A Union Bridge excursion train will be forced out of business if the state insists on collecting more than $300,000 in back sales and amusement taxes, company officials say.
Operators of the EnterTRAINment line -- which provides sightseeing tours, murder mystery excursions, and holiday rides for children and families -- also argue that the company should be exempt because it is a business protected by the Interstate Commerce Commission (ICC).
But ICC officials say they have no jurisdiction over taxes.
"They [state tax officials] are trying to drive us out of business," said Frank McKenna of Washington, the EnterTRAINment line's attorney. "There ought to be somewhere in this world where things can be worked out. But they want their bucks and they don't care."
The company received a notice of final determination from the Maryland comptroller's office last week that the rail line owes a total of $329,056.93 in sales and amusement taxes, penalties and interest accrued from Aug. 1, 1989, to Sept. 30, 1991.
Most of the money, $320,762.88, is owed as admissions and amusement tax. Company officials intend to file an appeal in Maryland Tax Court, said EnterTRAINment President Don Golec. "It's about a third of our annual income," said Mr. Golec, who took over the company with four other investors in April 1993. "It covers a period long before the current ownership. We were told we weren't liable for it, and the state came in and told us we owed in excess of $300,000."
Amusement taxes were assessed against the excursion rides when Maryland Midland Railway (MMR) -- which leases tracks, engines and staff to EnterTRAINment -- conducted them, said MMR President Paul D. Denton.
EnterTRAINment is the Union Bridge railroad's second-largest customer, he said.
"It was such a small amount, it was cheaper to pay it than appeal it," Mr. Denton said of his assessment, noting that it was before Maryland Midland sold its excursion division to EnterTRAINment.
The company has been collecting amusement taxes since the new owners took over last year, Mr. Golec said.
"We are paying sales and withholding," he said. "We [the investors] picked this specifically because it was on the interstate [rail] system."
The tracks on either end connect with the CSX rail line that runs coast to coast, said Mr. Golec. Therefore, he argued, the company is protected by federal ICC regulations put into place several years ago that prohibit discriminatory taxation of railroads.
"Railways like Penn Central went out of business because they were pretty heavily taxed at the local level," Mr. McKenna said. "Regulations were put in place saying you can't discriminate against railroads."
The men said EnterTRAINment is being discriminated against because similar rail carriers, such as the Western Maryland Railway out of Cumberland, are not being taxed.
"My understanding is that the county owns the track and its operations are heavily subsidized through grants and other forms of aid," Mr. Golec said of the Western Maryland Railway.
"We're fighting an uphill battle against a state-subsidized railway."
However, the state's determination notice said EnterTRAINment failed to prove in an informal hearing how the tax discriminated against railroads.
In addition, the company is not providing transportation subject to ICC jurisdiction, the notice said.
"The courts have said that if I pick you up in Westminster, take you somewhere and bring you back, that's entertainment, not transportation," said Marvin Bond, spokesman for the comptroller's office.
Al Brown, a spokesman for the ICC, said he was unaware of any federal regulations that would apply in this case.
"Our regulations have no force in effect on taxes," he said. "I don't know what they're talking about."
Nevertheless, Mr. McKenna maintains that state arguments that the EnterTRAINment line is an amusement are simply intended to muddy the issue.
"The state has one case, someone offering helicopter rides in Baltimore to view the city," he said. "There are some people who are going for a train ride. But there is nothing in the Federal Aviation Act which prohibits against discriminating against helicopters.
"The Interstate Commerce Commission has said you can't discriminate against railroads."
Furthermore, if the rail line does owe the tax, state officials have been assessing it incorrectly, Mr. McKenna said. Since all tickets are sold in Union Bridge, they should be subject to its 5 percent amusement tax and not Westminster's 10 percent tax, he said.
"The Westminster code says the tax will be assessed on sales within Westminster," Mr. Golec said. "All ticket sales take place in Union Bridge. They have chosen to ignore those regulations."
State officials said amusement taxes are always computed based on where admission takes place, or the place of boarding in this case.
"In the case where something is moving, it's where the ticket is used, not where the ticket is sold," Mr. Bond said.