Tax on boats to recede Monday in Connecticut

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Saturday, June 29, 2013 1:08 AM EDT

Tax on boats to recede Monday in Connecticut

HARTFORD — Boat sellers and their customers are getting a break as Connecticut scales back taxes on boat sales that produced little revenue, but lots of complaints from the industry.

Beginning Monday, boats docked in Connecticut for 60 days or less will be exempt from the sales and use tax and a 7 percent luxury tax will be reduced to 6.35 percent, the rate of the state’s sales tax, on boats costing more than $100,000.

“It has a huge effect,” Dave Pugsley, vice president and general manager at Brewer Yacht Sales, said of the tax. “We’re a small industry, but we’ve been around forever and employ a lot of people.”

The recession and weak recovery hurt boat sales and high taxes “would drive people out of the market,” he said.

Rep. Patricia Widlitz, the House chairwoman of the legislature’s Finance, Revenue and Bonding Committee, said lawmakers two years ago set a 7 percent luxury tax on boats selling for more than $100,000. Boat sellers were telling state officials that in response, buyers were avoiding the tax by negotiating the price to below the $100,000 threshold and bypassing Connecticut for Rhode Island, which does not impose a sales tax on most boats.

Making matters worse for the state, the tax generated only $70,000 in revenue, she said. Widlitz, a Democrat whose district includes the Long Island Sound towns of Branford and Guilford, said she received complaints from boat yards about the tax.

“We were losing business up and down the shoreline,” she said. “It was just as easy to go to Rhode Island.”

The luxury tax still applies to jewelry of more than $5,000, clothing sold for more than $1,000 and luxury cars of more than $50,000, Widlitz said.

Pugsley said the state should anticipate that increased sales due to the tax cut will yield more revenue. Florida capped taxes last year, and he said it helped restore business in the state.

Employment in Connecticut’s boating industry dropped from 12,000 before the recession to 4,500 this year.

Pugsley said business, particularly in the sale of “brokerage boats,” or used boats, has improved as the economic recovery picks up. New boat sales have not rebounded, he said.

Retail sales for new power and sail boats were up 10.7 percent in 2012, said Lauren Dunn, spokeswoman at the National Marine Manufacturers Association.

Boat owners are not rich, she said. Three-fourths of the estimated 17 million boat owners in the United States have household incomes of less than $100,000, keeping them in middle class or upper middle class.

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