State Tax Committee meets with Comptroller of Maryland Compliance Division

By Cheryl B. Smith, CPA, MS
Ellen & Tucker, Chartered
Member, MACPA State Tax Committee

The MACPA State Tax Committee held its annual liaison meeting with the comptroller of Maryland Compliance Division on Sept. 20, 2001. In attendance from the Maryland Compliance Division were Director Linda L. Tanton, Assistant Director Charles R. Townsend, Assistant Director James T. Loftus, Chief of Audits Richard M. Glacken, Hearings and Appeals Manager Mark A. Vulcan, Unclaimed Property Manager Lynn E. Hall, and Assistant Attorney General Rene Nacrelli.

Ms. Tanton began the meeting with a brief overview of the modification to the sales tax resale certificate. A vendor who sells antiques and used collectibles may now accept a non-registered, out-of-state number on a sales tax resale certificate. The out-of-state dealer must give the Maryland vendor a copy of the sales tax license from his or her own jurisdiction that vendors must retain with their records. This will not affect cash, check or credit card purchases for less than $200. These purchases will still be subject to sales tax, and then the buyer can request a sales tax refund after the item is resold. (See the Maryland sales and use tax notice).

According to Ms. Tanton, the "Tax Free Week" held in Maryland in August "went very well. ... Few problems were brought to our attention during the week. Any problems that occurred were dealt with very quickly." The division is in the midst of submitting a report to the General Assembly assessing the loss of revenue versus the economic gain for the retailers. The big issue will be whether or not the state can afford to hold a "Tax Free Week" in the future.

In addition, look for bills to be introduced in the General Assembly which may exempt school supplies from Maryland sales tax.

An update of various court decisions was presented by Rene Nacrelli:

Furnitureland South, Inc. v. Comptroller (Court of Appeals of Maryland, May 9, 2001). This was a nexus case in which the comptroller sought to collect Maryland sales tax from a North Carolina furniture dealer. The decision of the Circuit Court was reversed by the Court of Appeals on the basis that the agency failed to exhaust all administrative remedies which are prescribed by statute. If the comptroller wants to pursue this issue, it will have to begin again by issuing an assessment and going to Maryland Tax Court. At this time, there are plans to pursue the issue.
NIRSystems, Inc. v. Comptroller (Maryland Tax Court 2001). This case involved whether inventory used for demonstration purposes (i.e., trade shows) was subject to Maryland use tax. The Tax Court affirmed the assessment.
Mr. Pizza II, Inc. v. Comptroller (Court of Special Appeals, 2001). In this case, the Court of Special Appeals affirmed the Tax Court holding that in a bulk sale, the six-month statute of limitations period does not apply. The taxpayer failed to notify the comptroller that a bulk sale had taken place.
Comptroller of the Treasury v. Fairland Market, 136 Md. App. 452 (2001). This case involved whether a retailer who had multiple locations and not filing a consolidated sales tax return could take advantage of a 1.2 percent credit rate on the first $4,200 of tax for each of its locations. The Court of Appeals decided that since the retailer was eligible to file a consolidated sales tax return without the comptroller’s approval, the credit could be claimed only once.

We were then given a slide presentation on the tax amnesty program that ended on Oct. 31, 2001. Tax amnesty was eligible for all Maryland taxes that were due on or before Dec. 31, 2000, unless the taxpayer was under criminal investigation by the attorney general, state prosecutor or a state's attorney. In addition, all unpaid civil penalties were waived for eligible taxpayers and eligible taxes during the amnesty period.

After the amnesty period, fines have been increased from $5,000 to $10,000 for each criminal violation. Additional information can be obtained from ReveNews, Vol. 22, No. 4, or from the comptroller's Web site at www.marylandtaxes.com. The General Assembly had expected the amnesty program to bring in unpaid taxes of more than $50 million.

The division has added additional personnel in the enforcement, collection and audit areas. In addition, they have purchased new technology from Dun & Bradstreet to find unregistered businesses that are operating in Maryland. The technology not only will identify non-filers but also underreporting of income or sales.

The Compliance Division was working on final sales and use tax regulations on advertising agencies, energy efficient appliances and detective services. The final regulation on advertising agencies was released in October 2001.

The MACPA State Tax Committee thanks the representatives from the Maryland Compliance Division for their time in preparing for the meeting and for the informative presentations. A special “thank you” goes to Ron Townsend for his assistance in gathering the participants and setting up the meeting time and place.

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