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High Court's Boat Tax Ruling May
Have Local Impact
Benjamin L. Mook, Editor
OCEAN CITY (09/15/2006)
- A legal setback dealt to the Department of Natural Resources (DNR)
this month over what amounted largely to comma placement could
set a precedent for out-of-state boat owners who bring a vessel
to the resort area.
The Maryland Court of Appeals ruled this
month in the case of Charles J. Kushell IV v. Maryland State
Department of Natural Resources. The case centered on the
agencies efforts to collect over $14,000 in unpaid boat excise
tax and penalties. Kushell bought The Genesis, a 58-foot
Spindrift Motoryacht, in 1989, in California. He later moved to
Maryland part-time, where he was targeted by the DNR’s boat tax
enforcement division.
In Maryland, boats purchased in-state are
subject to sales tax. According to the DNR, boats purchased
outside the state, but used principally in Maryland are subject
to a boat excise tax.
The DNR not only levies an excise tax of
5 percent of the fair market value, but also a 10 percent
penalty and 18 percent back interest. The late penalty interest
generally goes back three year, which is the statute of
limitations.
This law was challenged by Kushell, who
claimed he did not intend to use the boat principally in
Maryland. Kushell and his attorney, Dirk Schwenk, argued that
the wording of the legislation supported this belief.
The court’s opinion, written by Judge
Irma S. Raker takes the argument further and is sprinkled with
grammatical references highlighting the importance of comma
placement in the vein of the bestselling book “Eats, Shoots and
Leaves: The Zero Tolerance Approach to Punctuation,” by Lynne
Truss.
“An actor playing Hamlet would hardly
expect his audience to accept, ‘Or not to be: that is the
question,’ as an inconsequential alteration,” Raker wrote in her
opinion.
In the end, the Court of Appeals
overturned the Anne Arundel Circuit Court, which favored the DNR.
Schwenk said this week the new ruling
gives ammunition to boat owners who want to fight the DNR-imposed
penalties. He said the ruling is especially important to the
Ocean City and West Ocean City areas, which are home to private
and commercial vessels that could be affected.
“The majority of the new cases I’ve been
seeing have come from the Ocean City area,” Schwenk said. “DNR
has targeted that area for enforcement.”
Locally, DNR has filed three boat tax
liens in Worcester County Circuit Court since January. Two of
the cases were filed this month alone, after the court’s
decision.
The agency is seeking over $2,000 in
unpaid tax from one boat owner and over $6,000 from another. It
also levied a lien against a local commercial fishing company
for over $20,000.
With the Maryland General Assembly now in
its final stretch, the legislation will likely be addressed
later this year. Schwenk said he hoped DNR would open the
process up for comment when it addressed re-writing the law to
meet the court order.
“Hopefully, this will be a cooperative
process and everyone will be involved, and not just a rewrite of
the same legislation that was overturned,” Schwenk said. |
