Maryland officials, proving that even houses of high fashion must bow to the tax collector, have negotiated an agreement with the Chevy Chase furrier Saks-Jandel to recover more than $100,000 in taxes the store failed to pay to the state over a four-year period.
In turn, Saks-Jandel President Ernest Marx has taken a step sure to ruffle the discriminating feathers of his loyal customers, who tend to live in neighborhoods called Potomac, Beverly Hills and Palm Beach. Marx has asked -- politely -- roughly 700 of them to foot the tax bill.
Officials at the retail sales tax division of the Maryland comptroller's office want to obtain from Marx -- and he from his customers -- unpaid "use" taxes, a type of sales tax that Maryland and many other states have instituted.
A merchant may waive Maryland's 5 percent use tax in those sales in which a product -- such as one of Saks-Jandel's $5,000 mink coats -- is delivered to an address outside Maryland. Saks-Jandel, which has catered to Washington's international community and the local elite since 1888, frequently delivers its items to the District, Virginia and elsewhere around the country.
The legal loophole is a boon to consumers, who can save hundreds of dollars in taxes on costly items like the fur stoles and designer fashions in which Saks-Jandel specializes. But there's a hitch: Maryland law also says the consumer must pay the use tax if he or she takes the item home to Maryland for its "storage, use or consumption" in the state.
In the case of Saks-Jandel, which is located just two blocks north of the District line in a block that includes Brooks Brothers, Gucci and other swank shops, hundreds of customers between 1979 and 1983 had their purchases delivered to an address outside Maryland, avoiding the use tax, and then simply took them home -- to Maryland, Marx said.
The practice was discovered last year, when state tax auditors, performing a routine inspection of Saks-Jandel's books, came across dozens of invoices for deliveries to Washington and other points outside Maryland.
"The state suspected, probably rightly so, that many customers . . . eventually took their purchases home" to Maryland, said B.J. Haynes, Marx's attorney.
"It's not uncommon to see this practice involving big-ticket items in border areas," said Marvin A. Bond, a spokesman for the state comptroller's office. "There's nothing wrong with delivery to D.C., but you are liable for the use tax once you bring the item back into Maryland."
Bond, citing taxpayer confidentiality, refused to discuss the Saks-Jandel case. By contrast, Marx and Haynes talked about their dilemma in some detail, if not without a little embarrassment.
"It's a high-class store that tries to maintain very good relations with its customers," said Haynes, adding that the state's enforcement of the use-tax law will force merchants "to be obtrusive and ridiculous and interrogate customers about where they're going to use their fur coat." Saks-Jandel employes are now under orders to do just that.
Marx, an elegant, silver-haired man more accustomed to dealing with European couturiers than Maryland tax auditors, appeared pained by the state's action and his resulting request to customers to foot the bill.
"We have the best the world has to offer," Marx said yesterday in an interview in his office, which is tucked behind Saks-Jandel's mini-boutiques offering Lagerfeld, Chanel and Yves St. Laurent clothing.
"We esteem our customers' confidentiality," he went on. "It's presumptuous for us to know what their official residence is."