Can Maryland's Comptroller waive late-filing penalties for a taxpayer just because they have a good track record of filing on time, and can that waiver be done automatically by computer?

Plain-English summary

The Comptroller's Retail Sales Tax Division had for years waived the penalty and interest on one late sales or admissions tax return per taxpayer per twelve-month period, if that taxpayer otherwise had a consistent record of filing on time. The Division wanted to know whether this practice complied with the statutory standards, which allowed a waiver "for cause shown" for sales tax and "good cause shown" for admissions tax, and whether it could go a step further and let its new computer system grant these waivers automatically instead of requiring a manual request each time.

The Attorney General concluded that a taxpayer's demonstrated history of timely filing could properly satisfy the "cause" and "good cause" standards, since the Comptroller had broad discretion to treat a track record as showing the "ordinary prudence" or "reasonable diligence" the case law required, and did not have to make taxpayers explain the individual circumstances of a single late return. The opinion also concluded that automating this waiver for eligible taxpayers was legally permissible and did not change the substance of the policy, but cautioned that switching from case-by-case waivers to an automatic, criteria-based system meant the policy would count as a "regulation," so the Comptroller had to adopt it through the formal rulemaking procedures of the Administrative Procedure Act.

Currency note

This opinion was issued in 1985. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Could Maryland's Comptroller waive a late-filing penalty just because a business had a good history of filing on time?
Yes, according to this opinion. The Attorney General concluded that a taxpayer's demonstrated record of past timely filing could itself satisfy the "cause" standard under Article 81, §365(c) for sales tax and the "good cause" standard under §407(c) for admissions tax, without the taxpayer needing to explain the specific reason for the one late return.

Could the Comptroller let a computer automatically grant these waivers instead of reviewing each request by hand?
Yes, the opinion found nothing in the statute that barred automating a waiver policy already established for a defined class of taxpayers, but it held that switching to an automatic, criteria-based system counted as adopting a "regulation," which meant the Comptroller had to follow the formal rulemaking process in the Administrative Procedure Act first.

Did the taxpayer have to prove they were personally diligent every time they wanted a late-filing penalty waived?
No. The opinion reasoned that once the Comptroller determined "good cause" existed for a defined class of taxpayers, an individual taxpayer only had to show they fell within that class (such as having a consistent filing history), similar to how the Comptroller could extend filing deadlines across the board after a snowstorm without each taxpayer proving they were personally snowbound.

Background and statutory framework

Under the Retail Sales Tax Act, returns were due before the 21st of each month under Article 81, §335, and the Comptroller had authority under §365(c) "to compromise disputed claims" and "for cause shown to remit penalties and interest." Under the admissions and amusement tax subtitle, returns were due by the 10th of each month under §405(a), and §407(c) let the Comptroller waive penalty and interest "for good cause shown." The opinion found that Maryland case law treated "cause" and "good cause" as meaning the same thing, citing Francois v. Alberti Van and Storage Company, 285 Md. 663, 672 (1979), and Merrimack Park Recreation Association v. County Board of Appeals, 228 Md. 184, 188 (1962), so the same legal principles governed both statutes despite the different wording.

Drawing on decisions defining "good cause" in other contexts, including Carter v. State, 54 Md. App. 220, 226 (1983), Madore v. Baltimore County, 34 Md. App. 340, 345 (1976) (quoting the Texas case Lee v. Houston Fire and Casualty Insurance Co., 530 S.W.2d 294, 296 (Tex. 1975)), and Langrall, Muir & Noppinger v. Gladding, 282 Md. 397, 400 (1978), the opinion found the standard generally turned on "ordinary prudence" or "reasonable diligence," a determination within the Comptroller's broad discretion. On the automation question, the opinion noted that "regulation" was defined in §10-101(e)(1) of the State Government Article as, among other things, a statement of general and future application adopted by an agency to carry out a law it administers, and concluded that converting the existing case-by-case waiver criteria into an automatic computerized policy would qualify as adopting a regulation, requiring compliance with the rulemaking procedures of Subtitle 1 of Title 10 of the State Government Article, the Administrative Procedure Act.

Citations

Statutes:

• Article 81, §365(c) of the Maryland Code (Comptroller's authority to waive sales tax penalty/interest "for cause shown")
• Article 81, §407(c) of the Maryland Code (Comptroller's authority to waive admissions tax penalty/interest "for good cause shown")
• Article 81, §335 of the Maryland Code (sales tax return filing deadline)
• Article 81, §405(a) of the Maryland Code (admissions and amusement tax return filing deadline)
• Article 81, §365(b) of the Maryland Code (Comptroller's authority to extend filing deadlines for cause shown)
• §10-101(e)(1) of the State Government Article (definition of "regulation")
• Subtitle 1 of Title 10 of the State Government Article (Administrative Procedure Act rulemaking requirements)

Cases:

