ABC 2014: Cobalt CEO talks taxes and ethanol with Kansas representative

Posted on Written by Reagan Haynes
Cobalt CEO Paxson St. Clair meets Tuesday with U.S. Rep. Lynn Jenkins, R-Kan., in Washington.

Cobalt CEO Paxson St. Clair meets Tuesday with U.S. Rep. Lynn Jenkins, R-Kan., in Washington.

WASHINGTON — A flurry of activity this week on Capitol Hill placed the interests of the marine industry squarely in front of the Congress that represents them.

During one meeting Tuesday, U.S. Rep. Lynn Jenkins, R-Kan., sat with executives of Cobalt Boats, which operates in Neodesha, Kan., to discuss some of the issues the company faces.

After some gentle ribbing about whether Kansas State or University of Kansas teams were superior, Jenkins and the Cobalt group had an opportunity to discuss issues that directly affect the company’s business.

“We were down to 240 people from 800,” Cobalt CEO Paxson St. Clair told Jenkins in a closed-door meeting Tuesday that all parties allowed Trade Only Today to sit in on. (Most constituent meetings are closed to the press.)

The company is now back to 600 employees and might be adding to that number in the foreseeable future. “There are just a couple of issues we see as potential roadblocks,” St. Clair said.

As he urged Jenkins to consider co-signing legislation that would amend the Renewable Fuel Standard, St. Clair emphasized that the industry is not opposed to ethanol, but that marine engines are unable to handle blends higher than E10.

Next he discussed the Business Activity Tax Simplification Act.

“It’s trying to establish fair rules,” St. Clair said. “I’m still going through discussions with Nebraska because we have to declare there.”

St. Clair and Bill Wallisch, of Cobalt, told Jenkins that conducting warranty work or having dealers in another state is obligating Cobalt to pay taxes there, even though the company does not have a physical presence in that state.

“Manufacturers understand that if we have a physical presence in New York, then we should have to pay taxes there,” St. Clair said. “It’s just very costly to have to file taxes in 40 different states.”

This issue was big for Indmar, too, CFO Wes Holmes told Trade Only during an industry breakfast earlier on Tuesday. “We drive through a lot of states,” Holmes said of the Millington, Tenn., company. “For states to tax you when you don’t have a presence there is not a good deal. We pick up engines from manufacturers, bring them back to Tennessee and then deliver them all over the U.S. So we’re running our trucks through a lot of states.”

It was a point St. Clair echoed as he spoke to Jenkins. If every state that Cobalt sells boats to or has a dealer in decides to make the company pay taxes there it would be an administrative nightmare. Already it is getting unwieldy, he said.

Although the code is not new, as states are increasingly looking for revenue sources in a strained economy, more are requiring companies such as Cobalt to file there even without a physical presence, St. Clair said.

“We’re sending tax dollars to other states that should be staying in Kansas,” St. Clair said.

“I want to look at the language in that bill,” Jenkins said, nodding and gesturing to a staffer who scribbled down notes.

When the Cobalt team expressed appreciation for her concern, Jenkins replied: “You are good to the state of Kansas, and we appreciate it.”

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