Yacht Luxury Sales Tax Now A Law in Connecticut

Connecticut Governor Dannel Malloy signed into law his controversial budget that raises the state sales tax and includes a .65% luxury tax on yacht sales in the state. The original luxury tax proposed was initially only 3%.

Earlier proposals called for removing 4 marine-related exemptions from the sales tax: yacht winter storage fees, labor fees on boat maintenance and repairs, yacht brokerage commissions and credit for trade-in values on boats, were dropped after strong opposition from the Connecticut Marine Trades Association (CMTA) and others in the yachting industry.

Grant Westerson, CMTA president, said the damage to the Connecticut yachting industry could have been worse. “Of the 5 issues affecting the industry, we got rid of 4 of them,” Westerson said. “We’re pleased that we got as far as we did.”

Under the new budget the Connecticut sales tax will increase from 6% to 6.35%. A 0.65% luxury tax will be added on yachts that sell for $100,000 and more, for a total tax of 7%. Mr. Westerson said the message from the association is simple: “We don’t have a 7% luxury tax; we have a 0.65% luxury tax.”

Although the tax difference in dollars and cents to yacht buyers may not be a deal-breaker, Westerson said the perception of a tax-heavy state could affect some buyers.

Referring to the 1991 federal luxury tax (repealed in August 1993) that devastated the yachting industry, Westerson said, “Anyone who’s been in this industry for the last 20 years knows that a luxury tax does not work when you factor in the unemployment benefits paid to laid-off workers.”

The budget is scheduled to take effect July 1, 2011 but is contingent on union concessions or Connecticut employee layoffs to balance it.

Source: Soundings