• Francois v. Alberti Van and Storage Company, 285 Md. 663, 672 (1979)
• Merrimack Park Recreation Association v. County Board of Appeals, 228 Md. 184, 188 (1962)
• Carter v. State, 54 Md. App. 220, 226 (1983), rev'd on other grounds sub nom. State v. Beard, 299 Md. 472 (1984)
• Madore v. Baltimore County, 34 Md. App. 340, 345 (1976)
• Lee v. Houston Fire and Casualty Insurance Co., 530 S.W.2d 294, 296 (Tex. 1975)
• Langrall, Muir & Noppinger v. Gladding, 282 Md. 397, 400 (1978)
• Bethea v. State, 26 Md. App. 398, 401 (1975)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1985/Volume70_1985.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

Taxation—Sales Tax—Admissions and Amusement Tax—Waiver of Penalty and Interest Charges—Comptroller may Consider Prior Record of Timely Filing as Sufficient Cause for Waiver and may Adopt Automatic Waiver Program by Regulation.

September 23, 1985

Mr. Stephen M. Cordi, Director
Retail Sales Tax Division
Comptroller of the Treasury

You have requested our opinion regarding the Comptroller's authority to waive certain penalty and interest charges on late-filed sales and admissions tax returns.

Article 81, §365(c) of the Maryland Code authorizes a waiver of these charges "for cause shown", in the case of sales tax returns; and Article 81, §407(c) authorizes a waiver for "good cause shown", in the case of admissions tax returns. You have advised that the Division has, for many years, considered a taxpayer's previous record of consistent timely filing as itself evidencing sufficient cause for waiver of interest and penalty. That is, the Division waives, upon request, the penalty and interest charges attributable to one late return within any twelve month period of time, absent other evidence of noncompliance.

Your first question is whether the present practice of considering a consistent record of timely filing as grounds for waiver is in accordance with State law. Your second question is whether implementation of an automatic, computerized waiver of late charges, applying criteria derived from the present case-by-case waiver practice, is permissible.

For the reasons set forth below, we conclude that (1) the present waiver practice is in accordance with State law; and (2) implementation of that practice on an automated basis is permissible, if that implementation follows the procedures for rulemaking in the Administrative Procedure Act.

I
Grounds for Waiver
A. Statutory Standard

Under the Retail Sales Tax Act, returns are to be filed "[b]efore the twenty-first day of each calendar month". Article 81, §335 of the Maryland Code.1 Article 81, §365(c) authorizes the Comptroller "[t]o compromise disputed claims in connection with the tax imposed by [the Retail Sales Tax Act], and for cause shown to remit penalties and interest."

Under the admissions and amusement tax subtitle, returns are to be filed with the Comptroller "[o]n or before the tenth day of each month". Article 81, §405(a).2 "For good cause shown, the Comptroller may waive the imposition of the penalty and interest" otherwise imposed for late-filed admissions and amusement taxes. Article 81, §407(c). Thus, your first question is whether a previous record of timely filing is sufficient cause, "cause" under §365(c) and "good cause" under §407(c), for the waiver of late charges.

Preliminarily, we note that the terms "cause" and "good cause" mean the same thing. Francois v. Alberti Van and Storage Company, 285 Md. 663, 672 (1979); Merrimack Park Recreation Association v. County Board of Appeals, 228 Md. 184, 188 (1962). Thus, although different terms were used in §§365(c) and 407(c), the same legal principles apply to both sections.

B. Application of Standard

"[N]o precise definition of 'good cause' has yet been developed to guide the courts." Carter v. State, 54 Md. App. 220, 226 (1983), rev'd on other grounds sub nom. State v. Beard, 299 Md. 472 (1984) (analyzing the "good cause" requirement for postponement of criminal trials). Nevertheless, a general test of "ordinary prudence" or "reasonable diligence" has been recognized as satisfying the "good cause" standard.

Thus, the Court of Special Appeals quoted with approval the following "clear and logical definition of good cause":

"'The term "good cause" for not filing a claim for compensation is not defined in the statute, but it has been uniformly held by the courts of this state that the test for its existence is that of ordinary prudence, that is, whether the claimant prosecuted his claim with that degree of diligence that an ordinarily prudent person would have exercised under the same or similar circumstances.'" Madore v. Baltimore County, 34 Md. App. 340, 345 (1976) (quoting Lee v. Houston Fire and Casualty Insurance Co., 530 S.W.2d 294, 296 (Tex. 1975)) (emphasis added).

Similarly, the Court of Special Appeals has observed that "cause for postponement under the statute and the rule may be found if the moving party, including the court, has exercised reasonable diligence...." Carter v. State, 54 Md. App. at 229 (emphasis added). A trial court's determination of "good cause" involves an exercise of discretion that is not to be set aside "except in extreme cases of clear abuse." Langrall, Muir & Noppinger v. Gladding, 282 Md. 397, 400 (1978). See also Francois v. Alberti Van and Storage Company, 285 Md. at 672.

