A Baltimore County Circuit Court judge has ordered the county to refund more than $600,000 in electricity taxes to five companies, agreeing with a lower court that the companies were overtaxed.
The county immediately announced it would appeal to the Court of Special Appeals and Circuit Judge Robert E. Cahill Sr. stayed his order.
"We hope we will be vindicated on appeal," says Michael McMahon, an assistant county attorney on the case. "If we lose, then we have to come up with the money."
Should Baltimore County lose on appeal, the court case could have an impact on four other counties and the city, which have similar taxes on the consumption of electricity.
They could stand to lose millions in tax revenue, according to McMahon. "This puts all the electricity taxes at risk," he says.
At issue is the way Baltimore Gas and Electric Co. assesses Baltimore County's 7.5 percent tax by applying the percentage to the consumer's total monthly electricity bill.
The five firms, Eastern Stainless Steel, Genstar, Blue Circle Atlantic, House of Seagrams and A.M.G. Resources Corp., challenged that application, saying the tax should be assessed only against total kilowatts of electricity consumed.
While consumers are billed for electricity usage only, BG&E bills for large commercial users of electricity contain two other charges, a fixed "customer charge" and a "demand charge."
Through their attorney, Robert R. Bair, the firms said those two charges were not based on consumption of electricity and should not be taxed.
The Maryland Tax Court agreed with the companies in a decision last August and, on June 26, Cahill agreed with the tax court.
Those two additional charges on the companies' bills are not based on "sales of electricity actually consumed," Cahill wrote.
McMahon had argued that the county should prevail because for more than 40 years the county assessed the tax the same way and no one challenged it.
In Cahill's decision, there was a bright spot for the county. The judge refused to grant the five companies interest on the tax refund, saving the county nearly $250,000.
Jim Gibson, director of finance for the county, says other firms have asked for the tax refund, but he has not acted on those requests. "We're waiting to see how this case turns out before we do anything," he says.
Besides Baltimore County and the city, the counties of Montgomery, Prince George's, St. Mary's and Anne Arundel levy electricity taxes.