Cumberland Times-News

Local News

August 6, 2012

Rising taxes forcing boaters out of state

Delaware is tax-free; Virginia charges 2 percent, $2,000 cap

ANNAPOLIS (AP) — Hamilton Chaney lost a customer last week.

Dr. Richard Rende, a 60-year-old orthopedic surgeon from Steamboat Springs, Colo., told Chaney his 48-foot sailing catamaran would be departing early from Herrington Harbour North, the marina Chaney’s family owns in southern Anne Arundel County.

On June 25, he arrived at the marina, where he pays $1,000 a month to dock. He has spent $30,000 in Maryland — mostly on boat work with different companies, but also at local restaurants and hotels.

But Rende is leaving for Delaware to avoid Maryland’s vessel excise tax, which would force him to pay 5 percent of the value of his boat if he stayed in the state longer than 90 days this year.

“People like me, we spend a lot of money,” he said. “And you’re going to lose all that money if you don’t change (the law).”

The excise tax is becoming more of an issue for an industry struggling to stay afloat. While it might be a mere hassle for some boat owners, others say it’s why Maryland didn’t enjoy rebounded boat sales in 2011.

Brokers say purchases lag in Maryland because residents go to tax-free Delaware or Virginia, where there’s a 2 percent tax and a $2,000 tax cap. Some marina owners blame Maryland’s excise tax for keeping transient boaters away from state docks.

The Department of Natural Resources has shied from decreasing or capping the tax for years. The tax powers the Waterway Improvement Fund, which provides grant money for dredging and other projects to keep the state’s waters healthy.

But some boating advocates say capping the tax, like Virginia did years ago and Florida in 2010, would increase tax revenue for Maryland. In next year’s General Assembly, the Marine Trades Association of Maryland hopes to propose such a bill.

“A tax cap will mean more money, more jobs and more revenue for the state,” Chaney said. “It should have been done eight or nine years ago. But now it has to be done.”

It’s hard to fathom Maryland, home to Annapolis, known as the “Sailing Capital of the World,” would be in the bottom half of the country in total sales for boats, engines, trailers and accessories.

Yet Maryland’s sales fell from $183 million in 2010 to $162 million in 2011, placing the state No. 26 in the nation. In 2008, that number was $248.5 million.

“There was an increase nationally. Maryland was definitely not on that trend,” said Ellen Hopkins, a spokeswoman for the National Marine Manufacturers Association, which provided the sales numbers.

About 4,600 fewer boats registered with the state’s Department of Natural Resources in 2011, compared to 2010. It was the eighth consecutive year the state registered fewer boats than the year before.

Across the bay, Delaware saw an increase in registered boats. The tax-free state registered 57,687 vessels in 2011, up from 56,669 in 2008. The reason for Maryland’s struggling numbers?

“Maybe they should look at their sales tax,” said Vicki Rhodes of Delaware’s Department of Natural Resources and Environmental Control.

Maryland officials have.

When a cap to that tax was proposed in 2005, the DNR and Marine Trades Association of Maryland “could not agree given the potential negative fiscal impacts to the Department and the Waterway Improvement Fund,” according to a 2008 report by a boating industry group.

The task force said a tax cap may be useful to extend the stay of visiting boaters. It recommended the Department of Legislative Services analyze how that and other options might help extend visiting boaters’ stays. But beyond the analysis, the idea hasn’t been explored much.

 

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