Baltimore County, facing tax appeal, moves to close $1.5 million loophole

January 17, 1992|By Dennis O'Brien | Dennis O'Brien,Baltimore County Bureau of The Sun

Baltimore County officials hope to close a loophole that could cost them $1.5 million in electricity tax revenues that five of the county's biggest electrical customers say they should not have paid.

Finance Director James Gibson told the County Council this week that the firms filed claims in April 1989 seeking refunds on portions of the county sales tax imposed on non-residential electrical customers.

Mr. Gibson said the county collects a 7.5 percent tax for non-residential electrical customers on itemized charges.

Itemized charges include an energy charge based on the amount of electricity used, and two other charges assessed larger customers to help pay for wear on the system: a fixed customer charge and a demand charge.

But the 1947 law establishing the tax says it is to be based on the "sales for consumption of electricity." The five companies cited the law in April 1989 when they applied to the county for partial refunds.

The companies -- Genstar, Blue Circle Cement, Eastern Stainless, Seagrams and AMG Resources Co. -- argued that they should not have to pay the 7.5 percent tax on the customer charge and on the demand charge because those charges have nothing to do with the actual "consumption of electricity."

The county finance office denied the appeals. The companies, which are the county's five biggest electrical customers with the exception of Bethlehem Steel, appealed to the Maryland Tax Court and won.

The county appealed that ruling to the Baltimore County Circuit Court. County attorneys lost again, but they have appealed to the Court of Special Appeals. That decision is pending.

The County Council amended its electricity tax codes in September to redefine the terms "consumption," and "sales or gross sales" to clarify the language in the electrical tax codes and ensure that all revenues would continue to be collected.

The measure recommended by Mr. Gibson at the County Council work session Tuesday would make the updated language retroactive to 1985. The measure is expected to pass at council's meeting Monday night.

Kevin E. Sniffen, general counsel for Genstar, said that by making the new language retroactive, the county essentially is trying to ensure that it will not have to pay refunds going back to 1985.

The statute of limitations on tax claims is five years.

County officials said the law represents an added legal protection.

Mr. Gibson said the county could have to pay $1.5 million if the taxes have to be refunded back to 1985.

Stanley Shapiro, deputy county attorney, said the county may still have to pay that amount, if the court orders full payment. But he said if the county loses, making the language retroactive gives county attorneys another argument to support claims that the county should not have to pay refunds as far back as 1985.

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