In the first seven years after the Great Recession, Rick Dieterich found that his Mystic business, Springline Yacht Sales, was struggling. But things started looking up in 2016, and then in 2018 he did a record $3.6 million worth of sales.
With 2019 not even half over, he has done $3.9 million in sales and expects another $600,000 or so in the remaining months, most of which are “pretty dead” for sales.
He said the average sale is in the $400,000 range but called them “working people’s boats,” for which buyers typically take out a 20-year mortgage — as if they’re paying for a second home.
Dieterich notes there are “probably a multitude of factors involved” in the success of the past year or two, but he attributes part of it to the Connecticut General Assembly lowering the boat tax last year. Effective July 1, 2018, the sales tax on boats, boat engines and boat trailers went from 6.35 percent to 2.99 percent.
The rationale was to better compete with Rhode Island, which does not charge any sales tax on boat purchases. In New York, the combined county and state sales taxes means total sales taxes range from 7 percent to 8.875 percent, but only the first $230,000 of a boat’s price is taxable.
Kathleen Burns, executive director of the Connecticut Marine Trades Association, said the organization had been working for four years to get the tax lowered.
The budget proposal Gov. Ned Lamont introduced in February would revert the tax to 6.35 percent, whereas the Finance, Revenue and Bonding Committee revenue bill would keep it at 2.99 percent. Sen. Heather Somers, R-Groton, a passionate advocate for lowering the boat tax, called this a “very wise and thoughtful decision” on the part of the committee, but she doesn’t know what the final budget will look like.
Local boat dealers see positive impact of lower tax
Between the February proposal and the committee’s favorable report on its alternative in May was a public hearing on Senate Bill 877, a bill of revenue items to implement the budget. It was a wide-ranging hearing, with massage therapists, architects, accountants and more testifying to how additional taxes would hurt their industries.
Buried among the hours of testimony on March 15 were several people urging the retention of the 2.99 percent boat sales tax rate.
Burns said average boat sales were up 41 percent per month, marinas reported an occupancy rate increase from 65 to 78 percent, and 85 percent of all dealers hired additional full-time personnel since July 2018.
She also noted the winter season was up 8 percent over previous years, and “winter storage is the driver for off-season work, labor and parts that keeps the workforce employed year-round, avoiding layoffs and unemployment claims.”
Tasha Cusson of the Westbrook new and used boat dealer Atlantic Outboard said her company invested more than $1 million in the business in the past year, something it wouldn’t have done if employees thought the sales tax reduction was temporary.
Both Ron Helbig and Alexa Kangley of Noank Village Boatyard in Groton said if the boat tax is raised again, customers will go to other states — and so will marine industry jobs.
“When we lose boat sales and boat slips to neighboring states, we also (lose) tax revenue from restaurants, hotels, spas, entertainment venues, and more,” wrote Kate Mosley, marina manager of Saybrook Point Marina. “Raising occupancy and boat sales taxes will drive tourists and jobs out of the state, resulting in the overall LOSS of tax revenue.”
While Dieterich didn’t submit written testimony, he said he was at the Capitol wearing his “Don’t sink an industry” T-shirt. Asked about the local legislators who advocated for lowering the boat tax, Dieterich cited Somers, former Sen. Andrew Maynard and Rep. Joe de la Cruz, D-Groton.
Somers wanted the boat tax to be eliminated entirely, to be on a level playing field with Rhode Island, but 2.99 percent was the compromise. She said someone wrote her a thank-you note because he could finally afford a boat for his family. Somers stressed that many boat sales are “not mega-yachts” but ones costing about $20,000.
Don MacKenzie, president of Boats Incorporated in East Lyme, told The Day last week his company grew from 25 full-time employees last May to 29 now, and that his marina is full — a type of growth he hasn’t seen in years.
“It has been so tough competing with Rhode Island,” he said in a written message. “The lower rate has first and foremost kept CT customers in our state, and for those customers that may have been sitting on the fence, they are now buying. Not just has the boating industry benefitted, but so many local businesses have benefitted as well.”
The owners of Reynolds’ Boats in Lyme and the regional brokerage Brewer Yacht Sales also told The Day they’ve seen a positive impact on boat sales from the lower sales tax.
It’s difficult to measure the extent to which the lower tax is having a multiplier effect on others in marine industries. The general manager of Norwest Marine, which offers dock slips and Yamaha parts in Pawcatuck, said he hasn’t seen an impact. The owner of Dodson Boatyard, a service yard in Stonington Borough, said he hasn’t felt any impact from the lower boat tax.
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Image Credit: Gerald Herbert/AP
