Kushell v. DNR

• Decision Date: 14 March 2005
• Docket Number: No. 96,96
• Citation: 870 A.2d 186,385 Md. 563
• Parties: Charles J. KUSHELL, IV v. DEPARTMENT OF NATURAL RESOURCES.
• Court: Maryland Court of Appeals

870 A.2d 186

385 Md. 563

Charles J. KUSHELL, IV v. DEPARTMENT OF NATURAL RESOURCES.

No. 96, September Term, 2004.

Court of Appeals of Maryland.

March 14, 2005.

J. Dirk Schwenk (Lochner and Schwenk, LLC, Annapolis, on brief), for appellant.

Saundra K. Canedo, Asst. Atty. Gen. (J. Joseph Curran, Jr., Marianne D. Mason, Asst. Atty. Gen., on brief), for appellee.

Argued before BELL, C.J., RAKER, WILNER, CATHELL, HARRELL, BATTAGLIA and GREENE, JJ.

RAKER, J.

In this case we consider whether Maryland tax liability under § 8-716(c)(1)(iv) of the State Boat Act for "[t]he possession within the State of a vessel purchased outside the State to be used principally in the State" requires that the out-of-state purchase have been made with an intent to use the vessel principally in Maryland. We find that the plain language of the statute requires this result. Both parties to this appeal agree that appellant Charles Kushell did not intend, at the time of purchase, to principally use his vessel in Maryland. We shall reverse the Circuit Court's order upholding a tax assessment against Kushell.

I.

The following findings of fact from the Administrative Law Judge's ("ALJ's") proposed decision are not disputed by either party:

"1. The Genesis is a 58-foot Spindrift Motoryacht. The vessel is documented by the U.S. Coast Guard, and bears USCG Document Number 684088.

2. Mr. Kushell purchased the Genesis in 1989 for use as [a] residence in California at a time when he was employed and living in California. The Genesis remained in California between purchase and 1996.

3. The vessel was purchased outside of Maryland.

4. At the time that it was purchased, the vessel was not intended to be used principally in Maryland.

5. Mr. Kushell paid personal property taxes on the vessel to the State of California between 1989 and 1999.

6. In 1996, the vessel was moved from the Pacific Ocean to the Atlantic Ocean, and after 1996 was used during most of the year in Florida and Man O' War Cay, Abacos, Bahamas.

7. The vessel was in Maryland for the first time for approximately a month during the fall of 1996.

8. The vessel returned to Maryland for the summer months of 1997, and for successive years thereafter.

9. Mr. Kushell registered an inflatable dinghy with a small outboard motor in Maryland in 1997.

10. The inflatable dinghy was kept during 1997 on a rack at Mears Marina in Annapolis, Maryland.

11. The Genesis was never used for a greater percentage of time in Maryland during any calendar year than it was used outside of Maryland.

12. During calendar year 2001, the vessel was in use in Maryland waters for a period of 171 days. The vessel was in Maryland from May 21, 2001 until November 7, 2001.

13. During calendar year 2001, the vessel was in use out of the State of Maryland and out of the United States and its territories, for a period of 189 days. The vessel was in Man of War [Cay], Abacos, Bahamas from January 1, 2001, to May 16, 2001 and November 12, 2001 to December 31, 2001.

14. During the year 2001, the vessel was not used in any other state of the United States more than it was used in Maryland.

15. Mr. Kushell believed that so long as he kept his boat in Maryland less than six months per year, his boat would not be "in principal use" in Maryland for purposes of the State Boat Act use tax.[¹]

16. Mr. Kushell was told by a representative of the Department of Natural Resources ("DNR") that he was not required to pay the tax so long as the vessel was federally documented and was used in Maryland for less than six months of any given year.

17. The application of the definition of "State of Principal Use," as employed by the DNR Boat Tax Enforcement Unit, has never been for a period of time of 6 months more or less. Instead, the application of "State of Principal Use" has always been for the period of time where the boat is most used in a state in a calendar year.

18. Mr. Kushell examined the DNR website, and found it confirmed his understanding that he did not owe tax so long as he had the boat out of Maryland the majority of the year.

19. At all times relevant, including the present, the DNR web site contains the following text: "What is meant by `used principally in Maryland?' A vessel is considered used principally in Maryland if it is in Maryland the greatest percentage of time in a given calendar year."

20. The definitions used for internal training by the Department of Natural Resources Division of Licensing define State of Principal Use as "the state or jurisdiction in which a vessel is used the greatest percentage of time in a calendar year."

21. In DNR internal training, the definition of State of Principal Use is merely a starting point in the training of personnel.

