By Dorie Cox
A bill to cap state sales taxes on yacht refits in Georgia has stalled in committee in the state senate, but its success in the state house has gotten the attention of Florida’s refit community.
The bill, which overwhelmingly passed the Georgia House in mid-February, would cap state sales tax on parts and equipment during a refit worth $500,000. Florida legislators passed a similar measure two years ago, but its bill caps state sales tax on repairs worth $1 million. If Georgia’s proposed law passes, it would mean that refits half as large as those in Florida would benefit from a tax cap.
For example, a $3 million refit in Florida would pay the state’s 6 percent sales tax only on the first $1 million, or $60,000. A $3 million refit in Savannah would pay, if this bill passes, 7 percent sales tax on the first $500,000, or $35,000.
Under Georgia’s House Bill 125, any parts, engines or equipment above $500,000 that a boat owner spends to repair, retrofit or maintain a boat, would be exempt from Georgia sales taxes. The current Georgia sales tax rate ranges from 7 to 8 percent, depending upon the county.
“Bringing more business into our state creates opportunities for everyone from florists to the local caulking business,” said Ernest Joseph D’Alto, president of Thunderbolt Marine in Savannah, Ga. “We would see growth from carpenters, electricians, mechanics and more. There’s a trickle down to restaurants, renters and drivers, and downtown Savannah will reap rewards with yacht crew here.
“We saw that it served Florida well,” he said. “Everybody’s goal here is to see the bill passed.”
The bill potentially “levels the playing field” for shipyard services between Georgia and Florida, said Ryan Chandler, vice president of business development at Colonial Group, the parent company of Savannah Yacht Center that is scheduled to open this summer. This legislation will encourage “significant private investment that is expected to lead to the creation of over 700 Georgia jobs,” he said by email.
“Vessels of this class have their choice of shipyards from anywhere on the U.S. Atlantic coast all the way to Europe,” Chandler said. “As it stands, Florida shipyards enjoy a tax exemption that makes Georgia uncompetitive. HB125 ensures that southeastern shipyards will be competing on the basis of quality facilities and services, not on tax treatment.”
Dania Cut Superyacht Repair in Dania Beach, Fla., benefits from the Florida refit tax cap. It has made the choice of location easier for many owners, said Deanna Tully, the company’s accountant.
“It has proven to be a financial benefit to get yachts to come to Florida when they have been looking at other options,” she said. “We specialize in superyachts, so it has definitely helped with bigger refit options.”
Florida may have a financial advantage now, but if Georgia passes the bill, that could change. James Brewer, head of business development at Derecktor of Florida in Dania Beach and a board member of the Marine Industries Association of South Florida, said industry leaders are paying attention.
“The fact that Georgia is trying to do this means they are following suit,” he said. “It’s all in the name of jobs and work for individual states. Ultimately, it’s the competitive advantage to the client and anything we can do to enhance client experience is positive.”
But he thinks yards like his and others in Florida may still have an advantage.
“We’re in a lucky sort of situation in Florida; it’s location, location, location,” Brewer said. “We’re still the preferred place to be for many yachts.”
Yards in South Florida are not so easy for Georgia to compete with, said David Morrison, one of the managing partners of Taylor Lane Yacht and Ship, also in Dania Beach. He said his yard is working on a yacht refit that could run to $4 million.
“Georgia has to primarily compete with Ft. Lauderdale and Palm Beach,” Morrison said. “Palm Beach has Rybovich, arguably the premier shipyard in South Florida in terms of crew amenities and big boat dockage.”
But the Ft. Lauderdale area, including Dania Beach, still rises to the top, he said.
“While the actual shipyards may lack in crew amenities, we have the one thing they don’t have, that’s Ft. Lauderdale,” Morrison said. “Georgia has to compete with the ease of doing work in Florida and the fact that all the vendors are here, they don’t have to fly in. And these are not just vendors, but great vendors.”
Aside from the South Florida’s yacht infrastructure of provisioning, crew houses, and other services, it is home to premier contractors.
“Everyone is here and they are all good, you have your choice,” Morrison said. “That’s why Georgia is not ready to take business from Florida. They have a lot to compete with.”
And industry leaders want to keep it that way.
“There is not a piece of legislation currently ready, but we have had conversations and are looking at that opportunity this year,” said Kelly Skidmore, public relations specialist with the Marine Industries Association of South Florida.
To organize new legislation requires working with members of the Florida legislature, the group’s lobbying firm and association members for public support, Skidmore said. Phil Purcell, CEO/president of MIASF, was at the Florida state capitol in mid-March for several issues impacting South Florida and was expected to talk about gaining support to lower Florida’s cap.
“It is a difficult year in the legislature, to say the least,” Skidmore said. “But we will work on this.”