# Move boat to Maryland: Did you pay excise tax?



## TakeFive (Oct 22, 2009)

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:


> §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
> ...


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:



> 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:



> 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:



> 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.
> ...


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.


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## TakeFive (Oct 22, 2009)

FYI, here is what HerbDB wrote about this topic over on the other thread:



HerbDB said:


> You do need to be careful how you register your boat. I live in PA and have a documented vessel that is registered and kept in Maryland. I pay a small amount for a Maryland use sticker every two years. I also paid sales tax to the state of Maryland when I bought it.
> 
> The state of PA came after me a year or so later wanting a 6% "Use Fee" plus penalty and interest.
> 
> ...


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## sck5 (Aug 20, 2007)

SAVE YOUR PA TAX RECEIPT!!!!! Maryland charges 6% but gives a credit for tax paid to another state. That is, if you paid 5% somewhere else you only owe the difference (i.e. 1%) to Maryland.

Call them up and ask them.

Maryland Department of Natural Resources - Boating

Or look here

Boating Law - Boat Tax - Maryland Boat Tax 101


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## TakeFive (Oct 22, 2009)

sck5 said:


> SAVE YOUR PA TAX RECEIPT!!!!! Maryland charges 6% but gives a credit for tax paid to another state. That is, if you paid 5% somewhere else you only owe the difference (i.e. 1%) to Maryland.
> 
> Call them up and ask them.


I will call after the holiday. But it appears that Maryland only gives credit if the other state would give reciprocal credit. So I also need to call PA and ask them a totally hypothetical question on behalf of a fictitious Maryland residant - and try to get their answer in writing.


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## HerbDB (Sep 30, 2000)

Here is a possible alternative to your plan that will work. You could keep the boat in Riverside, NJ and still use it on the Delaware. Pay the NJ 5% tax when you buy the boat. Then when you move to MD, you can pay the extra 1% and register with them.

I actually did this back in 1997 and I had no problems with taxes. This is the first time the state of PA came after me for a "use fee". I bought another boat in 2002 in MD and paid taxes on it there and they came after me again. I think they scour the Coast Guard data base of Documented vessels for owners living in PA.


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## MC1 (Jan 6, 2008)

HerbDB said:


> I think they scour the Coast Guard data base of Documented vessels for owners living in PA.


FYI, I can confirm New York State also does this - they sent me a letter asking to see proof of taxes paid to NY; I had purchased the boat in CT and had it documented. Fortunately I was able to supply the requested proof.


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## pdqaltair (Nov 14, 2008)

*Does this apply if the vessel is being re-titled to place it in a trust?*

Documented vessel, revokable living trust.

If so, I would have to un-document the boat, transfer the title to a family benificiary before I die, and then it could be re-documented.

All of this assumes my daughter would still let me take it sailing!


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## ToddLochner (Jan 18, 2010)

Typically, MD and PA have a reciprocal relationship. The reality is that reciprocity is done on a "state by state basis" and although the answer rarely "officially" changes the practical ease of taking the exemption can vary based upon the relationship between the vessel tax enforcement administrators. I have heard of one state bureaucrat giving a different state's bureaucrat a hard time over reciprocity and an individual taxpayer has been caught in the middle. Remember that it is all about money and which state keeps the tax dollar. Budgets are tight all over. There is an organization which tries to smooth over some of these common issues and you may find their site useful. It is the National Association of State Boating Law Administrators. 

As for PA and MD in particular, they have always had a good relationship. This can be a real blessing on one hand but on the other it is a huge problem for the vessel owner. When the vessel tax officials are "too chummy" they have one another on speed dial. If you escape tax in one state they call their compatriot who often goes for penalty and interest. 

You should also consider whether your vessel may be a good candidate for offshore flagging. It is not as expensive as people think. Depending upon a number of circumstances, the break point for cost savings is usually with a purchase price in the $150,000 to $200,000 range. There is info available on a site that I am not allowed to post due to forum rules.

Since you have two threads I will post the answer in both.

Todd Lochner
Proctor in Admiralty
Lochner Law Firm, P.C.
30 C West Street Phone: (443) 716-4400
Annapolis, Maryland 21401 Fax: (443) 716-4405


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## TakeFive (Oct 22, 2009)

I have gotten clarification from both PA and MD's boat registration offices, and I have their assurance that I will have no problem moving a boat from one state to the other (either direction). I will pay sales tax to whichever state I choose to moor my boat for the first year, then be able to move it to the other state with no payment (if the taxes are the same) or only pay the difference if moving to a more expensive state.

They insisted that the horror stories I have heard all involve boat owners who had attempted to evade paying any taxes to any state, and were therefore hit with penalty and interest many years later.


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## TSOJOURNER (Dec 16, 1999)

*Documented vessels in Delaware*

My question deals with documented vessels purchased in Delaware and Documented. If the vessel is kept in Delaware for more than 183 days is it subject to the Maryland Excise tax if it sails in Maryland waters for 150 days?


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## sailingfool (Apr 17, 2000)

Blancke said:


> My question deals with documented vessels purchased in Delaware and Documented. If the vessel is kept in Delaware for more than 183 days is it subject to the Maryland Excise tax if it sails in Maryland waters for 150 days?


Excise tax...probably yes (I live in New England...).

But you should be asking about the sales/use tax, as typically that's the big one. And the general answer is...you will pay the sales/use tax in a state where you have the boat, less whatever you paid in a different state. The whole tread above considers some of the ifs and buts in actual PA/MD practices.

One clarification, if while a resident of a state with a sales/use tax you buy a boat in a different state, and pay sales/use tax to that different state, be extra careful to retain legal proof of the boat's "non-residency". Should you subsequently bring the boat to your residency state, that state may demand their sales/use tax, with no credit for the previous payment, unless you can prove the "non-residency" of the boat at the time you paid the other tax.


