I received an email from a loyal reader who is thinking of buying a new yacht to take his family out on the water this summer.
In his email, he asked me if a boat salesperson has to be licensed in California, because he is also looking at boats in other states where the salesperson does not need a license. In addition, he questioned the additional cost of buying a million-dollar yacht in California since California has a high sales tax.
Well to begin answering, a state-licensed yacht broker must oversees all transactions in which a yacht salesperson is involved for either party. The salesperson also must have a license if they are selling a brokerage boat, a used boat under a sales agreement with a dealership. The Department of Boating & Waterways (Cal Boating) issues both the broker and salesperson licenses, after the person passes a written exam.
This is a good regulation that helps to protect the buyer or seller, as Cal Boating can revoke the broker’s license if nefarious acts are proved. Always check to see if the broker and salesperson licenses are current before conducting business with a yacht brokerage.
The sales-tax question is an easier one: just need to do the math.
A million-dollar yacht sold in Newport Beach will cost the buyer an extra $77,500 in sales tax (and an extra $87,500 if purchased in Los Angeles County). If someone buys a boat out of California than they will save money by not paying the sales tax. It really depends on the purchase price whether buying out of state is justified, but the sales tax does realistically shift some higher-end sales out of California.
The bad part is that our local yacht industry loses if the yacht is purchased outside of California. Locally, we will not have the sales tax, of course, plus no shipyard time, no upgrades to the vessel, no rigging, no slip rent, no electronics sales, no dinghy with davit sale, no lifejacket sale, no bottom cleaning, no topsides cleaning, no canvas work, no fuel purchases, and, once again, no local personal property tax for a year.
Other states have seen the light. Florida has capped the amount of sales tax levied on vessel purchases in the state, to encourage more local sales. The Florida Yacht Brokers Association reported in October 2011, “in the roughly 16 months since it became law, Florida’s $18,000 Sales/Use Tax Cap on boat sales has preserved thousands of marine-related jobs and generated millions of dollars in additional tax revenue. In fact, by making Florida a more attractive state in which to purchase and register a boat, the Tax Cap has provided the state’s highly prized marine industry with a much needed economic boost during difficult times.”
The article also mentioned that Florida’s taxpayers have benefited from the Sales/Use Tax Cap as well with more boaters from around the world purchasing and operating their boats in the Sunshine State as opposed to neighboring states or other countries.
Meanwhile, Washington state’s tax code states that the tax levied for watercraft purchases shall not apply to sales to nonresidents of this state.
The money saved by purchasing two states to our north will buy a lot of airline tickets from John Wayne Airport to Sea-Tac Airport, and maybe help purchase additional add-ons to the boat. All of which could have been spent in our local economy, so maybe our state legislators should look to keep the sales in our state.
As of now, the family is seriously considering purchasing their yacht in Seattle, and then they will be cruising the Pacific Northwest this summer with a perfect vacation condo on the water. The good part of this plan for me is that I get paid trips to teach them how to operate their boat. Then, in a year’s time, I will have a downhill delivery bringing the boat to her new homeport in Newport.
And don’t forget: Tune in to the No. 1 boating radio talk show in the nation, Capt. Mike Whitehead’s Boathouse Radio Show, broadcasting coast-to-coast on the CRN Digital Talk Radio syndicated network every Saturday at noon, Pacific Time and replayed on Sunday at 10 am Pacific. Join Chandler Bell and me as we talk about “all things boating.” You can find the station listings, cable TV channels, live streaming on the Internet, and now available are apps to listen to the show for your iPhone, Blackberry, Itouch, Android, Palm, and Windows Mobile at www.BoathouseTV.com or www.BoathouseRadio.com.
Until next week, Safe Voyages!