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Sales tax cap works in Florida

Kudos to the Florida Yacht Brokers Association, first for pushing positive legislation and, second, for taking time to show that it works as predicted.

Like the recent victory in California (see Dealer Outlook on Sept. 24) that stopped the boater’s Harbor and Watercraft Revolving Fund from being hijacked for non-boating uses, the Florida Yacht Brokers Association offers still another illustration that getting lawmakers to pass pro-boating legislation isn’t a pipe dream.

Research conducted  by the Florida Yacht Brokers Association in 2009 revealed Florida’s marine industry was losing business to nearby states and/or foreign countries with lower or no sales and use taxes. So the state was also losing potential revenue. In testimony before the Florida Legislature, the Florida Yacht Brokers Association’s public affairs chairman Jeff Erdmann argued that the state’s existing 6 percent sales or use tax was keeping larger vessels out of the state and Florida’s $17 billion marine industry that employs more than 200,000 Floridians was losing business.

The result was passage of a bipartisan bill in 2010 that capped the state’s sales/use tax on boats at $18,000. Since then, the number of larger recreational vessels registered in the state has done exactly what the Florida Yacht Brokers Association told lawmakers it would — it climbed.

The latest analysis of Florida boat registrations by the Florida Yacht Brokers Association shows the number of 65- to 110-foot boats registered has increased 28 percent from 807 in 2010 to 1,032 in 2012. In addition, the number of yachts over 110 feet rose by 7 percent, up for the first time after annually falling since 2007.

“The overall increase in larger vessels (65-foot plus) registered is especially significant as the number of boats registered under 65 feet declined during the same period,” Erdmann says. “Equally important, with superyacht expenses averaging $4.75 million per year for everything from fuel to crew salaries to maintenance and repair, increasing their presence in Florida’s waters was a top priority.”

There’s a twofold bottom line in all this. First, while Florida is somewhat unique in its ability to attract “superyachts,” it’s not unique in pursuing legislation that can enhance the boating industry. In recent times, several state marine trade associations have been very successful in gaining favorable boating tax or growth legislation, among them Ohio, North Carolina, Michigan and Rhode Island, to note a few. Indeed, every marine trade group should have a list of pro-boating business legislation and getting it done should be among the the organization’s highest priorities.

Second, every dealer, marina operator and local supplier to the industry should be an active member of their local marine association. If you never get anything else for your membership dues, positive legislation that helps grow your business will be reward enough.

Comments

6 comments on “Sales tax cap works in Florida

  1. Lon Mc Closkey

    Norm, thank you for your article. The sales/use tax cap applies to both new and used boats. This law has been huge boost for brokers and dealers and the state coffers. Buyers have saved as well and are spending their savings at the many boat yards and marinas therefore maintaining and creating jobs.

    The Florida Yacht Brokers’s Association has approximately 1100 members and its board of directors is made of up 11 volunteer yacht brokers and paid staff of three. We have reciprocal membership with other associations around the country proving that there is strength in numbers when it comes to working with legislation and growing business. For membership information, contact http://www.FYBA.org or 954 522 9270

  2. AnonymousBob

    So, 1032 boats x $18,000 = $18,576,000 in tax revenue. 807 65-100 ft boats with an average value of, say, $750k x 6% = $36,315,000. A 27% increase in the number of registrations equals a 48-49% DECREASE in tax revenue. Where’s the good in that? You’ve automatically decreased the amount of funds available to maintain the marine environment infrastructure while simultaneously increasing the demand on the system. Where is the benefit? Please provide some better data, namely, financial, that indicates this move was a good thing. Believe me, I’m all for a healthy marine market in Florida, but something smells fishy.

  3. Jeff Erdmann

    AnonymousBob, Thanks for your interest & question.
    Before the Tax cap was passed an analysis predicted a LOSS of $1.5m in revenue.
    A follow-up study of the first year revealed revenue collections of $13.46m, an INCREASE of nearly 10 times on the taxes collected.
    The 6% unlimited sales tax drove large boat sales out of Florida to more competitive states & countries (0% sales tax – $1500 capped) which Florida received NO tax revenue.
    Additionally large boats spend on average 13% of their value during the first year & 10% per annum thereafter creating a huge sustainable economic impact with tax revenues for Florida & its businesses that can not be overlooked.

  4. Nicholas Scherb

    AnonymousBob,

    An additional benefit not mentioned is that the boats that were previously foreign flagged hired a lot of foreign crew, these “Florida” flagged boats employ mostly Americans.

    Foreign flagged vessels generally need to clear out of the country on a yearly basis, while out of the country the are not spending money within the United States.

    The net tax gain cannot truly be measured, but think of the additional federal and sales taxes collected while the boats are in town: crew salaries, fuel, tax on crew and boat purchases, dockage, vendor’s income, etc.

    According to the Marine Industries Association of Florida the economic impact of the marine industry in Florida is 18.5B USD for 2005. http://marinaassociation.org/sites/default/files/free-resources/FL%20Rec%20Marine%20Industry.pdf

    The longer the boats are in town the more they spend, there is a huge trickle down effect on the Florida Economy.

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