Tax Break on Yachts In South Carolina Considered

Last week, 6 megayachts were docked at the City Marina on Lockwood Boulevard, each of them a potential revenue generator for Charleston County in South Carolina. How many of them will pay any taxes, though, is another matter, officials said.

Yachts registered out-of-state are taxable if they are in South Carolina waters for 180 days or more. It’s a difficult law to enforce, however, because on day 179, a vessel can put to sea for a while, then return to a dock in the county.

At that point, the 180-day tax clock starts ticking again. Keeping tabs on which yachts stay put and for how long is part of the problem, officials said.

“That’s what makes it so difficult. The monitoring of it is complicated,” said Keith Bustraan, deputy county administrator.

County Register of Mesne Conveyance Charlie Lybrand suggested Thursday in an email to County Council Chairman Teddie Pryor that the county consider lowering its 10.5% tax rate for yachts to 6%. Megayacht owners would be more likely to pay rather than seek to avoid taxes, and upkeep of yachts could generate local revenue, he said.

Pryor said Friday that Council has directed county staff to research the issue and report its findings at the Council meeting in this Summer.

“I’m really waiting to hear the pros and cons. I want to make sure the pluses outweigh the minuses,” Pryor said.

County revenue is 3% ahead of projections, or about $4 million. Some $1 million of that amount is money the county received for keeping federal prisoners in its jail.

In his e-mail to Pryor, Lybrand said he was forwarding information on yacht taxes provided to him by James Island resident David Coe, who has pushed for county taxation of yachts and large boats.

“It makes sense to me that this new 6% rate should be considered by Council,” Lybrand said.

Seven million-dollar megayachts were on the tax rolls last year, and five with a value of at least a half-million dollars. In 2010, the property tax bill on a $10 million yacht was $277,765.

Lybrand said Friday that council could appoint a committee, including yacht owners and concerned residents, to study the issue and make recommendations.

The 10.5% county tax rate on yachts is the major reason vessel owners either do not pay the tax and hope they don’t get caught, under-value the vessel or just move the yacht or boat to another dock in South Carolina or out-of-state, Lybrand said.

Reducing the tax rate could be better for the county financially over the long run, he said. “You may lose a few dollars the first year of implementation, but the buy-in you would get from this community of tax payers will bring dividends for years to come,” Lybrand said.

There are more than 20,000 boats whose owners receive property tax bills in Charleston County, but the top 50 account for 20% of all the property taxes.

The property taxes levied on boats in Charleston County last year totaled $5.3 million, up from $4.6 million in 2009. Most of it came from high-value boats and yachts.

Marina operators and boat-related businesses have complained that the tax laws drive away some of their most lucrative business to states such as Florida, which has no boat taxes.

Source: The Post & Courier