ELLSWORTH, Maine — Maine boat builders are applauding the recent change in the state’s sales tax that eases the tax burden on out-of-state boat buyers, hoping it will encourage more nonresidents to build, buy, repair and keep their boats in Maine.
The Legislature approved “An Act to Reduce the Sales Tax on Certain Watercraft” during the waning hours of the session, and Gov. John Baldacci signed the bill into law last week. The law provides a 60 percent reduction in the state sales and use tax — from 5 percent to 2 percent — for nonresidents who keep their boats in Maine longer than 30 days. It eliminates the sales tax on nonresident boats that remain in Maine for fewer than 30 days.
The current law requires boats to leave the state within 30 days or pay the full 5 percent sales tax.
“We’re very excited about this,” said Kerri Russell, the operations manager at John Williams Boat Co. in Southwest Harbor and the chair of the board of directors of Maine Built Boats. “I hope this will encourage people to build their boats in the state of Maine and to keep them here for a while.”
The tax exemption also applies to materials for construction, repairs and alterations, and boat builders said that could help boost the coastal economy.
“Boat builders are very encouraged,” said Jane Wellehan, president of Maine Built Boats. “I think this is going to encourage boat owners to keep their boats up here. That can only be good for all of us — the repair yards, the restaurants, bed-and-breakfasts, as well as the boat builders.”
Peter Webb, co-owner of French & Webb in Belfast, said the change in the law has the potential to bring even more sales tax dollars to the state, despite the fact that it reduces the rate for out-of-state customers.
“That 5 percent tax is a pretty daunting number,” Webb said.
In the past, he said, boat owners have found ways to avoid paying the tax — including home-porting their boats in other states that don’t have a sales tax, such as Rhode Island.
“We’ve supported this all along,” he said. “We have a current customer who’s going to benefit from this; he wants to keep his boat here. I think you’re going to see an increase in the taxes the state collects, because there will be more people paying into it under the new law.”
The tax issue has been a factor in marketing Maine-built boats according to Wellehan, who said people often complain that the state is trying to hit them with the high tax. Maine has a lot more boat builders than a state like Rhode Island, and the labor costs are generally lower in Maine. The tax exemption could help encourage customers to build and maintain their boats in Maine and to stay here longer once the project is completed.
“It’s one more tool in our tool belts,” Russell said. “It gives us one more thing to talk about, one more factor we can use when we’re talking to potential customers.”
The change in the law comes at a time when the boat-building industry is beginning to see signs of a rebound and could help provide a boost to the industry.
“The winter has been quiet,” Webb said. “We’ve had some projects, but no new construction. This will certainly help people with the decision to build in Maine.”
The law is scheduled to take effect Aug. 1.