Yacht brokers across Florida are compiling data to convince elected officials to cap the state's sales tax on boat purchases at $18,000, a move they say will help keep large yachts -- and their money -- in Florida.

"Every time we sell a boat, the first question the broker asks is 'so what do you want to do about tax?'" said Jason Dunbar, a sales broker with Luke Brown in Ft. Lauderdale.

Then, what usually happens, he said, is a lawyer will create a foreign corporation to "own" the yacht in some tax-friendly district such as the Cayman Islands or the Marshall Islands, and the closing of the sales deal will take place off shore somewhere to avoid Florida's 6 percent sales tax.

All that paperwork, lawyer's effort, sales surveys, etc. end up costing the owner about $20,000, Dunbar said, a fraction of the tax the owner would pay in Florida on a new yacht worth $5 million or $10 million.

"There's no easier movement of tonnage than a boat," Dunbar said. "This is so easy to float out of a taxable district. So he says, 'Call my lawyer. I want to pay $20,000; I don't want to pay $200,000.' It's as simple as that.

"Until the past few years, that method of buying/selling yachts was the accepted way of doing business. But then several states close to Florida began changing their sales tax rules to draw some business north. 

"There are two kinds of ports: ports of convenience and ports of necessity," Dunbar said. "South Florida was the rare combination of both, but that's gone now. Yachts no longer have to come here. They can go to North Carolina to get work done, or to the Bahamas, or even St. Maarten. The competition has crept up on us and the product is disappearing.

"Georgia charges boats 3.5 percent sales tax. South Carolina's 5 percent sales tax is capped at $300 for boats. And North Carolina charges 3 percent sales tax for boats, capped at $1,500.

 "We encourage them to leave," Dunbar said of Florida. "We don't have to do that. We can make ourselves competitive with other taxable states and nationally. So we've hired a lobbyist and we're collecting data. We want to know: when do boat owners exercise their right to move their yacht to avoid taxes?"

As chairman of the Florida Yacht Brokers Association's legislative affairs committee, Dunbar has been working with statisticians to collect data from 15 brokerages across Florida in late December and early January.

"They asked, in the past 12 months, what did your boats sell for, did they pay the tax or do a foreign flag?" he said. Results, including an executive summary, was expected in late January. "We're trying to determine at what price does a yacht sell for the owner to stop paying the tax."

FYBA members also have been working with lobbyists and meeting with elected officials to gain support of a tax cap bill.

"My goal, I want to do this job for the next 20 years," Dunbar said. "When a boat domiciles out of Florida and flags foreign, it has to leave our waters, and the chance of getting it back diminishes."

And that impacts everyone, not just brokers.

"Unfortunately, I don't think other segments of the industry realize how much business is lost because of the way the taxes are," said Graeme Lord, fleet manager at International Yacht Collection in Ft. Lauderdale. " I would say 50 percent of potential business is lost because of it. It's a big deal.

"Where we really lose is on refits," he said. "An owner buys a boat and before he even uses it, he tears it apart. Those first six months are critical. That's the sweet spot for refits.

"Florida did change its tax law last year to give yachts 180 days (an extension from 90 days) in state waters after a sale without paying taxes, as long as the vessel was in a repair yard.

"Those 180 days are better, but it just delays the inevitable," Dunbar said. "All our legislation is designed to make them leave. ... I don't want to give these guys a break. I just want to get a piece of it. I want to keep that money in my state, and in my town."

The effort to cap Florida sales tax for boats started last year in House Bill 469, the Aviation and Maritime Full Employment Act. That bill would have capped taxes on boat and plane sales at $24,000. 

It faced resistance from Central Florida, mostly the black caucus representing the area south of Orlando in the sugar area. So FYBA invited the head of the black caucus, Rep. Perry Thurston Jr., to one of its monthly shows at Lauderdale Marine Center. 

"Mr. Thurston got it," Dunbar said. "It wasn't about big white boats and their owners. He came into the shipyard and saw all the workers. And he asked great questions."

Within 36 hours, Rep. Thurston had amended the bill to cap it at $18,000 and it passed the house unanimously. The bill went to the Senate but didn't get voted on.

"They were facing a budget with a $5 billion deficit," Dunbar said. "Senators focused their attention on that, and rightly so. They had bigger issues to deal with."

So they are trying again.Florida's congress is in session from March 2-April 30. Dunbar and FYBA, working with marine industry associations across the state, expect to have statistics that prove the cap will stop the exodus, keep business in the state and therefore retain jobs, the key to successful bills.

The marine industry employs more than 220,000 people in Florida, more than half of them in South Florida.If approved and passed by both houses of the state legislature, and signed by Gov. Charlie Crist, the tax cap would take effect July 1.

About the Author

Lucy Chabot Reed

Editor

Lucy Chabot Reed is editor of The Triton.