Boaters applaud tax change Trade-in measure cuts levy on owners who buy bigger models

July 06, 1998|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

A state tax law that went into effect last week has boat lovers smiling all the way down to their deck shoes.

Just ask Brent Cohn, who had been eyeing a 35-foot Avanti cabin cruiser -- equipped with two staterooms, teak steps, a full galley and sprawling lounge -- and was waiting for the right moment.

The moment came Wednesday, when the new trade-in law gave Cohn an extra incentive to swap his old 27-foot Bayliner for the new yacht: a savings of more than $1,100.

Across the state, many boat owners are taking advantage of the barely week-old law that gives buyers a tax break when they trade old boats for bigger, better and more expensive models. For many buyers, the savings are thousands of dollars.

"This is a beautiful thing," said Cohn, a 47-year-old contractor from Owings Mills who docks his $130,000 yacht at Anchorage Marina in Baltimore. "It was worth the wait because now I'm sitting in my beautiful boat and I saved a nice chunk of change. It's a great deal.

"I think more boat owners [would] consider getting newer boats if they knew about this," Cohn said. "Nobody wants to pay taxes twice."

That is exactly the sentiment of the Marine Trades Association of Maryland, which began lobbying lawmakers about 10 years ago to change the tax law.

'On an even keel'

"It means a great deal to us," said Sandy Zimmerman, president of the association. "It puts us on an even keel with surrounding states because the old tax really put us behind the eight ball. People were buying boats in other states to avoid our tax."

Before the new law, buyers had to pay a 5 percent state sales tax on the cost of a new boat, even if they traded in an older model. Now, with a trade-in, buyers pay taxes only on the price difference.

For example, someone who trades in a $50,000 boat for a $100,000 boat would pay $2,500 in taxes. Before, the transaction would have meant a $5,000 tax bill.

In North Carolina, buyers pay a 3 percent sales tax on boats, but the state limits the tax 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.

"The boats I sell are $1 million and up," said Ray Curry, sales manager at Burr Yacht Sales in Edgewater, which specializes in Fleming yachts. "With the old tax, if a customer buys one, in one shot they'll have paid $50,000 in taxes. That was enough to have anyone running to another state.

"I think this will make a tremendous difference for the industry," Curry said.

Widespread benefits

The benefits could be widespread. More boat sales mean buyers will need more accessories, services and boat slips. 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 Maryland Sea Grant College in College Park.

Tom Trainer Sr., owner of McDaniel Yacht Basin Inc. in North East, Cecil County, says he's begun to see benefits from the new law.

"We've sold three boats already," Trainer said Wednesday. "Word is spreading rapidly. I have people flying in from New York who are looking at a 53-foot Carver. That wouldn't have happened so easily a week ago."

At Riverside Marine Inc. in Essex, where Cohn bought his boat, David Baumgartner, the company's president, said he's experiencing similar sales activity.

"We've had quite a few people hold off on buying their boat for about a week so the law would be enacted," Baumgartner said Tuesday. "I've seen three today already. It's not widely enough publicized for there to be a huge rush, but we've already seen it starting."

Even those who haven't yet reaped the benefits say they're sold.

Sales increase seen

"If it's going to lower the overall cost to consumers, it's going to increase sales," said Don Rogers, manager of Gunpowder Cove Marina in Joppatowne.

At Crusader Yacht Sales Inc. in Annapolis, a red-and-white canvas banner in front of the building reads, "Ask Us About the New Tax Benefits for Trade-Ins."

"Our customers are all talking about it," said Nancy Cann, president of Crusader. "They're planning for it. When you're in a decision-making process, there are always good points and bad points. This is a good point, and I can use all the good points I can get. It'll definitely keep more boat sales in the state."

Jim Schiff is a good example. The Harrington, Del., resident said he's thinking about buying a $330,000, 440 Trojan Express at McDaniel Yacht Basin because of the new tax law.

$9,500 savings

In 1991, Schiff bought a secondhand boat for $125,000. He traded it in four years later for a $180,000 boat. He paid more than $10,000 in sales taxes for both boats. This time, his trade-in is valued at $140,000, and the new law will most likely save him about $9,500.

"That's real neat," Schiff said. "I'd have to say, that was just unfair to trade in and still pay tax on the full amount. I already paid it on the first one. This definitely is a factor in whether I buy in Maryland or not."

Earle Rowdon is also a believer. He's tickled about the $2,800 in taxes his old Sea Ray Sundancer saved him on a new 28-foot Carver cabin cruiser.

"I think the next step, " said Rowdon, a retired Air Force colonel from Grasonville, "is for the [General Assembly] to consider a similar law that would cover automobiles. Think of how much that could help the Maryland economy."

Pub Date: 7/06/98

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