The state Court of Appeals has ruled that the rafting tax is invalid, echoing a decision made earlier by Chancellor Jerri Bryant based on the federal Maritime Act of 2002. The chancellor later accepted the county’s contention that rafting outfitters do not have standing to challenge the tax because they are not the taxpayers, but the Court of Appeals reversed that ruling.

The ruling states that the taxes that were collected from a multitude of unknown customers and any refunds belong to the customers, not the outfitters. The Court of Appeals directed that the refund amounts be held by the county pending claim by any of those customers. If unclaimed after one year, the money shall be assumed abandoned and is to be paid to the state treasurer for disposition in accordance with state law. The county is to pay the costs of the appeal.

The ruling does not address tax money that may have been collected but not paid to the county. While outfitters paid taxes “under protest” for several years, most have not made any payments in the past few years. The amount paid under protest from 2002 to date amounts to $1.3 million. County Executive Mike Stinnett said he did not know how much of that was paid after the Maritime Act went into effect.

Stinnett met with former County Attorney Denny Mobbs and new County Attorney Jimmy Logan last week to discuss options. Logan will be meeting with the county commission at their regular meeting on Thursday. Stinnett said the county has 45 days to decide whether to ask the state Supreme Court to hear an appeal. If there is no appeal, he said, the county will have to come up with the money once the amount is determined. He noted he did not know how to pay the money back to customers unless they can verify payments.

On the issue of standing, the Court of Appeals disagreed with the county’s argument that the rafting tax law only allows outfitters to challenge assessments, not the legality of the law, which first went into effect by Private Act in 1981 and has been amended several times. The chancellor had agreed with the county, saying the customers were required to make the payments and the outfitters were only tax collectors.  The Appeals Court said this would normally be the case but wording of the Private Act indicates otherwise. The Court further said the outfitters also have standing as taxpayers because the penalty for non-payment falls on the companies, not the customers.

With that established, the Court of Appeals then ruled that the November 2002 amendment to the federal Maritime Act prohibits non-Federal interests from imposing taxes or fees on vessels on navigable waters. The county had argued that the Ocoee should not be considered a “navigable waterway” and rafts should not be considered “vessels” for the purposes of this law, pointing out there are no definitions in the law. The Appeals Court said there is no reason to believe that Congress intended different definitions from the natural and ordinary meaning of the terms. It also disagreed with the county’s argument that Congress did not intend to pre-empt a non-federal tax already in effect, noting that state legislation is subordinate to federal law where there is a conflict.

For years, the amusement tax was adding $300,000 - $400,000 to the county’s general fund, but it was taken out of the anticipated revenue in 2006 after outfitters stopped making payments.

The rafting tax was created by Private Act in 1981, with the agreement of the outfitters. At the time, it was identical to the sales tax and outfitters were made exempt from sales tax. The tax was later changed to 10%, then to a flat $2.50/person to make it easier to calculate. When water releases began on the upper Ocoee, the commission agreed to forego tax collection for a while to help the industry grow.

The first legal challenge to the tax came from Ocoee River Rats more than 10 years ago after the county filed suit in 1994 for collection of unpaid taxes for 1988-1991. There have been rulings, appeals, and new challenges, with the county coming out on the winning side until the Maritime Act was changed. Chancellor Bryant ruled in 2000 that the tax was constitutional and the Court of Appeals agreed in a ruling in Oct. 2002. The state Supreme Court declined to hear an appeal. The county had begun taking legal action to collect the back taxes, and several other outfitters had filed challenges, but Chancellor Bryant put them all on hold pending the outcome of the River Rats case.

In 2005, the Chancellor declined to hear more arguments about the law’s constitutionality, saying that decision had been made, but she did agree to hear arguments by ten outfitters about the impact of the Maritime Act. She noted that this argument would not apply to taxes due before Nov. 2002.