Anonymous
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California tax bill may steer more megayachts to Mexico
http://www.the-triton.com/news/2004/october/0410-04-Californ...
By Jean Quist
In polite company, yacht brokers and admiralty attorneys call the bill that closed California?s use tax loophole for megayachts ?bad legislation.?
Among their own at San Diego?s YachtFest in mid-September, however, they called it disastrous to the state?s growing megayacht market.
California residents used to be able to avoid paying the state?s 7.75 percent use tax on yachts by keeping their vessels out of state for 90 days.
For a $5 million megayacht, that equates to a one-time tax of $387,500.
Effective Oct. 1, however, they must keep their megayachts out of state waters for a year to avoid the use tax.
?How can I describe the chaos this bill will create?? said William Dysart, a San Diego admiralty attorney and staff commodore of Southwestern Yacht
Club. He spoke to brokers, owners, crew and boatyard operators about the bill?s ramifications at YachtFest.
Expecting an exodus
The initial effect of the bill would be to drive California-resident owners who purchase vessels out-of-state to park their yachts in marinas along
Mexico?s Baja Peninsula for 12 months, Dysart said, sending repair and tourism dollars ordinarily spent in San Diego to Ensenada, Cabo San Lucas and
other Mexican ports.
The impact on captains and crew will be a significant increase in the amount of paperwork required to prove the yacht?s homeport residency and
alternate situs, sailing time, and repair and maintenance confirmations. Deliveries to California may also turn into long-term babysitting jobs as
yachts are docked elsewhere for 12 months.
While legislators hope the tax code revision will generate additional revenue for the state?s stretched budget, analysts and critics of the reform
believe it will actually cost the state revenue, as brokers and owners move to register their purchases in other states and offshore.
Increased paperwork for crew
Even non-California residents are affected by the legislation. Vessels brought into the state for repairs, retrofits or modification during the
12-month period are exempted from the use tax if their owners or captains can prove the vessel is only in the state for repair, that no more than 25
hours of ?sailing time? are logged in California waters moving the vessel to the yard and that the vessel left the state immediately upon work being
completed.
?It is obvious from the bill?s language that it was originally written for aircraft ownership,? Dysart said. ?We don?t ?retrofit? yachts, and very few
private yacht owners keep detailed logbooks.
?And the 25-hour clause is wide open to interpretation,? he said. ?Does it include the time from when a vessel enters California waters to when it
arrives at a boatyard for repairs? In terms of sailing time, 25 hours gets me about halfway to Catalina.?
Dysart recommended that new owners consider foreign-flag registration, such as the Cayman or Marshall islands, since offshore registration is the only
factor the bill does not address. He also suggested using an out-of-state hailing port, because a California port on the stern will raise a red flag
with local assessors.
Sunset in 2006
The bill is set to expire June 30, 2006, though it is believed it will be amended to remain in force and may be revised to include details on how
foreign-flagged vessels might be affected.
?I think we will see some refinement in the language,? Dysart said, ?but as it stands now, it?s going to drive nearly all big-boat business out of the
state.?
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The Sculpin
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Registered: 9-3-2002
Location: Back in the Saddle
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Mood: Riding into the Sunset, looking for a sunrise.
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Uhmmmm...OK.....
Are you saying these yachts should be exempt from tax, or are you giving us an example of how powerful the Escalera Nautica lobby is in California?
heehee
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