Boat tax thrown out by Maryland court

ANNAPOLIS, Md. - Boat owners in Maryland may no longer have to pay taxes on boats purchased outside the state and those who've paid already may be able to get refunds, after a recent ruling by the state's highest court, the Annapolis Capital reported in a story yesterday.

The Maryland Court of Appeals ruled that state law only requires people to pay taxes on out-of-state boat purchases if they intended to use the boat mostly in Maryland when they bought it.

That ruling came in the case of a Connecticut businessman named Charles J. Kushell IV, who challenged a $14,304.54 bill he received from the state for keeping his 58-foot Spindrift Motoryacht in Maryland part-time.

The newspaper reported that Kushell purchased the boat in California in 1997, but believed he didn't have to pay tax on it in Maryland if he kept it there less than six months a year, because Maryland wouldn't be considered the primary place he was using the boat.

An administrative law judge, the secretary of natural resources and a Circuit Court judge upheld the tax, but the Court of Appeals threw it out.

That decision could cost the state $10 million a year in boat tax revenue, according to J. Dirk Schwenk, the Annapolis attorney who won the case. Schwenk told the newspaper that the state collects about $25 million a year in boat taxes, about half from boats bought out of state.

Schwenk says people who already have paid the tax could challenge the bill as Kushell did and, with the new court ruling, likely prevail.

The head of the Marine Trades Association of Maryland agreed that many who have paid the tax might be looking for their money back.

"We have several attorneys that have membership in Marine Trades, and I'm sure they're thinking that," said Susan Zellers, executive director of the MTAM told the Capital.

The newspaper said state officials have so far had no comment on that possibility.

The ruling could also prevent the state from charging the tax in the future, though the General Assembly could change the law, the newspaper reported.

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