In our view, the Comptroller has comparably broad discretion to determine whether a taxpayer has shown "ordinary prudence" or "reasonable diligence" and, hence, has met the statutory standard of good cause. Under one view of the waiver provisions, the taxpayer would meet the "good cause shown" standard by his or her demonstrated record of past timely filing. In other words, that taxpayer will have demonstrated "ordinary prudence" or "reasonable diligence" through a pattern of compliance with the applicable law, and the Comptroller may properly treat one instance of untimely filing as not vitiating that diligent track record.

Even if one were to adopt a narrower reading of the waiver provisions, i.e., that the requisite showing of good cause must be made with isolated reference to the one late return, regardless of the taxpayer's filing history, nevertheless we regard the waiver policy as within the Comptroller's discretion. In effect, the Comptroller has applied his expertise in tax administration to presume that demonstrably diligent taxpayers have "good cause" for one late filing. We do not think that the Comptroller is barred from making that kind of determination of "good cause", applicable to a class of taxpayers. The requisite particularized showing is that the taxpayer falls within the class.3

Obviously, the Comptroller has determined that a previous record of timely filing of returns does constitute cause enough to excuse an isolated instance of untimely filing, without requiring the taxpayer to detail the circumstances giving rise to the late return. We regard this determination as properly within the Comptroller's broad discretion. While it is possible, at least in theory, that the waiver practice could amount to a clear abuse in unusual circumstances, that theoretical possibility alone does not make the practice inconsistent with State law.

Accordingly, we conclude that the Division's practice of waiving, upon request, penalty and interest charges attributable to one late return within any twelve month period of time (absent other evidence of noncompliance) is in accordance with State law.

II
Automatic Application of Waiver Criteria

Your second question, whether an automatic waiver is permissible, under the same criteria as have applied to waivers requested on a case-by-case basis, follows from developments in the Division's data processing capability. The Division is now able to identify automatically all taxpayers who would be eligible for waiver under the prior, case-by-case request procedure.

In our view, the applicable principles are the same, and so is the result: An automatic grant of a waiver is not precluded by the statute. "Good cause" having been determined by the Comptroller for the class of taxpayers who have timely filed for the requisite period, the new computer capability simply allows the good cause to be "shown" automatically, instead of after manual search. Article 81, §§365(c) and 407(c) do not prevent implementation of a system that, we are advised, is more efficient and cost effective.4

However, a change from case-by-case waivers to automatic waivers does implicate a different set of legal requirements: the rulemaking procedures of the Administrative Procedure Act. We believe that the automatic waiver policy is plainly a "regulation", within the meaning of the Act.5 Hence, its implementation must accord with the requirements in Subtitle 1 of Title 10 of the State Government Article.

III
Conclusion

In summary, it is our opinion that the Comptroller's present practice of considering a previous record of timely filing as cause for waiver of penalty and interest charges on late returns of sales tax and admissions tax is in accordance with State law. Implementation of that practice on an automated basis would also be permissible, if that implementation follows the rulemaking procedures of the Administrative Procedure Act.

Stephen H. Sachs, Attorney General
Gerald Langbaum, Assistant Attorney General
Linda Koerber Boyd, Assistant Attorney General

Jack Schwartz
Chief Counsel
Opinions and Advice

1 The Comptroller is authorized by this section "to permit or require such returns to be made for other periods and upon such other dates as he may by regulations specify."

2 The Comptroller is authorized by this subsection to "permit or require such returns to be made for other periods and upon such other dates as may be specified by regulation."

3 The Comptroller's authority under Article 81, §365(b) "[t]o extend, for cause shown, the time of filing" any sales tax return provides an apt analogy. Suppose that a snowstorm paralyzes Baltimore City. Surely the Comptroller has authority to extend the time of filing across-the-board, for all City residents. Any given taxpayer need only show that he or she is a City resident, i.e., within the class for which "good cause" has been determined. The taxpayer need not show that he or she was personally snowbound.

4 Although determinations of "good cause" are made by the courts on a case-by-case basis, nevertheless previously established criteria may be used as guides for such determinations. Bethea v. State, 26 Md. App. 398, 401 (1975).

5 "'Regulation' means a statement or an amendment or repeal of a statement that:
(i) has general application;
(ii) has future effect;
(iii) is adopted by a unit to:

1. detail or carry out a law that the unit administers;
   ... and
   (iv) is any form, including:

2. a guideline;

3. a statement of interpretation; or

4. a statement of policy." §10-101(e)(1) of the State Government Article.
   See generally 65 Opinions of the Attorney General 396, 404-06 (1980).
   In view of the Division's change to an automatic waiver procedure, we need not consider whether the criteria heretofore applied to case-by-case waivers were themselves a "regulation".