OLR Research Report

March 29, 2000





By: Judith Lohman, Chief Analyst

You ask why a boat slip rental may be subject to both the 6% sales tax and the 10% dues tax.

A boat slip rental is subject to both taxes if the entity renting the boat slip is a club, such as a yacht or sailing club, that charges at least $100 annually for membership and is not sponsored and controlled by a charitable or religious organization, nonprofit educational institution, or government agency.

The reason for the overlapping or “double” taxation lies in the fact that the dues tax and the sales tax on boat slips were enacted at different times. Though the enactments were 20 years apart, each time the state was suffering such a severe revenue shortfall that the General Assembly passed an income tax. (The first time, the income tax was repealed shortly afterwards.)

The dues tax was first imposed in 1969 and made permanent in 1971. The 10% tax, which was enacted in conjunction with the admissions and cabaret taxes, applies to dues or initiation fees exceeding $100 paid for membership in any social, athletic, or sporting club. (As already mentioned, certain types of clubs are exempt.) Thus, membership dues paid to private yacht or boating clubs have been taxed at 10% since 1969.

In 1991, the state was once again in need of increased revenues. The omnibus tax and budget act (PA 91-3, June Special Session), passed that year that included the income tax, reduced the state sales tax rate from 8% to 6%. But the act also expanded the application of the sales tax to many new items, including boat slip rentals for noncommercial vessels.

A sales tax on boat slip rentals was also part of every non-income tax revenue bill enacted by the General Assembly in 1991, all of which the governor vetoed. The overlap between the new sales tax and the existing dues tax was not discussed.