Texas poised to give yacht owners US$2.3m tax break

Calling it “more of a jobs bill” than a tax break, Texas State Senator Larry Taylor’s bill that would cap the amount of sales tax on boats up to 115ft at US$18,750 has moved one step closer to passage, which is expected and could cost the state US$2.3m over two years.

According to the Houston Chronicle, the buyer of a US$3m yacht would save almost US$228,000 in taxes.

Boat sales in Texas are sinking, according to the Senator. “People who buy big boats are buying them in other states,” Taylor said, pointing to Florida and others that offer tax breaks on yacht sales.

In 2010, Florida capped sales taxes for yachts at US$18,000. Alabama also caps sales taxes for boats, but at US$37,500. Some states, including Delaware and Rhode Island, have no sales taxes on boats over US$1m, according to the Texas Marine Industry Coalition.

Taylor said the tax break could create up to 600 jobs in Texas, citing fuel purchases, equipment sales and repairs that now go to other states where Texans are buying and then docking their vessels.

“The sales tax cap gives them plenty of money to travel from Texas to Florida and keep their boats in marinas there,” said John Preston, president of the Texas Marine Industry Coalition, which backs the bill. “This sales cap jobs bill will allow Texas to get the first bite of the apple, and continue to get tax revenue when products and services are purchased over the lifetime of the boat in Texas waters.”

“It’s not the biggest tax break, but it benefits a very small number of very wealthy people and the folks that sell things to them,” said Dick Lavine, a senior tax analyst with the Center for Public Policy Priorities, an independent research group based in Austin. “It’s another unnecessary loss of revenue.”

Data shows large boat registrations in Texas have remained largely steady over the past two decades. There are currently 3,597 non-commercial boats between 40ft-115ft registered in the state, according to data from the parks and wildlife department. Of those, 1,641 were registered from 1999 to the end of 2008, and 1,532 registered from 2009 to the end of last year. That includes a large spike in registrations in 2004, and the national recession in 2009. It doesn’t include boats that were registered previously and no longer in Texas.

The bill now moves back to the Texas House, where it passed previously in a slightly modified version. The House is expected to pass the measure and send it to Governor Greg Abbott, who is expected to sign the measure.