Boat Tax 2005 - Maryland's Top Court Speaks

With a new decision from the Court of Appeals, many boat owners that paid tax to Maryland may be entitled to a refund. If you purchased your vessel outside of Maryland and eventually paid vessel tax here, you may wish to immediately contact us concerning refunds. Please call 443-716-4400 or send an email to Please review the information on our refunds page - Boat Tax Refunds


On March 14, 2005, Maryland's highest court, the Court of Appeals, spoke for the first time on the interpretation of Maryland's vessel excise tax. In Kushell v. DNR, a case briefed and argued by attorneys the Court held that the Department of Natural Resources could not tax all federally documented vessels.  For decades the DNR had taken the position that it could tax any boat that was principally used in Maryland.  Mr. Kushell admitted to having his boat in Maryland, but argued that he did not purchase the boat with the intent that it be principally used in this state, since he had used it in California for nearly a decade before entering Maryland waters.  Kushell argued that he could only be taxed if he had: "possession within the State of a vessel purchased outside the State to be used principally in the State" under the statute.  This argument was repeatedly rejected, including by the Office of Administrative Hearings (the first level of appeal); the Secretary of the DNR (the second level of appeal); and the Circuit Court for Anne Arundel County (the third level of appeal).  The Court of Appeals, however, unanimously agreed with Mr. Kushell and held that the plain language of the statute required that, to be taxable, a federally documented boat must be purchased with the specific intent that it be principally used in Maryland.  Because of the way that boat tax is structured, this should also mean that a boat purchased and registered in another state is not taxable, so long as the numbering system of the other state is maintained.  The Court's decision can be found Kushell v. DNR on the Court of Appeals website.

On the same day, the Court issued a second decision concerning the boat tax.  This appeal was not handled by attorneys.  In Schwarz v. DNR, the vessel owner purchased the boat in Maryland, but did not remove it within 30 days as the DNR requires.  The vessel owner argued that he kept the boat in Maryland for a longer period because the boat required significant warranty repairs.  Ultimately, the vessel owner invested nearly $35,000 in after-market stabilizers to address a significant stability issue, then took the boat South to Florida.  During the first appeal, the Office of Administrative Hearings held that Mr. Schwarz did not meet the repair exception to the tax because the boat had not been "held for maintenance or repair" for periods of greater than 30 days, and it was therefore simply being used in Maryland waters.  In the Circuit Court, the judge held that there was no exception at all to the tax for a boat that was purchased in Maryland, and so the "maintenance and repair" exception did not apply.  The Court of Appeals clearly struggled with whether the Circuit Court was correct, but in a split decision analyzed the case on the basis of the maintenance and repair issues.  In so doing, the Maryland's boat dealers and brokers narrowly avoided a decision that could have crippled the industry, since every boat purchased or sold in Maryland would have been taxed, irrespective of where the boat was to be used.  In dissent, Judge Wilner stated:

"If the Circuit Court's reading of the statute is correct [that there is no exception to the tax for boats that are purchased in Maryland], but may cause some economic hardship to the boating industry in Maryland, the industry can ask the General Assembly, which is now in session and will remain in session for another month, to reconsider the tax statute and create the exemption that is not presently there.  That is the normal way, and a perfectly effective way, in which a statutory construction decision by this Court can be reviewed by the Legislature.  If the General Assembly believes that the kind of exemption created by the Department of Natural Resources should exist, it can easily and quickly place it into the law.  To acknowledge but then fail to address the issue will, because of the lingering uncertainty, create more of a hardship for the boating industry than a clear decision which, unfavorable to the industry, can easily be corrected by the legislature." 


And so, boat dealers and brokers were that close to losing the 30 day exemption to the boat tax.  What the DNR will do next remains to be seen. The Court's decision can be found at Schwarz v. DNR.


For the immediate future, this changes the Maryland tax analysis for all owners of vessels whether purchased in or outside of Maryland.  The following are probably subject to tax:

  1. Boats purchased in Maryland and principally used in Maryland. It remains to be seen whether a boat can continue to avoid taxation if it leaves the state within 30 days.

  2. Federally documented boats that are purchased elsewhere, but the owner plans to bring the boat to Maryland and principally use it in this State.  This may apply to a Maryland resident, one that intends to become a Maryland resident, or one who expects to use the boat for more days in Maryland than in any other state or territory of the United States, especially in the first year or so after purchase.
  3. A state numbered boat purchased in a state without a sales tax (such as Delaware), and on which valid State numbers are kept, but the boat is purchased with the intent that it be principally used in Maryland.

By contrast, the following should no longer be subject to the tax:

  1. Federally documented boats that were purchased elsewhere, and the owner did not plan at the time of purchase to bring the boat to Maryland for principal use.  Examples would include: out of state residents relocating to Maryland; out of state residents visiting Maryland, even staying in Maryland, so long as the boat was initially purchased for use elsewhere; out of state residents purchasing elsewhere, but ending up for extended periods in Maryland by accident, illness or other change of plans.
  2. State numbered boats that were purchased elsewhere, are properly numbered by the other state, and the owner did not plan at the time of purchase to bring the boat to Maryland for principal use.  See above for examples.

In Schwarz, the Court declined to overturn the DNR's view that a boat that is purchased in Maryland and files a Certification of Principal Use that the boat will leave the State within 30 days is not subject to tax, at least so long as the boat does leave the State.  This Firm supports that exemption because it is needed by the marine industry of this State, but has grave concerns about whether it is really an enforceable exemption in the law. 

As always, boat tax issues are entirely tied up in the peculiar facts of the situation, and this page must be viewed as general information and not specific advice.  The intent of a purchaser is particularly subject to inference, and should be presented in the best possible light, if one is to achieve success on this point.  There are no cases addressing the fine line indicating when a boat is purchased with the intent that it be principally used in Maryland, so this area is ripe for both powerful advocacy and grave misstep.  If proceeding without representation, great caution is advised.