12 pp.) (Wilkinson, J.) No. 15-2586, Jan. 24, 2017; USDC at Greenbelt, Md. (Titus, J.) 4th Cir.
Holding: A plaintiff who challenges a medical-records vendor’s $23 sales tax imposed on records he ordered may not bring a class-action consumer complaint in federal court based on his claim that the state exempted medical-records sales from its general sales tax; the federal Tax Injunction Act and principles of comity deprive the federal court of jurisdiction.
Tax Injunction Act
Under the TIA, 28 U.S.C. § 1341, federal courts may not enjoin, suspend or restrain the assessment, levy or collection of any tax under state law where a plain, speedy and efficient remedy may be had in the state’s courts. Maryland has established just such a remedy.
Maryland courts have uniformly held that the administrative remedy is a taxpayer’s sole route to relief. Beyond the administrative scheme, no action lies to challenge the validity of a tax paid under a mistake of law, regardless of the nature of the legal attack mounted.
Plaintiff does not contend in any non-conclusory manner that the administrative remedial scheme was in any way defective. The fact that his initial remedy is an administrative one (followed by judicial review) does not place it outside the TIA’s purview. Nor does the provision of initial administrative exclusivity remove the state’s collection procedures from the protection of the Act.
Unlawful Billing Claim
Plaintiff next argues that he is not a taxpayer disputing an improper tax but a consumer challenging an unlawful billing practice. But artful pleading cannot remove this case from the broad reach of Maryland’s administrative remedy.
Plaintiff included claims for damages in addition to his claims for equitable relief. The TIA applies by its terms to suits to “enjoin” or “restrain” state tax collection efforts, thereby speaking directly to equitable remedies. A claim for damages against vendors in the performance of their tax collection duties has precisely the same potential as a claim for equitable relief to disrupt a state’s entire system of revenue collection.
While the Supreme Court has not addressed whether the TIA forbids damages claims, it has applied a principle of comity to bar a § 1983 action by landowners against state and local officials seeking damages for the allegedly unconstitutional administration of a state tax system.
If plaintiff prevailed here, aggrieved taxpayers could repackage an allegedly unlawful sales tax collection into a faux consumer protection suit and embroil vendors of every description in litigation, thus punishing sellers for fulfilling their obligations to collect sales taxes under Maryland law. This is precisely what Maryland’s administrative remedy was designed to prevent.
We vacate the district court judgment and remand with instructions to remand the action to state court.
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