New Taxes May Hit Sailors In The Pocket, At The Marina


December 05, 1990|By Nancy Noyes

Many of us don't think too often about the health and well-being of the national and local marine industry that makes it possible for us to enjoy our time in boats.

Over the past few weeks, however, it has become very clear that not only the marine industry but also boating consumers -- boat owners, especially -- are being singled out systematically to bear an increasing burden.

By now, the new federal excise tax of 10 percent of the amount over $100,000 for boat purchases, and the graduated annual Coast Guard user fee ranging from $25 to $100 based on boat size are old news to most of us.

Now, however, the state of Maryland is proposing to hit us again, both directly and indirectly.

The most direct hit is the 2 percent annual personal property tax on boats proposed in the report from the Linowes Commission sitting on Gov.

William Donald Schaefer's desk.

Although exact administrative regulations and procedures have not been spelled out by the report, the new tax proposal should be of great concern to every Marylander who owns or hopes to own a boat.

"The 2 percent personal property tax is the most potentially dangerous of all," said Interyacht's Alan Hamerstrom, who until last month was president of the Yacht Architects & Brokers Association. "If a person bought a new boat for $200,000 and kept it in Maryland for 10 years, his total taxes over the period could be as high as $70,000 if the boat was one which held its value well."

Mick Blackistone, executive director of the Marine Trades Association of Maryland, said MTAM already has written to the governor and key members of the General Assembly. It is mounting a coordinated write-in campaign, including yacht club associations, yacht brokers associations, yacht charterers organizations and the Chesapeake Bay Power Boat Association, aimed at persuading Governor Schaefer to withdraw the additional tax on boats from the Linowes Commission report package before it reaches the General Assembly. The issue needs to be watched closely in case it can't be stopped at that level.

"There's also a 5.5 percent sales tax proposed on services, which, of course, means labor," Blackistone said.

These are the proposals that consumers will feel directly in out-of-pocket costs of buying and maintaining a boat. But they also have a serious, if less immediately obvious, effect on the kinds of choices boaters are able to make, the selections of products and the quality and range of services available, because of their impact on the marine trades.

Similarly, what seems only to affect the marine industry has an impact on boaters. A bit farther afield from consumers' checkbooks is another proposal, put forth by the state Department of Licensing and Consumer Affairs and the Department of Natural Resources.

New regulations recently have been issued to increase the bond that must be posted for boat dealer licenses.

"The way they figured the bond was to take a dealer's annual volume of sales, divide it by 12 to get the average monthly figure, and then multiply it by 2 to get the amount of the bond," Blackistone said. "It's a surety bond which says that if you go out of business the bond protects the state from losing the excise tax you might not have paid before you closed."

On the face of it, this may not sound unreasonable, but from a practical point of view it can be devastating to a dealer.

"The DNR didn't know, for instance, that the premiums for this type of bond had already doubled," Hamerstrom said.

Although the sales excise taxes are supposed to be paid within 30 days, Hamerstrom said, "I think the theory the DNR has is that if your business is starting to get shaky, then you will use the money you've collected for the taxes in whatever way you have to to keep going and think of excuses until you can come up with the taxes you owe or you go out of business.

They said that last year they lost $100,000 to businesses that closed without paying the taxes they owed, but that's really just a drop in the bucket in the overall picture."

Both Blackistone and Hamerstrom agree that the new bond regulations will penalize unfairly stable and responsible businesses by making them pay much higher bond insurance premiums and by forcing them to undergo complex and difficult financial scrutiny to persuade bonding insurers to cover them.

"For bonds over $10,000, you need an in-depth financial analysis by the insurance company before they will issue a bond," Blackistone said.

"There's a chance that maybe some dealers can't even get the new bonds at all. Theoretically, we could lose some dealers because they can't meet the new bonding requirements."

Hamerstrom said, "It's one more prop being kicked out from underneath the boat dealers and servicers. It will make it more difficult for the consumer to get what he wants. Our frustration is such that almost anything we say right now is going to sound hostile, when what we really need is to find some way to work together on this problem. After all, where is government without businesses?"

And where are the consumers without healthy marine businesses?

Blackistone and other activists in the marine trades are working on the new bond requirements, as well as on the state tax proposals. The success of their efforts will have an effect across the boating community, for businesses and consumers alike.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.