Excursion line to have day in court

April 18, 1995|By Kerry O'Rourke | Kerry O'Rourke,Sun Staff Writer

The EnterTRAINment Line President Donald S. Golec will argue in Maryland Tax Court tomorrow that his excursion company pays all the taxes it should.

"To make it sound like I'm stealing tax dollars is not accurate," said Mr. Golec, 46, of Eldersburg.

But the state comptroller's office will counter that the business owes about a half-million dollars in admissions and amusement tax to Union Bridge and Westminster.

"Nobody wants to see any business fail," comptroller spokesman Marvin A. Bond said. "Our first job is to get the revenue that's due."

Mr. Golec and one of his partners have said the Union Bridge company, which had 40,000 customers last year, would close if forced to pay the back taxes. The company has 10 full-time and 40 part-time employees.

Municipalities may charge the admissions and amusement tax on the gross receipts of activities such as movies, athletic events, nightclubs and live shows, Mr. Bond said.

Union Bridge charges a 5 percent rate. Westminster, where many train passengers board, charges 10 percent.

The EnterTRAINment Line offers train rides through Carroll and Frederick counties and into Pennsylvania with a variety of entertainment, including dinner and dancing, a murder mystery play or a visit with the Easter bunny.

Maryland Midland Railway, also based in Union Bridge, provides the locomotives and track for the line.

Mr. Golec argues that the tourist train should be exempt from the admissions and amusement tax because railroads are protected from certain local taxes by federal law.

"We are a fringe operation under the law, but we are under the law," he said.

The history of the excursion line's tax dilemma is perplexing. It includes the train's previous owners, General Assembly legislation and an appeal to Tax Court. What's clear is that the tax bill has continued to grow -- with penalties and interest -- since 1989.

Maryland Midland operated the excursion line from about 1983 until 1989, President Paul D. Denton said. It was a scenic ride with no entertainment and was not called The EnterTRAINment Line, he said.

Maryland Midland was assessed the admissions and amusement tax. "We didn't like to pay it. We tried to get it abated," Mr. Denton said.

But it was cheaper to pay the tax than fight it, he concluded.

In 1989, Mr. Denton sold the passenger line business to Gus Novotny Associates Inc. [GNA], which adopted The EnterTRAINment Line name.

State tax records show The EnterTRAINment Line did not pay the admissions and amusement tax from 1989 through 1993, the period when GNA owned the business.

Mr. Novotny could not be reached for comment in recent weeks.

He sold the business to Mr. Golec and his associates in February 1993. Mr. Golec, who moved from Michigan to become general manager of the excursion line, said he learned of the large tax debt three months after taking over.

The comptroller audited the business from Aug. 1, 1989, to Sept. 30, 1991, state records show. Mr. Bond said the state may go back four years to audit a business.

Mr. Golec said he was shocked by the amount owed -- $329,057. Before he bought the business, he and his associates had researched its records.

"We were told the property was free and clear of all liens," he said.

Mr. Denton also was surprised by the tax bill. "We simply assumed they were paying it," he said.

The contract between GNA and Maryland Midland says GNA is responsible for all taxes, including the admissions and amusement tax, Mr. Denton said.

The EnterTRAINment Line is Maryland Midland's second largest customer with 10 percent to 11 percent of its business, he said. Lehigh Portland Cement Co. in Union Bridge is the railway's largest customer with 75 percent of its business.

Mr. Golec and his associates could walk away from The EnterTRAINment Line if they wanted, he said, but they've chosen to stay. The purchase agreement he signed with Mr. Novotny contains an escape clause that allows the buyer out of the deal if hidden problems occur, he said.

"We've chosen to fight it [the tax] because the law as written supports us," he said.

The Code of Federal Regulations defines a passenger train as one that may be used, among other things, "for excursion or recreational purposes." The code protects railroads from excessive taxation and over-regulation. Congress intended to protect excursion lines, Mr. Golec said.

The Tourist Railway Association in Denver has no record of other states that charge an admissions or amusement tax on excursion lines, spokesman Joseph E. Minnich said.

"Other states regard tourist railways as transportation attractions as railroads," he said.

A researcher at the Federation of Tax Administrators in Washington said it's unlikely Maryland is the only state to levy an admissions and amusement tax on tourist railroads. A listing of other states was not available, he said.

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