(Nov. 22, 2013) The apparently Byzantine operations of the Maryland comptroller’s office has resort beach stand concession owners clamoring for the city and state to resolve the issue of whether they are subject to the city’s 3 percent admissions and amusement tax ahead of the crucial auction of beach concession parcels next month.
According to stand operators, the state has reversed and re-reversed its position on what types of business are subject to the levy, even requiring some operators to pay while others do not, causing discord within the industry.
“There was a lot of discussion if beach stand operators are considered ‘amusement’ or ‘non-amusement,’” concession owner Ron Steen told the City Council this week. “Some operators have never received a bill … and some have been paying.”
This inconsistency would give some owners a financial advantage over others when they bid next month on parcels of city beach from which to operate their stands.
“We have a bid coming up soon and I would like to have a level playing field,” said concession owner Will Edmunds.
The admissions and amusement tax is one of several taxes that are collected by the state and county tax apparatus on the city’s behalf. Under municipal law, city government only has the authority to levy an ad valorem tax on real property. But the state, at the behest of the city, collects several other taxes specific to the municipality and turns over the proceeds on a monthly basis.
The amusement tax was to be applied to rides, mini golf courses, movie theaters and other entertainment venues. Whether beach chair and umbrella rentals fall under this purview is a gray area, but many rental operators have apparently been paying.
Upon hearing that others have not, however, they applied for a refund, and got mixed signals from the comptroller’s office.
Steen said he had applied for a refund and subsequently received a letter stating that his request would be denied. A week later, he received a reimbursement check in the mail. Fortunately, he did not cash it, given that the state has since asked for the money back.
“I had an experience similar to Ron’s,” Edmunds said. “I was told in June that my refund application was accepted.”
“When the check wasn’t forthcoming, I followed up in August. A week ago, I got a letter reversing the decision, saying I was subject to the tax.”
Because the state authorizes the tax for the city, it would stand to reason that the municipal government could tell the comptroller’s office who should and should not be charged. City officials said this week that they were aware of the inconsistency and were in the process of making a decision.
“We’ll be getting a letter out to everybody about how we’re going to handle this,” said Council President Lloyd Martin. “We’ll make it perfectly clear for everyone.”
For their part, concession owners want the council to declare them exempt from the tax, given that they are already paying the city a hefty sum for the right to operate on the beach. The three percent amusement tax is on top of the state’s six percent sales tax as well.
“The city is getting 100 percent of our bid,” Steen said. “Then we’re taxed another nine percent … I think that’s pretty hefty. I would hope you would consider exempting us.”
Ocean City has a revolving system by which it takes bids for the rights of private operators to rent umbrellas, chairs and other equipment on public beaches. The city’s coastline is divided into three zones – south end, north end and mid-beach. Each zone is further divided into parcels, consisting of one block’s worth of beach in the mid and south areas and several blocks on the less busy north end.
Each zone is auctioned at the end of every third year, with contracts lasting for three years with the option to renew for another three years at a 10 percent increase over the first term’s price. The beach concession system netted the city over $800,000 last year.
If the amusement tax continues to be charged to beach stand operators, Edmunds suggested that the council do more to make sure everyone is paying, so no operator is at a competitive advantage during the December bidding process just because they slipped between the cracks at the comptroller’s office.
“When we bid and we win a bid, we’re required to sign a paper that says the mayor and council have the power to look into our credit history and financial records,” Edmunds said.
“Could we include that we have to be up to date on our amusement tax and that a new operator has applied for an account [with the comptroller]?”
“I’m hoping we can include that on our bid forms and contracts,” echoed stand owner Patti Murrell.
If beach concessions were to be exempted from the admissions and amusement tax, the city would naturally receive less income. The tax brought in roughly $1.2 million last year, but since the comptroller’s office does not itemize receipts, there is no way for the town to know what portion of those proceeds is coming from beach concessions, according to city Assistant Finance Administrator Roger Baskerville.