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Old 01-17-2010
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Move boat to Maryland: Did you pay excise tax?

This thread is a re-start of another similar thread because I would like a more descriptive title to solicit your experience with moving a boat into Maryland waters.

I am planning to purchase a boat in the near future. If there were not tax considerations, I would moor it in Essington, PA in the Delaware River for the first year, and probably move it to the Chesapeake Bay in Maryland in 2011. Unfortunately I have learned that there is a very real risk of paying 11% tax in doing so: 6% sales/use tax to PA shortly after purchase, and another 5% excise tax to MD when I relocate there.

I'll explain below what I have learned so far, but I am interested in hearing others' actual experiences with this. If you owned a boat outside Maryland and moved her into MD:
  • What state(s) was she in before Maryland?
  • How much tax had you paid to the previous state(s)?
  • How long was she in the prior state(s)?
  • How much did you have to pay to MD upon relocating there?
  • What documentation did you have to provide to legally avoid the tax?

There is quite a bit on the web about this, but as usual the answers are not 100% clear. Maryland covers the subject on their DNR website:
Quote:
§8-716(f) of the State Boat Act allows reciprocity credit for excise or sales tax previously paid to another jurisdiction if:

* The vessel was formerly titled or numbered in another jurisdiction; or
* The vessel was formerly federally documented and principally used in another jurisdiction; and
* The present owner paid a sales or excise tax on the vessel to the other jurisdiction (proof required – validated receipt, etc.); and
* The jurisdiction to which the tax was paid would allow an equivalent exemption or credit for vessel excise tax formerly paid to the State of Maryland.
So the key question would seem to be whether MD and PA have reciprocity with each other. Pennsylvania's Boater Registration FAQs address the topic this way:

Quote:
Pennsylvania State Sales Tax: Sales tax is six percent (6%), seven percent (7%) for residents of Allegheny and Philadelphia counties. Payment of sales tax (or proof it has been paid) is required before any motorboat can be registered or titled. Credit may be given for tax paid in another state. (emphasis added by me)
Note the use of the weasel word of "may." Furthermore, PA has an online document that states that they grant reciprocity for sales tax on "Property Except Vehicles." Of course, this document (which is targeted primarily at passenger cars) begs the question of whether a boat is a vehicle. If so, there is no reciprocity. If not, there is reciprocity.

Pennsylvania's Department of Motor Vehicles does not register boats - their Fish & Boat Commission does. Their F&BC website addresses the issue in this equally weasely way:

Quote:
However, there may be a few cases where a person registering a boat does not pay Pennsylvania state sales/use tax at the time of registration. The person registering the boat may not believe he or she owes sales/use taxes because, for example, he or she paid them at the time of purchase some years ago. In such a case, the registration can still be completed. The applicant should submit sales/use tax information using a form provided by the Commission. The Fish and Boat Commission will then process the registration and issue the registration certificate and decal.

The Commission will forward the sales/use tax information to the Pennsylvania Department of Revenue, which will review it and determine whether any sales/use taxes are due and owing. If the Department of Revenue notifies the Fish and Boat Commission that a holder of a boat registration has not paid required sales/use taxes, the registrant may not be able to renew his/her registration when it expires.
In other words, you apply for registration first, and then throw yourself at the mercy of the Department of Revenue who makes a decision after-the-fact. I can only guess how Maryland interprets this - I'll have to try to call tomorrow.

Maryland has been notoriously hard-line about their excise taxes. Two notable cases in 2005 dealt with this - Schwartz vs. DNR and Kushell vs. DNR. They both make for interesting reading. Click here for an interesting summary. The Kushell guy had owned his boat in California for 10 years before bringing it to MD, and they nailed him for taxes. It was not clear from the summary whether he had paid any taxes in CA. (he won) The Schwartz guy left his boat in MD for repairs and got nailed for taxes even through MD had a specific exclusion for repairs (he lost, but the court asked MD to rewrite the law).

Finally, it seems that the legislature was getting a lot of complaints from boat dealers and repair companies about losing business. People were becoming scared to bring their boats into Maryland for transient dockage or repairs. So they drafted emergency legislation in 2006 to deal with this:

Quote:
SB316 – Department of Natural Resources – Vessel Excise Tax – Principal Use
This Departmental bill is an emergency bill that clarifies that the excise tax applies to vessels used principally in the State, despite the owner’s intention of where the vessel would be principally used at the time of purchase. Except under specified conditions, an excise tax is levied at the rate of 5% of the fair market value of a vessel on the issuance of every original certificate of title required for a vessel; the issuance of every subsequent certificate of title for the sale, resale, or transfer of the vessel; the sale within the State of every other vessel; and the possession within the State of a vessel purchased outside the State to be used principally in the State. The “state of principal use” is defined in statute to mean the state on whose water a vessel is used most during a calendar year. The Department historically has applied a vessel excise tax on vessels that are purchased outside the State and used in Maryland the greatest percentage of a calendar year.
The bill also exempts from the vessel excise tax the possession within the State of a vessel for a period of up to one year if the current owner is a member of the armed services and is serving on active duty in the State. This provision mirrors what is currently available for motor vehicles in the Transportation Article.
Finally, the bill also copied the current provision of reciprocity for the vessel excise tax into this section of the law. The bill has become effective as it has already been signed by the Governor.

SB317 – Vessel Excise Tax – Exemption – Vessels Taken Out of State
This Departmental bill came out of cooperative interim discussions with DNR’s Boat Dealer Advisory Committee. This bill codifies the current DNR form B110. The bill releases a boat dealer from the responsibility of collecting the vessel excise tax when the purchaser certifies that the principal use will be established in a state other than Maryland. The exemption applies if the vessel is purchased from a licensed dealer, the issuance of a title is not sought or required, the vessel is not used or to be used in the State, the vessel is duly registered in another jurisdiction within 30 days of purchase, and the dealer and the purchaser execute an agreement certifying the state of principal use for the vessel which is filed with DNR within 30 days of purchase. The bill becomes effective June 1, 2006.

SB318 – Vessel Excise Tax – Family Transfers – Documented Vessels
This Departmental bill also came out of cooperative interim discussions with DNR’s Boat Dealer Advisory Committee. The bill establishes an exemption from the vessel excise tax for federally documented vessels transferred between immediate family members, so long as the vessel has a valid use sticker issued by DNR. “Immediate family”, for purposes of the family exemption, is currently defined in DNR regulations as a spouse, son, daughter, mother, father, sister, brother, grandmother, grandfather, son-in-law, father-in-law, mother-in-law, daughter-in-law, grandson, granddaughter, stepfather, stepmother, half-brother, half-sister, stepson, stepdaughter, and persons so related by virtue of adoption. The law allows for an exemption from the vessel excise tax for vessels that are transferred to immediate family. However, because the chain of ownership on a federally documented vessel is handled by the United States Coast Guard, the taxable event upon which the gift exemption is based cannot be applied to federally documented vessels. The bill becomes effective October 1, 2006.
While new legislation would usually clarify the situation, it can also make prior court rulings (like Schwartz and Kushell) irrelevant.

So I'd like to hear how all of this has translated into actual experience for the users here.

Please note: I am not a lawyer, but maybe I should play one on TV.

Last edited by TakeFive; 01-20-2010 at 09:06 PM.
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