As Hinckley Yachts manager Peter Manion lowered a powerboat into Stamford Harbor on Wednesday morning at the Maine manufacturer’s new boatyard, he took a moment to reflect on Connecticut’s move this month to cut taxes by more than half on new boat purchases.
Hinckley is hiring up in Stamford either way, but Manion says a rising tide of boat sales can only help things further.
Starting in July, Connecticut dealers will charge a 2.99 percent tax on the sales of boats, engines and trailers to transport them, down from the state’s standard 6.35 percent tax, and with boats sold for $100,000 or more having previously having been subject to a 7.75 percent levy.
Boat dealers and related industries had spent years arguing for the tax to be lowered, saying many buyers simply bought and berthed boats in neighboring Rhode Island and New York, costing them both sales commissions and revenue from services they provide during boating season.
The Connecticut General Assembly and Gov. Dannel P. Malloy finally reached concurrence this month, adding the tax break despite attaching a fiscal note that it could cost the state $2.3 million in revenue. Many in the industry believe that deficit will be more than made up by extra sales generated in Connecticut, as well as ancillary revenue from services provided by boatyards.
As a small concession in a big budget, the new tax has yet to get wide notice, but boat dealerships and brokers from Greenwich to Stonington are hopeful it will have a ripple effect starting in July.
“We’re not getting a lot of feedback on it yet,” said Rick Delfosse, business manager with Rex Marine in South Norwalk. “It comes out as a net positive, because (buyers) don’t pay the sales tax, but they pay taxes on storage, fuel and other services.”
‘Booming with boats’
Testifying in February in support of a tax cut, the head of the Connecticut Marine Trades Association said 1,125 boats were sold in Connecticut last year, about 1,900 fewer than a decade prior. Last year, there were 2,300 fewer boats registered in Connecticut, with revenue down 9 percent.
“This is not about the rich,” stated Kathleen Burns, executive director of CMTA, which from its Essex office counts a membership base of more than 330 marinas, dealers, retailers and other entities. “Only 10 of those boats were larger than 40 feet, (and) 574 were under 20 feet. In the Northeast, we are now the only state (that) lost boat registrations and saw declining sales — the only one. It’s got to stop.”
Tax considerations often come up in purchase discussions, according to John Herrmann, a Formula regional sales representative at the Indiana-based boat manufacturer’s showroom at Rex Marine — seldom as a deal breaker but certainly in the context of buyers looking for any possible savings on a major purchase.
“It’s a big deal,” Herrmann said of Connecticut’s revised tax rate. “It’s not a half-point you are talking about here.”
Delfosse believes said his daughter is able to draw regular comparisons between the marine industries in Connecticut and Rhode Island, where she works in the marine industry in Newport.
“People are going elsewhere,” he said. “You go up to Newport, the harbor is booming with boats.”
Rex Marine is among the marinas that have created a boating club as a way to boost interest, with some 200 members availing themselves of 10 powerboats that can be reserved via a mobile app. The early returns have been encouraging, with Delfosse interested to see whether Connecticut’s new tax rate will boost interest further.
“We’ve had two or three people leave the boating club to buy a boat,” Delfosse said. “The bigger boats are selling, but not a lot of millennials are coming into the marketplace, and that’s what we are pushing — to try to get the millennials in.”