Texas House kills, then reverses course and passes bill for tax break on yachts

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Courtesy MarineMax

Courtesy MarineMax

The Texas House of Representatives last Friday appeared to kill a bill that lowers the state tax rate on boats. Then, three hours later, it re-voted on the bill and passed it by a large majority.

According to a story in the Houston Chronicle, House members voted 74 to 68 to kill a proposal that would have capped sales taxes on yachts up to 115 feet at $18,750. On a $1 million boat, that would reduce sales taxes by more than $60,000.

After voting down the bill, legislators reversed course and voted 82 to 55 to pass it. House Bill 4032 had already passed the Texas Senate 25 to 6 as an identical bill. It will now go to Texas Governor Greg Abbott who will decide whether to sign it into law.

State Rep. Ryan Guillen, D-Rio Grande City, told the paper that critics will see his bill as a tax break for yacht buyers. The real goal, Guillen said, is to help the state’s boating industry. Since 2010, when Florida capped sales taxes on boats at $18,000, the boating industry in Texas has suffered. Guillen said owners are buying larger boats in other states to avoid paying the sales tax.

Total boat registrations in Texas dropped from 2016 to 2017 by about 10,000 registrations to 565,000, according to U.S. Coast Guard data.

Boats in Texas are now subject to a 6.25 percent state sales tax, plus local taxes that could add another 2 percent. At 8.25 percent, the sales tax on a $3 million boat would be $247,500. Under Guillen’s proposal, that tax bill would drop to $18,750.

“We are trying to revive the coastal economy,” Guillen told the paper. Boat buyers are going to get their tax breaks either way by going to other states, he added. Texas needs to have a similar tax break in order to compete.

The Texas Marine Industry Coalition has told legislators that the bill is about retaining jobs in the boating industry. If the bill passes, Texas would lose about $2.3 million in sales tax over the next two years, but Guillen said the resulting jobs created would benefit the state more.

“In just a few years we’re going to see the industry improve because of this bill,” Guillen said.

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