THE HARBOR COLUMN:

Ahoy,

The discussion of a sales tax loophole for new yacht sales is in the news again as it is an easy target for politicians to say they will change the law to save the poor. It is not a loophole but a provision written in California’s tax code that if you purchase a yacht in California and remove the vessel out of the state for more than 90 days you will not have to pay sales tax. The law was originally written to bring yacht sales back to California, as well as sales of private airplanes and jets, because buyers simply bought in states with no sales tax.

Politicians report that changing the law to one year would increase sales tax revenue, but this is short-sighted thinking that does not bring the whole industry into account.

I have explained in numerous columns about how the 90-day yacht club is good for California because it generates jobs and sales taxes. California recently temporarily changed the time to 360 days, and during that time, I know of a person who planned to purchase a new 55-foot yacht in Newport. Well, he purchased the yacht in Florida when he found out the 90 days had been increased to a year.

The 55-footer sells for $1.5 million so he would have paid an additional $116,250 in sales tax (7.75% in Orange County), but he purchased it in Florida, saving $116,250. That just makes good fiscal sense.

The major problem of pushing purchasing of yachts outside California is not just the loss of that one-time sales tax, but the actual net loss to our local economy of the whole package. This includes marina rents, fuel purchases, electronic sales, restaurants, hotels, marine retail stores and much more. These ancillary purchases collectively produce more sales tax and jobs in our community. Let’s not forget the loss to local brokers, bottom cleaners, mechanics, electronic technicians, captains, cleaning crews and others who make their living by servicing these vessels. The old saying “penny-wise and pound-foolish” comes to mind.

Tip of the week is stay tuned as next week I respond to comments I have received about the issue of setting speed limits for sailboat races.

Remember to tune in at 11 a.m. Saturday to “Capt. Mike Whitehead’s Boathouse Radio Show” on KLAA-AM (830).

MIKE WHITEHEAD is the Pilot’s boating columnist. Send marine-related thoughts and story suggestions to [email protected] or go to www.boathousetv.com.