This loophole needs to be widened

MIKE WHITEHEAD

Ahoy,

Here we go again with recent newspaper articles about how the rich

avoid paying sales tax on yachts. I have written numerous columns

about offshore deliveries and how they are good for California’s

boating industry. Some people still do not understand the concept,

and now Assemblyman Lloyd Levine (D-Sherman Oaks) wants to “close the

loophole,” as he puts it.

What Levine does not understand, by his shortsightedness of

wanting to just grab any tax, is that the so-called loophole was

created to bring these sales back to California. Democrats want to

completely end the offshore deliveries or increase the time the

vessel has to be out of California from 90 days to one year.

Unfortunately, they have not done their homework and both ideas

are terrible, not only for the boating industry but also for tax

revenues. I want everyone to think back to ugly effects of the 10%

luxury tax and how that tax virtually killed the boating industry.

Let’s examine taxing a yacht sale, which is equivalent to imposing

a 7.75% (in Orange County) luxury tax. The price of boats have

increased so that 40-footers are selling for half a million dollars

and 50-footers can easily sell for a million. Therefore, if I

purchased a $1-million yacht, then I would pay an additional $77,500

in sales tax.

Hey wait, I can purchase my boat in Washington, Texas, Florida or

over the Internet, so I will not have to pay an additional $77,500.

That is just good business sense.

However, the major problem of purchasing outside California will

be the net loss to our local economy from the loss of jobs, marina

rents, fuel purchases, electronic sales, restaurants and much more.

Let’s not forget the bottom cleaners like mechanics, electronic

technicians, captains, cleaning crews and others who make their

living by servicing these vessels. They will lose, and in return, the

tax revenue will lose.

When someone buys a $1-million yacht, they will then rig and equip

that vessel with tens of thousands of dollars worth of additional

items, and they will spend money around the town, eating and

shopping.

Now, let’s look at this dumb idea of keeping your vessel out of

California for one year, an increase from the current 90 days. Levine

wants to directly divert our jobs and money to other states and

Mexico for one year. In 2000, California’s total boating impact on

the gross state product was $16.5 billion, boating contributions to

state and local tax revenues were $1.6 billion, and boating

contributions to state employment (direct and indirect) were 284,060

jobs.

Every day that vessel is out of California is another day that

that vessel is not contributing to our local economy. I think the

offshore delivery code should be modified so that you do not have to

take your vessel out of the state at all, because that law is helping

other states and Mexico.

Also, these vessels are subject to property tax. So at 1%, a $1

million dollar yacht pays $10,000 annually. Remember that property

tax is not collected when the vessel is out of the state. Have you

ever noticed why we do not have many $15 million or $30 million

dollar yachts in California? The property tax for a $15 million yacht is $150,000 a year, so I keep my yacht in Florida behind the house I

purchased with the money I saved from not having to pay property tax.

TIP OF THE WEEK

Deputy Steve McCormick from the Orange County Sheriff’s

Department’s Harbor Division, e-mailed that there will be another

boat auction today at the Harbor Department, 1901 Bayside Drive. The

viewing period is from 8 to 9 a.m. with the bidding beginning at 9

a.m. There are approximately 19 boats -- from kayaks to a 28-foot

Owens. Detailed information is on the Harbor Resources section of the

City of Newport Beach website.

Recognized as the #1 boating talk radio show in the nation, “Capt.

Mike Whitehead’s Boathouse Radio Show” airs every Saturday from noon

to 1 p.m. on KCBQ-AM (1170). You can join me, Chandler Bell and Eric

Hovland on my radio show by calling the listener line at (888)

344-1170 and you can listen worldwide at https://www.

BoathouseRadio.com.

* MIKE WHITEHEAD is the Pilot’s boating and harbor columnist. Send

him your harbor and marine-related thoughts and story suggestions by

e-mail to mike@boathousetv.com.