Maryland Boat Tax Act


Editors Note: This Article first appeared in print and on this website in 2002. Please note the date as the law is constantly evolving.

For those Spinsheet readers that have been following the discussion on the Maryland's Boat Tax over the past few months, here is an update on the new changes to the State Boat Act as it pertains to vessel excise taxes. For those of you that missed the earlier installments, the short of it is that boats that are principally used in Maryland (meaning used more here than any other state in a given year), must pay 5% of the value of the vessel, plus potentially interest and fees, to the Department of Natural Resources. Over the past few years, the DNR has raised large sums of money through enforcing the tax against boats that are in Maryland, but do not bear Maryland registration stickers. These efforts have caused some anxiety in boaters, particularly those that travel up and down the coast with the seasons. Boats that overwinter in the Caribbean are especially vulnerable, as they could be required to pay the tax even if they were only in Maryland for a couple of months.

Maryland's General Assembly passed a new version of the boat tax law, by votes of 138-0 in the House and 47-0 in Senate, with final action on April 3, 2002. The changes to the law formally take effect on October 1, 2002. There were two changes of real significance. First, there is now a 90 day period in which an out-of-state boat can be in Maryland without having to pay vessel excise taxes. It was initially proposed that the period would be 120 days, but this was successfully opposed by the DNR. Second, there is now a specific exemption from tax for vessels that are held for sale by a boat dealer licensed in Maryland.

The first change, the 90 day window, is pretty self explanatory. A boat can be brought into Maryland, remain here for 90 days, and it will not owe the tax. Things get a little trickier if the boat is in for 91 days, however. At that point, the analysis will be the same as it was under the old bill. You will owe the tax unless you can show that the boat was in one other state (not in transit or in another country) for more days than it was in Maryland during the calendar year. This provision should ease the minds of those that keep the boat in the south over the winter, then stop in the Chesapeake on their way to and from New England. Let's hope those folks spend a few dollars in Annapolis during their trip.

The second change is that boats that are up for sale will not owe the tax. This should be a boon for Maryland's boat brokers, who can now say with confidence that a boat can be brought to Maryland, listed for sale, and have no tax liability. If you are a boat owner, and you want to be protected by this provision, there are two things to keep in mind. The boat must be "held for resale or listed for resale with a licensed dealer" and the owner must sign an affidavit that says that the vessel will not be used except for a sea trial of no more than one day. Needless to say, if you sign the affidavit, you are well advised not to use the boat. If the boat is listed with a licensed broker and up on blocks at Port Annapolis you are fine - if you list the boat in the classifieds and then cruise around on it all summer, this new exception is not going to help you very much.

2004 Note: The General Assembly is again examining and changing the tax provisions of the State Boat Act during this 2003-2004 legislative session. It appears that those changes will have an impact on the 90 day exception and the listed for sale exception that are discussed above. No doubt there will be important changes in other areas, as well. If you receive an assessment, be sure to check with us about potential defenses as soon as possible. There is only a short window after an assessment to appeal, and there are many possible defenses, exceptions, or exemptions that may apply.