“Floating Stimulus” Turned Away by State Taxes?

By Lucas Wiseman, August 9, 2013, Vancouver Business Journal

Washington state, the nation’s biggest producer of super yachts, is building boats but wasting their potential economic impact, according to Joe Foggia, president of Vancouver-based Christensen Shipyards.

In Washington, a boat that is registered as an LLC, as most super yachts are, can only stay in the state’s waters for 60 days before needing to pay a 10 percent tax on the value of the boat. For a Christensen yacht, the boat’s cost can range up to 40 million dollars; a four million dollar tax.

Foggia said this 60-day limit pushes boats out of our waters and toward places like Florida, which has a flat, $18,000 tax on all super yachts regardless of length per year.

“No matter how big the boat is, they all stay in Florida, and they are all spending a ton of money there,” said Foggia.

From Florida, which has become a central hub for 100-plus foot yachts, there is little draw to come all the way to Washington, only to leave after 60 days, Foggia said. The trip from Florida, through the Panama Canal and up the west coast takes roughly a month.

“Washington can become a destination, but it has to be worth it,” he said. “It has to be made a destination so that owners can spend money and not worry about getting their boat out in time.”

As Foggia explained it, to put the potential economic gain from an anchored yacht in perspective, imagine a small town anchored to a dock with every one of the crew and the guests on the boat spending money on tourist attractions, fuel, dinner and provisions every day for a month.

“If you take a 150-foot yacht, [everyone] spends about $150,000 to $250,000 a month,” said Foggia. He estimated that of that, at least $100,000 goes straight into the local economy, adding that yachts act as a floating stimulus package.

Though Vancouver does not have a marina for yachts to dock at, Foggia said super yachts still provide incredible benefits to the local economy.

“On a $40 million project, about 90 percent of that gets put back in our local economy” he noted.

Foggia, who has been president of Christensen Shipyards since 2000, said that in the long run, the state makes more if the yachts stay longer.

“The state is making sales tax off of everything the crew and passengers buy,” he said, money they would not be making if the yachts left to avoid the tax.

A bill was introduced into the Legislature this year to extend the time boats can stay in Washington before paying the tax, but did not go anywhere. House Bill 1366 will be automatically re-introduced for the 2014 session. The legislation is being supported by the Northwest Marine Trade Association.

Washington’s tax on super yachts also applies to boats receiving repairs in the state’s waters. If repairs take longer than the 60 days, the 10 percent tax is added onto the cost of repairs. For something like a new paint job, which can take up to four months and cost half a million dollars, the added cost in taxes drives yachts away.

“Most repairs are never shorter than a month,” said Foggia.

Washington produces on average 19 yachts a year, as opposed to 12 in other states, according to the Superyachts Annual Report 2013 book of orders.

Christensen, Vancouver’s biggest yacht-building company, accounts for about 10 percent of that total, completing one-and-a-half to two yachts a year.

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