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## ToddLochner (Jan 18, 2010)

Blancke said:


> My question deals with documented vessels purchased in Delaware and Documented. If the vessel is kept in Delaware for more than 183 days is it subject to the Maryland Excise tax if it sails in Maryland waters for 150 days?


I preface with the infuriating lawyer answer "it depends." Theoretically if the purchase occurred in DE and you have more days in a single other state than you have in MD then you should be ok, but&#8230;&#8230; I have seen DE residents who have dockage facilities in both MD and in DE. The slip rental in MD is a yearly contract so on its face it looks like evidence that the vessel is kept in Maryland for a year. Remember that the burden of proof rests with the tax payer and if you receive an assessment letter that is considered prima facia evidence that you owe the tax. The state's initial burden has been met by printing the letter. YOU MUST PROVE WITH THRID PARTY EVIDENCE EVERY DAY THAT YOUR VESSEL IS IN BOTH STATES. 
Furthermore, the MD, DNR has never actually taken the position that they can count time "in MD" from the moment you slip the mooring lines in another jurisdiction but the way the regulations are written they could take that position. I think the only reason they have not is because, as a matter of common sense, it is ludicrous, however; I never rule out the possibility that someday one of the state of MD's attorneys will take such a position. I once heard an attorney for MD, state on the record that the comptroller of MD's position is "Everything is taxable." The result of taking the regulations to their absurd conclusion can be seen when a vessel slips its mooring lines in Bermuda and comes to MD. Theoretically, some attorney for the state could make the argument that all the time in the Atlantic counts as time in MD for the purposes of the tax. I am not sure that attorney would be able to do so with a straight face but stranger things have happened.

Todd Lochner
Proctor in Admiralty
Lochner Law Firm, P.C.
182 Duke of Gloucester Street Phone: (443) 716-4400
Annapolis, Maryland 21401 Fax: (443) 716-4405


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## hellosailor (Apr 11, 2006)

Maryland is the state which, last year, established three "school zones" in areas where there are no schools OR school children, as a clever way to set up speed cameras and then send out the tickets at higher rates because a "school zone" was being violated.

I kid you not.

And as of 1/1/2009 NJ became the first state to require a boating safety course or similar certification for ALL boaters in NJ waters, including folks transiting across from the neighboring states. Either a NJ course, or one from your home state, no grandfathering no age exemptions.

When in doubt with tax authorities, the safest course is to ask them for an official advisory opinion, which may be worthless when a new commissioner or new policy comes into effect the next year anyway.

They're all getting very very hungry with all the budget shortfalls, it is not paranoid to assume they'll try to find new ways to get revenue, or higher rates, in the next year or two.


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## TakeFive (Oct 22, 2009)

hellosailor said:


> Maryland is the state which, last year, established three "school zones" in areas where there are no schools OR school children, as a clever way to set up speed cameras and then send out the tickets at higher rates because a "school zone" was being violated.


While I also disagree with this practice, I think you are stretching the truth by saying that Maryland created these. Actually it is the municipalities, not the state, that are collecting the revenue.

Here in PA municipalities were banned from using radar detectors and cameras for decades. It's only within the last year or two that the state allowed municipalities to use them, but the state takes such a huge piece of the action that there is no profit in it for the municipalities. So the towns will only buy the equipment if there is a true safety hazard. This is one of the only things that the PA legislature has ever gotten right. 



hellosailor said:


> And as of 1/1/2009 NJ became the first state to require a boating safety course or similar certification for ALL boaters in NJ waters, including folks transiting across from the neighboring states. Either a NJ course, or one from your home state, no grandfathering no age exemptions.


And what is wrong with this?

After reading Chapman's as a kid I never took one of these courses. However, just as a refresher, I completed the PA course two days ago. I did not realize that NJ required this for transient traffic. But it's a good thing I have it since I'll be on the Delaware River.

And it's a good thing for me that those other nut cases will have some training.


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## reillyjd (Oct 14, 2006)

It is scientifically proven that sailors who keep their boats in a state's waters but fail to pay the proper tax to the state treasury are twice as likely to find themselves aground in a channel that has not been dredged for many years because..... drumroll please.... the state is short on funds to do the dredging in part because sailors who keep their boats in a state's waters have failed to pay the proper tax. 

Paying a tax like this isn't much fun, but sailing is. 

Enjoy not running aground. Its more fun to watch other people do so.


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## dschwenk (Jan 4, 2010)

*Maryland Boat Tax*

Blancke -- If the boat is in the water in Delaware for 183 and in the water in Maryland for 150, it should not be subject to tax, at least so long as you can prove to the State's satisfaction where the boat was. If it was out of the water in Delaware, I would be less certain. Either way, 150 Maryland days will put you at risk for being assessed, and will leave you in a position to have to prove that you are not taxable. 90 days or less would be safer.


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## hellosailor (Apr 11, 2006)

"And what is wrong with this?"
What is wrong with this may be nothing--but it conflicts with traditional rights of passage and navigation. While other states have demanded that their own boaters meet certain criteria, no other state has said "You may not enter our waters unless you have" some type of license or certification, which some states don't even issue!
Then there are federal issues to be raised, potentially including interference with interstate commerce or failure to recognize the laws of other states (i.e. states that require training only for youngsters, and grandfather in older boaters.) 
Do I think boaters should have some basic competencies? Sure. Do I think NJ has the right to raise an iron curtain on their waters? No. If they want federal boater competency, let them do it through the fed. (Oh, wait, DHS wants to do that anyway...)


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