22. Mr. Kushell relied on the DNR representative's statement, and the statement on the website, in deciding to keep his boat in Maryland for 171 days in calendar year 2001.

23. Had Mr. Kushell known that he could be responsible for the tax if the boat was only used in Maryland, and no other state of the United States, he would have registered the boat in Florida and kept it in that state for part of the year.

24. At the end of the calendar year 2001, Mr. Kushell was assessed excise tax, penalties and interest in the total amount of $14,304.54. He paid this amount in full on October 3, 2002, while reserving his right to challenge whether the tax was due."

Kushell appealed the tax assessment to the Office of Administrative Hearings ("OAH"), and OAH held a hearing pursuant to § 8-716.2(e). The ALJ ruled that Kushell was liable for the tax, rejecting Kushell's contention that imposition of tax under § 8-716(c)(1)(iv) required that an owner have purchased his vessel with the intent to use it principally in Maryland. He also rejected Kushell's contention that DNR should be equitably estopped, based on the statements of its website and personnel, from collecting the tax. He rejected Kushell's contention that a vessel must spend six months in Maryland in order to be "used principally" in this State. The ALJ further rejected Kushell's arguments that § 8-716(c)(1)(iv) was unconstitutional, either for vagueness or as a duty on tonnage proscribed by U.S. Const. art. I, § 10, cl. 3.

The Secretary of Natural Resources adopted the entire proposed decision of the ALJ. Kushell filed in the Circuit Court for Anne Arundel County a petition for judicial review. The Circuit Court affirmed the agency decision, holding that the ALJ had construed § 8-716(c)(1)(iv) correctly in finding no requirement of intent. The court held that the ALJ had ruled correctly with respect to estoppel, and further found that the explanation of "used principally" on DNR's website was not misleading. The Circuit Court also agreed with the ALJ's analysis of Kushell's Constitutional arguments.

Kushell noted a timely appeal to the Court of Special Appeals. We issued a Writ of Certiorari on our own initiative before consideration by that court. Kushell v. DNR, 383 Md. 569, 861 A.2d 60 (2004).

II.

Before this Court, Kushell argues that the State Boat Act imposes tax only on the possession of a vessel which, at the time of sale, was purchased with the specific intent of using it principally in Maryland. He argues that the plain language of § 8-716(c)(1)(iv) unambiguously requires this result. Kushell suggests that DNR's reading renders the words "to be" nugatory, because the meaning would not change if "to be" were deleted and the statute simply read "possession within the State of a vessel purchased outside the state[,] used principally in the State." DNR's reading also renders the words "possession within the State" superfluous, according to Kushell, because any vessel used principally in Maryland is by definition possessed here.

Kushell points to cases in which we construed the language "purchased ... tangible personal property for use, storage or [other] consumption in this State," contained in Md.Code (1951), Art. 81 §§ 368(c) and 369, to require, as a precondition for assessment, that a purchaser have intended at the time of purchase to use, store, or consume the property in Maryland. See Comp. of Treas. v. Thompson Trailer Corp., 209 Md. 490, 495-96, 121 A.2d 850, 853 (1956)

; Comptroller v. James Julian, Inc., 215 Md. 406, 412, 137 A.2d 674, 679 (1958).

Kushell notes that Art. 81 § 368(c) was amended in 1955 to replace the phrase "for use, storage or other consumption" with "used, stored or consumed," and that Art. 81 § 369 was simultaneously amended to delete altogether the phrase "for use, storage or consumption." See 1955 Md. Laws, Ch. 332 at 507-08. We subsequently held that these amendments made liability "depend on actual use, storage or consumption in Maryland, rather than on purchase with intent to use, store or consume in the State." Lane Const. Corp. v. Comptroller, 228 Md. 90, 92, 178 A.2d 904, 905 (1962). Kushell contends that the current language of § 8-716(c)(1)(iv) is more akin to that of Md.Code (1951), Art. 81 §§ 368(c) and 369 than it is to the post-1955 versions of those statutes. He suggests that this similarity evinces an intent on the part of the General Assembly to include the same intent requirement in the present-day boat tax as was contained in the pre-1955 general use tax.

Turning to legislative history, Kushell contends that an earlier proposed version of the provision that ultimately became § 8-716(c)(1)(iv) would unambiguously have imposed the tax without regard to intent at the time of purchase. The rejection of this bill in favor of the enacted legislation, Kushell argues, demonstrates a legislative purpose to condition tax liability on the purchaser's contemporaneous intent to use a vessel in Maryland. See House Bill 1575 (1985) (providing, in pertinent part, "the owner of any vessel that has a valid document issued by the United States Coast Guard and that is used principally on the waters of the State for pleasure shall pay a 5 percent excise tax on the gross...