Controller v. Pleasure Cove Yacht Club, Inc.

639 A.2d 685, 334 Md. 450, 1994 Md. LEXIS 57
CourtCourt of Appeals of Maryland
DecidedApril 14, 1994
Docket17, September Term, 1993
StatusPublished
Cited by8 cases

This text of 639 A.2d 685 (Controller v. Pleasure Cove Yacht Club, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Controller v. Pleasure Cove Yacht Club, Inc., 639 A.2d 685, 334 Md. 450, 1994 Md. LEXIS 57 (Md. 1994).

Opinion

ELDRIDGE, Judge.

The dispositive issue in this case concerns the scope of Maryland Code (1957, 1990 Repl.Vol.), Art. 24, § 9-602, authorizing Anne Arundel County to tax “space rentals.”

*452 I.

Ch. 302 of the Acts of 1971 provided that “[t]he County Council for Anne Arundel is hereby empowered and authorized, by ordinance, enacted from time to time pursuant to its legislative procedure, to levy, impose, and collect a sales or use tax upon ... space rentals.” Although the statute has been amended several times, the pertinent part has remained essentially unchanged. In its present form, the statute provides that “Anne Arundel County may impose, by ordinance, and collect a sales or use tax on ... space rentals.” Art. 24, § 9-602(a). Pursuant to this authorization, the County enacted Article 6, § 7-405(b), of the Anne Arundel County Code levying

“a tax of 10% of any charges or other consideration paid or received in exchange for the use of services or facilities for the purpose of docking or storing boats, including marina or boat slip facilities, space rentals, and docking and storage areas. If the services or facilities are offered in conjunction with other services or facilities, the tax applies only to the portion of consideration derived from space rental, docking, or storage.”

The tax is usually referred to as the “boat slip tax.” The county ordinance also requires that any person offering “services or facilities for the storage or docking of boats shall collect the tax from the user of the services or facilities, file a return, and remit the tax directly to the collecting authority.” Anne Arundel County Code, Articie 6, § 7-405(c)(l).

The Anne Arundel County Controller promulgated regulations to assist in the administration of the boat slip tax levied by § 7-405(b). Specifically, section IIA of the regulations explains:

“The rate of tax is 10% and is effective July 1, 1975. The tax is levied on money received for space rental, docking or storage. In the event that there are other charges, i.e., charges for crane rental, hauling or the like, included with the charge for space rent, storage or docking, such amounts are to be excluded from the taxable amount and the bill for *453 the charge must indicate the proportionate amount charged for each specific service.”

In addition, the Sales Tax Division of the Controller’s Office issued internal guidelines related to the administration of the boat slip tax. The guidelines were drafted by a county attorney who was apparently assigned to the Sales Tax Division. These guidelines provide in part:

“In the case of ‘boatel’ storage .... [a]s to when a crane is in actual use in lifting a given customer’s boat in and out of storage, this service, only if separately invoiced, may be charged to a given customer as a separate non-taxable service.”

II.

Pleasure Cove Yacht Club, Inc., is an Anne Arundel County Yacht Club which, in exchange for annual dues, grants members the use of its swimming pool, tennis courts, picnic area, and clubhouse. Pleasure Cove also operates a marina and rents wet slips, outside storage racks, and boatel spaces to yacht club members only. 1 Before 1989, members seeking to rent a slip, outside storage rack, or boatel space would enter a rental contract with the marina to pay, in addition to membership dues, a rental fee for the slip or space. The entire rental fee was subject to the boat slip tax, even though the amount paid included the cost of marina services. Among the marina services covered by the rental fee were forklift services, 2 ice *454 eater, 3 electricity, trash removal, assistance to members getting on and off the boats, assistance with canvassing boats, boat cleaning services, security, snow removal, and periodic checking of bilge pumps.

After being told by other managers that marina services were not taxable, Ed Sealing, Pleasure Cove’s general manager, revised the manner in which members were charged under the rental contracts. In the 1989 rental agreements, Pleasure Cove reduced by one-half the previous cost of the space rental and charged members separately for marina services, usually in the amount of the abated rental fee. 4 Pleasure Cove only applied the boat slip tax to the reduced amount separately stated for the space rental.

Pleasure Cove then requested a $10,000 refund from the County for overpayment of the boat tax for the years prior to 1989. This request precipitated an audit by the County. While examining Pleasure Cove’s records, Tracy Cabral, an auditor with the Sales Tax Division of the County Controller’s office, noticed the difference between the tax amount collected on the space rentals in 1988 and the amount collected in 1989. She also discovered that the 1989 rental contracts contained a new charge for marina services to which the boat sales tax had not been applied. After receiving what she regarded as an unsatisfactory explanation of the marina services charge, Ms. Cabral concluded that the cost of marina services should have been subject to the county boat slip tax. Pleasure Cove was *455 assessed $7,736.16 for the tax deficiency and $773.62 in penalties.

Pleasure Cove requested a review of the assessment by the Maryland Tax Court. At the Tax Court hearing, Mr. Sealing testified as to the services that were provided for by the marina service fee. He also testified that the need for certain services depended on whether the rental was for a slip or a boatel. He explained that, although the slip renters are permitted to store their boats temporarily in a boatel space and may make use of the forklift to do so, the forklift is primarily used by boatel renters to remove their boats from the space and to return the boats to the boatel. Slip renters, on the other hand, make primary use of the ice eater because their boats remain in the water throughout the winter. Mr. Sealing further testified that, unless a renter intended to store his boat for the year without making use of it, every renter would pay some amount for marina services. He explained that there was no set formula for determining the marina services fee, 5 but that the cost of the space rental generally equalled the cost of marina services. According to Mr. Sealing,

“[t]he amount of the service is corresponding, in most cases, to the length of the vessel that we are handling.... Different length vessels require special handling, strain upon the equipment. Larger,vessels, heavier vessels produce more strain, more wear and tear on the equipment and the operators. Some vessels even require multiple operators, where you have people on the ground we call spotting the vessel at both ends of it, while the equipment operator is moving it.”

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Bluebook (online)
639 A.2d 685, 334 Md. 450, 1994 Md. LEXIS 57, Counsel Stack Legal Research, https://law.counselstack.com/opinion/controller-v-pleasure-cove-yacht-club-inc-md-1994.