By Jeff Erdmann
The state of Florida’s major tax policy change to cap sales tax on yachts at $18,000 was conceived to stimulate Florida’s maritime industry, its 220,000 jobs and Florida’s overall economy by keeping more boats in Florida.
By competing with the lucrative financial incentives of offshore yacht ownership and registration, Florida will collect additional much-needed tax revenues for our state rather than losing those dollars to other more competitive states and offshore jurisdictions to legally avoid paying Florida’s 6 percent full tax. Paying the capped tax at $18,000 allows yacht owners to remain and enjoy their boats in Florida waters – a win-win for all.
The sales and use tax remains at 6 percent but places a first-ever Florida cap of $18,000 on boat sales or use tax, regardless of size and price tag.
To fully understand the benefits I will lay out how we arrived at the cap amount.
The sweet spot – the amount of tax a buyer will pay to any state or nation – was determined by looking at the competition and a survey of what price buyers exercised their right to pay another taxable jurisdiction to legally avoid Florida sales tax. FYBA commissioned the research firm of Tom J. Murray to compile the data used and presented to state legislators. The study clearly demonstrated that $18,000 and higher was the threshold where 63.4 percent chose to pay someone other than Florida.
With the cap, it’s estimated the state could collect $17.2 million in additional tax revenue from boat sales, compared to the $1.5 million that’s currently collected on sales over $300,000. (That’s right. Florida collected only $1.5 million in sales tax revenue on vessel sales over $300,000 in 2009).
The cap will produce a significant increase in tax revenue for Florida, while generating sales, creating jobs and new business for people who work in marine related businesses, and an incentive for our clients to stay in Florida.
With more boats remaining in Florida year round, money spent for goods and services stays in Florida, including registration, legal advice, dockage, repairs, painting, decorating, upgrades, equipment, maintenance, groceries, car rentals, restaurants, hotels, etc., that yachts consume, not to mention that businesses hire state residents to perform these services.
Florida’s entire economy benefits from this bold change in tax policy.
Because there are many scenarios and individual circumstances of various owners, this is not a one-size fits all fix, but here are some facts to consider for purchasers or owners of vessels valued at more than $300,000:
1. U.S. buyer from Florida can pay $18,000 capped tax and keep his boat in Florida.
2. U.S. buyer from out of Florida can pay $18,000 capped tax and stay in Florida.
3. U.S. buyer from out of Florida can pay $18,000 capped tax and get $18,000 credit toward his/her home state’s sales tax.
4. A non-U.S. buyer can foreign flag their vessel as well as pay the $18,000 and register in Florida.
5. Vessels that were purchased out of Florida can pay the $18,000 capped use tax and register in Florida.
6. After a foreign-flagged vessel is imported for sale, the owner can pay the $18,000 to Florida as a maximum use tax.
7. Vessels having paid the capped tax are not required to place a vessel for sale in the Care, Custody and Control of a broker, which restricts owner’s personal use.
The $18,000 sales and use tax cap will create more jobs for the marine industry by driving boat sales and needed tax revenue into Florida while encouraging boaters to buy, store, use, upgrade, and resell their boats in Florida. It’s a win-win-win situation for yacht owners, the state of Florida and everyone involved in the yachting industry.
Jeff Erdmann is president of Bollman Yachts in Ft. Lauderdale and chairman of the legislative committee of the Florida Yacht Brokers Association.
