Boat Tax 2010 — How Long Can I Cruise?

Boaters coming in to Maryland regularly ask us how long can they stay without owing tax under the State Boat Act. The answer to this question is somewhat difficult to give, because there are a lot of factors both future (repairs) and past (location of purchase), that may affect the answer to the question. There are also ambiguities in the law that may be read differently by a judge than they are by this Firm or by the personnel at the Department of Natural Resources — not to mention that the personnel at the Department of Natural Resources, being human, sometimes are not 100% consistent as to their views on what the statute says. That said, here is the short answer, and the best answers that we can give without a 25 page legal brief. I include the actual text of the 90 day exception below, so you can see why we are hesitant to speak in absolutes.

It should be noted that if you have paid sales or use tax on your boat to another state, and paid at least 5% tax on the purchase, you will not likely owe Maryland anything. You should register with Maryland if you are staying on and cruise without significant concern if not.How Long?

1. You can cruise for 90 days in a calendar year in Maryland waters without tax consequences if your boat was purchased in another state and principally used or registered there prior to coming to Maryland. 2. We are hearing that brokers are saying that one can cruise Maryland for 90 days after purchase. By our reading, this is not what the law says, although it is true that the DNR does not generally issue assessments for tax on boats that are in Maryland less than 90 days. If it did, however, tax would probably be due.

3. The DNR generally takes the position that you can cruise for 90 days even if your boat was purchased in Maryland, so long as you did not owe tax when the boat was purchased. (Generally this means that the boat was purchased in Maryland, but left within 30 days and filed the DNR’s form B110 Affidavit of Out of State Use). WARNING: We are not aware of anyone that has tested the DNR’s patience by leaving on day 29 and returning on day 31, then staying for the remaining 90 days. If you do this, or something similar, you are in a gray area of the statute, and we do not make any promises about your outcome. WARNING: If it smells to the DNR that there was a fraud-ish effort to avoid tax (for example, if you are Maryland resident) then this general rule may not apply.

4. You can stay in Maryland more than 90 days in a calendar year without tax consequences, so long as you stay more days in another single jurisdiction. If you are in Maryland 100 days and in Florida 110 days, you are fine — but you may need to demonstrate this to Maryland’s DNR, and you will therefore need to be sure that you are on the right side of Florida’s sales and use tax. WARNING: If you are in the BVI, or some combination of other states (as opposed to a single state of the United States), then you need to be under 90 days. Editor’s note: if you have spent time in a jurisdiction other than a US State or territory, and this time matters in terms of whether the boat is taxable, please call for specific advice – analysis in this area of the law is currently in a state of flux.

5. International cruising permits — we do not presently have any public position on what to expect for such a boat. If the boat is here for an extended period, taxation is an issue. If you are in this position, you should call for specific advice.

Actual Text of the State Boat Act —

(c)(1) Except as provided in ยง 8-715(d) of this subtitle and in subsections (e) and (f) of this section, and in addition to the fees prescribed in subsection (b) of this section, an excise tax is levied at the rate of 5% of the fair market value of the vessel on: (i) The issuance of every original certificate of title required for a vessel under this subtitle;

(ii) The issuance of every subsequent certificate of title for the sale, resale, or transfer of the vessel; (iii) The sale within the State of every other vessel; and

(iv) The possession within the State of a vessel used or to be used principally in the State. (e) A person is not required to pay the tax provided for in subsection (c) of this section resulting from:

(9) The possession of a vessel in the State that is not used or to be used principally on the waters of the State and for which the issuance of a title is not sought or required under this subtitle, except that: (i) A vessel is not deemed used on the waters of the State if the vessel is used for 90 days or less of a calendar year; and

(ii) If a vessel is used for more days than 90 days in a calendar year, the period of 90 days shall be counted in the determination of principal use under this subtitle;

Happy cruising.

J. Dirk Schwenk, Baylaw, LLC.