Train line must pay overdue tax

April 20, 1995|By Kerry O'Rourke | Kerry O'Rourke,Sun Staff Writer

A Maryland Tax Court judge ruled yesterday that The EnterTRAINment Line must pay at least $300,000 in overdue taxes, interest and penalties to Union Bridge and Westminster because it did not pay admissions and amusement taxes for a four-year period.

The decision could close the business, the company president said after the all-day hearing in Tax Court in Baltimore.

"It could cause our demise, but not immediately," President Donald S. Golec said. "We're going to be here a while."

He said he did not know if the company, Gus Novotny Associates Inc. of Union Bridge, will appeal yesterday's decision to Carroll County Circuit Court.

Tax Court Judge William Calvert said after reviewing the evidence that he had no difficulty determining that the admissions and amusement tax applied to The EnterTRAINment Line. Mr. Golec argued that the company was a rail carrier and protected from the tax by federal law.

"This is not a taxation scheme that discriminates against railroads," the judge said. The company "is without question subject to the admissions and amusement tax."

The Maryland comptroller of the treasury's office audited The EnterTRAINment Line in late 1993 and determined the company owed $207,388 to Westminster and $13,674 to Union Bridge in admissions and amusement taxes, plus interest and penalties for the period Aug. 1, 1989, to Sept. 30, 1993.

The tax on gross receipts is levied by municipalities and collected by the state. The auditor also determined the company owed $5,110 in sales tax.

The town of Union Bridge disagreed with the auditor's figures and argued yesterday that The EnterTRAINment Line owes it more tax than Westminster because all train tickets are sold in Union Bridge.

"The EnterTRAINment Line is basically a citizen of the town of Union Bridge," Town Attorney John T. Maguire II said.

Auditor Karen Scheerer testified that Westminster should receive more money because 89 percent of train passengers boarded there during the audit period. The comptroller's policy is to tax at the place of admission, she said.

Mr. Maguire said the tax should be collected where the tickets are sold. Mr. Golec testified that almost all tickets are sold through the office in Union Bridge. "When you have an amusement that moves, to which jurisdiction do you assess the tax?" asked Assistant Attorney General Sheldon H. Laskin, who represented the comptroller's office.

Judge Calvert said the issue of how the tax should be divided troubled him, but he concluded the evidence supported the current system.

If he had ruled otherwise, The EnterTRAINment Line could have reduced its tax bill by almost $104,000 because Union Bridge charges a 5 percent admissions and amusement tax rate and Westminster charges 10 percent.

Mr. Golec, who represented himself in the case, said neither town should receive the tax money because the amusement on the train occurs on the rails, not in a town.

Mr. Golec and his business partners protested the tax because they felt federal law protects railroads against certain local taxes. He argued that The EnterTRAINment Line is a passenger railroad.

"We're a rail carrier. We're not a ball game. We're not a boat or a helicopter," he said. "The only entity that looks on The EnterTRAINment Line as an amusement is the comptroller's office."

Mr. Laskin responded by reading from the train's brochures, which detailed offerings of dinner, dancing, murder mystery plays and visits with Santa.

Mr. Laskin said The EnterTRAINment Line officials knew in 1989 that they might be required to pay the admissions and amusement tax.

That year, Maryland Midland Railway of Union Bridge sold its excursion passenger business to Gus Novotny Associates. The contract included clauses about the admissions and amusement tax.

Mr. Golec did not own the company then. He and his partners purchased it in February 1993 and retained the name. They were owners for eight months of the audit period.

Mr. Golec said before he bought the company he researched the issue and was told there were no tax liens against the company. The company never was assessed the admissions and amusement tax, he said.

Mr. Laskin said he should have asked state officials about the tax. If the company did not want to pay it, officials should have challenged it and asked for a ruling, he said.

"And they're still not paying the tax," Mr. Laskin said.

Mr. Golec said back taxes, interest and penalties have accrued to almost a half-million dollars. The ruling by Judge Calvert included only the period covered in the audit.

The company may be due a tax refund of about $100,000 because it may have overpaid on sales tax for food and beverages served on certain train rides since 1989, Mr. Laskin said. But the company needs to prove it overpaid, he said.

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