Connecticut marine industry gains concessions on proposed taxes

Thu Apr 28 2011, 10:56 AM

Most of the tax proposals were jettisoned by legislators, but Connecticut trade officials say its sales tax drives business to neighboring Rhode Island

Connecticut’s marine industry won concessions last week after state legislators decided to reverse course on a spate of new taxes. But the head of the Connecticut Marine Trades Association (CMTA) said that sales taxes on boats still makes his state non-competitive with neighboring Rhode Island.

Under the proposals, Connecticut would have eliminated the existing sales tax exemption for the value of a trade-in boat as well as reinstated sales taxes on maintenance and labor costs for boat repairs. Connecticut Governor Dan Malloy also wanted to levy a property tax on boats and add three per cent to the existing 6 per cent sales tax on new boats costing more than US$100,000.

Grant Westerson, executive director of CMTA, told IBI that his organisation spent nearly US$1m in lobbying costs and marketing efforts to convince state legislators to jettison the majority of taxes. The campaign began in mid-February after the proposals were announced.

“We generated literally tens of thousands of emails and phone calls,” said Westerson. “We talked to one legislator, who wasn’t even on the budget committee, and he had received 250 emails.”

The association set up a website called DoNotSinkAnIndustry.com with updates on the proposals as well as sending out thousands of postcards to boaters around the state.

Under the new budget, the property tax proposal was eliminated, and the sales tax exemptions reinstated. The sales tax on new boats was raised from 6 to 6.35 per cent, and for boats more than US$100,000 the sales tax was lifted to seven per cent.

”We saved Connecticut’s boaters about US$40m when they did away with the property tax proposal,” says Westerson. “And the 7 per cent tax on boats over US$100,000 is lower than what it would have been at 9.35 per cent. But it’s still generating confusion among boaters. Whether it’s a penny or thousands of dollars, the luxury tax is still going to drive business away.”

Westerson says his organization will continue to push for a lower sales tax rate on new boats. “A buyer can just go to Rhode Island, where there is no sales tax on boats, and register it up there,” he says. "They can still use the boat in Connecticut."

Rhode Island legislators are considering adopting a one per cent sales tax on new boats.

National associations like BoatUS even got involved in the Connecticut tax debate, calling on members to contact their legislators. “For Connecticut’s marine industry businesses and employees such as boat mechanics, riggers, marina staff and dealers, these proposals could easily cause boaters to move their boats (and maintenance dollars) to lower cost states like Rhode Island,” said Margaret Podlich, BoatUS Vice President of Government Affairs in a statement last week.