In July, 2010 we discussed the fact that Florida had passed a tax cap limiting sales tax on boats to a maximum of $18,000. Under Florida’s 6% scheme, that meant that boats of more than $350,000 could begin to realize tax savings, and big boats could really obtain significant savings. Prior to the tax cap, Florida had a thriving offshore registration industry (where boats were flagged to offshore nations, and brought back to Florida under a cruising permit). Offshore flagging was expensive to set up and maintain, and my prediction was that offshore flagging would be much less popular under the cap. The original article — which also discusses Florida’s basic tax scheme — is here.
Florida’s Marina Industry Association and Yacht Broker’s Association were integral into getting the tax cap passed into law in 2010. They effectively made the argument that capping taxes would bring more big boats to Florida and thereby increase work for brokers, yards, marinas, restaurants, etc., and it would probably increase tax revenue as well. Legislative analysis indicated that tax revenue would go down in the first year after passage. On March 1, 2012, however, they released the first study of the effects on tax revenue, with the study being conducted by Thomas J. Murray and Associates, Inc. The study found that direct tax revenues increased as a result of the tax by $13.46 Million. It also found that the average sales price for boats closed in Florida increased to $907,002 — nearly twice the pre-cap average, and that the percentage of sales on which no tax was collected dropped dramatically.
In the press release issued by the MIA and Florida Yacht Brokers, the exact methodology of the study is not laid out, and clearly there is a strong incentive to justify the law. Even so, however, even a very modest increase in tax revenue would be a major gain when one factors in the additional boats that would remain in Florida each year, and the revenues they spin off to marine businesses. The $13.46 Million figure found in the study indicates that 747 more boats paid tax under the study than would have been expected to pay under the old scheme. Florida’s legislators should be applauded for their forward thinking on a politically difficult tax question — and it will be interesting to see if other states follow suit.