Boaters may get break on sales tax House OKs lowering levy on trade-ins to help maritime industry

March 18, 1998|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

In a move designed to boost the state's maritime industry, the Maryland House of Delegates voted yesterday to give boat buyers a tax break when they trade in old boats for more expensive models.

Supporters said the measure would make Maryland more competitive with other states in the region and would help the industry recover from a sales slump.

"It's the best news we've had in at least 20 years," said Beth Kahr, executive director of the Marine Trades Association of Maryland. "We've finally got a chance to gain parity with our competitors in other states. It's a great economic development initiative and it shows that legislators recognize boating as a major economic force in the state.

"Boating in the Chesapeake is probably premier along the East Coast because we've got the best water, the longest season and so many other things to offer. We just needed an economic advantage, and this bill gives us that."

The bill, which passed the House 139-0, would lower the tax on many boat sales. For example, someone who trades in a $50,000 boat to buy a $100,000 boat would pay a 5 percent tax on the difference in price, which would come to $2,500. Currently, that transaction would mean a $5,000 tax on the full price of the new boat.

Delegates expect their counterparts in the Senate to pass the bill with little controversy in the next couple of weeks.

"I would hope this would be an easy decision," said Del. Charles A. McClenahan, an Eastern Shore Republican. "It's a bipartisan issue with widespread support because of the enormous financial impact it offers. We should be aggressive leaders in this industry."

In 1996, recreational boaters spent more than $1 billion and the marine industry employed about 20,000 people in the state, according to a study by the University of Maryland Sea Grant at College Park.

Boat registrations in Maryland climbed from 190,436 in 1993 to 203,984 in 1996, and most of that 7.1 percent increase occurred in sales of trailered powerboats and personal watercraft. The number of in-water powerboats and sailboats sold decreased by 1.3 percent over the same period, according to the study.

Experts said that decrease can be attributed to a number of factors but that the main one is a short-lived luxury tax passed by Congress in 1990. The tax crippled the boating industry and was repealed in 1993.

In Maryland, the climb back to prosperity has been tough.

Boat dealers say they are at a disadvantage because other East Coast states do not levy such high taxes on sales. For example, North Carolina has a 3 percent sales tax on boats but limits it to $1,500. Virginia has a 2 percent tax and a $2,000 limit. Delaware and Rhode Island have no excise taxes on boat sales.

Maryland's tax system is considered behind the times and is thought to drive some boat buyers to other states.

"When we work at a national boat show, we work a boat with several dealers from other states," said Nancy Cann, president of Crusader Yacht Sales at Port Annapolis Marina. "If I'm sitting next to a dealer from Rhode Island, they have an automatic 5 percent advantage over me.

"Who do you think the buyer's going to buy from? We've missed out on a lot of boat sales over the years. This bill would make a tremendous difference to people in my business and to the state."

Changing the sales tax to provide the trade-in allowance would cost Maryland about $1 million in dedicated waterway improvement funds.

"But everybody's going to profit in the long run," said John Poleck, owner of Sunset Harbor Marina on Norman Creek in Essex. "When people trade up to a bigger boat, they're going to want to buy accessories, services and boat slips. That means I might hire more workers and expand my business more.

"This is great news. Anything the General Assembly can do to make it easier for people to spend their discretionary income on boats in the state is good."

Pub Date: 3/18/98

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