ELLSWORTH, Maine — It may be too early to assess the full impact of a change in the sales tax on boats bought by out-of-staters.
But early indications are that the sales tax reduction has increased interest in Maine boats and, coupled with a slowly reviving economy, will have a long-lasting, positive impact on the industry and on Maine’s economy.
The new tax law that went into effect Aug. 1 reduced the sales tax — from 5 percent to 2 percent — on boats bought by nonresidents who keep their boats in Maine for at least 30 days.
The previous law required boats to leave the state within 30 days or pay the full 5 percent sales tax.
Five months is a short time to determine whether the tax change is encouraging sales of Maine built boats. Anecdotal reports, however, indicate it is having a positive effect, according to Susan Swanton, executive director of the Maine Marine Trades Association.
“I’m hearing from a few [boat]yards that it is starting to have some effect on sales they’re trying to close,” Swanton said Tuesday. “They’re telling me that when clients find out that they only have to pay 2 percent, they’re saying: ‘I’ll keep the boat here then.’ And that’s exactly what we wanted it to do.”
Boat builders as a group understood that the higher tax on boats that stayed in Maine after they were built here was running counter to other state efforts to attract people to stay in Maine and spend more, according to Phil Bennett, vice president of sales at the Hinckley Company in Southwest Harbor and a director at Maine Built Boats.
“We lobbied hard to get it down to zero like they did in Rhode Island where they literally revived their boat building business,” Bennett said Wednesday.
The Legislature balked at proposals to abolish the tax on boats, but the 60 percent reduction in the sales tax on those out-of-state boats seems to have lit a little spark in Maine’s boat building industry. That change, Bennett said, is one way for the state to bring money and jobs to the state.
“We need to do more of it,” he said.
The passage of the law in April had an initial effect on some clients, said Kerri Russell, the operations manager at John Williams Boat Co. in Southwest Harbor and the chairman of the board of Maine Built Boats.
“There were a couple of instances, where people were in the deciding stage, where they were waiting to see what was going to happen, and when the law took effect, there was an initial positive impact,” she said.
When one builder told a client whose boat was being built this year that the sales tax would only be 2 percent, the client said, “Great, here’s some other work I’d like to have you do,” according to Swanton.
“That amounted to $50,000 worth of work,” Swanton said. “That’s a lot of money for anybody, but it’s huge for a small company.”
While Bennett acknowledged that it is hard to draw a direct corollary between the sales tax cut and new business for boat builders, he also said it seems the change has had a positive impact on sales.
“People are coming in and buying boats,” he said, noting that Hinckley’s new power boat the Talaria 48 already is selling even before crews have started building the first hull.
“We haven’t even started building, and we’ve already sold three boats,” he said, “and we’ve sold them to people who are probably going to stay around here longer than they would have before.”
Hinckley has rehired some workers, a process that began before the tax change was approved, and the company continues to look for more qualified workers, Bennett said.
Though by no means universal yet, the boost to the boatyards also will benefit a supply chain of marine industries throughout the state.
“When the boat stays in Maine, the work stays in Maine,” Swanton said. “Things like repairs, storage, refits. All of that work will be done here. It’s going to have an impact.”
Russell added that the more boats that are built and stay in Maine, the more that will benefit other peripheral marine businesses, such as marinas, as well as the coastal restaurants and shops in areas where those boaters sail and stay.
“Once the boat is launched, then it’s part of the tourist industry,” she said.