November 29, 2011
STATE AND LOCAL TAXES ON THE MARITIME INDUSTRY
By: Judith Lohman, Assistant Director
You asked for a list of state and local taxes applicable to the maritime industry.
State tax laws do not explicitly refer to “the maritime industry.” Thus, this report lists the state and local taxes that could apply to vessels, boats, and marine-related businesses and activities, as well as any specific marine or maritime-related exemptions from those taxes.
Property taxes apply to maritime real property, taxable motor vehicles, and business personal property on the same basis as other property, with the following exceptions:
● Vessels are exempt (CGS § 12-81(64)). In lieu of property taxes all vessels must be registered with the Department of Motor Vehicles and pay a registration fee. The fee varies according to a vessel's length with larger craft subject to higher fees (CGS § 15-144).
● Vessels primarily used in commercial fishing are exempt (CGS § 12-81(61)).
● The value up to $500 of commercial fishing apparatus purchased for use in a person's main business or company is exempt (CGS § 12-81(36)). Municipalities have the option to exempt such apparatus valued at more than $500 (CGS § 12-81s).
● “Maritime heritage land” is assessed at use value, similar to farm, open, space, and forest land. Maritime heritage land is the portion of waterfront real property, including buildings, that a licensed commercial lobster fisherman owns and uses for commercial lobstering (CGS §§ 12-107b and 12-107g).
● Municipalities can exempt up to 50% of the property taxes on commercial lobstering business property located on maritime heritage land (CGS § 12-81m).
Maritime businesses organized as corporations are subject to the corporation business tax on the same basis as other corporations doing business in Connecticut. They are eligible for tax credits and deductions on the same basis as other corporations. There are no tax credits specifically targeted to maritime or marine-related industries (CGS § 12-214).
BUSINESS ENTITY TAX
Maritime businesses organized as limited partnerships, limited liability partnerships, limited liability companies, or S corporations are subject to the business entity tax on the same basis as all similarly organized businesses (CGS § 12-284b).
SALES AND USE TAXES
Sales and use taxes apply to taxable maritime industry transactions and services on the same basis as other taxable transactions with certain exceptions described below.
PA 11-6 increased the state sales tax rate from 6% to 6.35% and also imposed a “luxury tax” of 7% on certain purchases. The 7% tax applies to the full sale price of any boat costing more than $100,000. The higher rates apply to sales occurring on or after July 1, 2011 (PA 11-6, §§ 93 & 97).
The following marine and maritime industry transactions are exempt from sales and use taxes:
● Sale of storage space or moorings for noncommercial vessels from November 1 of any year to April 30 of the following year (“winter boat storage”) (CGS § 12-407(a)(2)(M))
● Charges for storage, maintenance, and repairs on out-of-state vessels brought into the state exclusively for those purposes from October 1 of any year to April 30 of the following year (CGS § 12-413a)
● Charges for vessel repair and maintenance (CGS § 12-408 (1)(D))
● Sale of vessels, machinery, and equipment used exclusively in commercial fishing (CGS § 12-412 (40))
● Marine vessel brokerage services provided by brokers selling vessels for owners (CGS § 12-412 (116))
● Vessels sold in Connecticut to nonresidents and not registered in this state (CGS § 12-412 (60))
● Marine fuel for vessels (a) with displacements greater than 4,000 dead weight tons or (b) primarily engaged in interstate commerce (CGS § 12-412 (79))
● Casual sales of vessels (a) between family members or (b) as a result of a business organization, reorganization, or termination, if the business paid the tax when it acquired the vessel (CGS § 12-431)
Deduction for Trade-Ins
When a boat is sold, the sales tax applies only to the difference between the price of the new boat and the value of any old boat the buyer trades in (CGS § 12-430a).
Personal income from maritime industries and businesses is taxable on the same basis as other types of personal income (CGS, Chapter 229).
MOTOR VEHICLE FUELS TAX
The motor fuel tax applies to the maritime industry on the same basis as other taxpayers, except that someone who buys motor fuel for use in a boat is eligible for a refund of the tax (CGS § 12-459 (a)(1)). A taxpayer who receives a refund of the motor fuel taxes must instead pay sales tax on the fuel (CGS § 12-412 (15)). The Department of Revenue Services deducts the sales tax owed from the motor fuel tax refund.
PETROLEUM PRODUCTS GROSS EARNINGS TAX
Petroleum products used in maritime industries or activities are subject to the tax on the same basis as other products, with the following marine-related exemptions:
● # 2 home heating oil for a vessel used exclusively in a commercial fishing or primarily engaged in interstate commerce (CGS § 12-587 (b)(2)(B) & (H))
● Bunker fuel oil, intermediate fuel, marine diesel oil, and marine gas oil used in a vessel with a displacement of more than 4,000 dead weight tons (CGS § 12-587(b)(2)(E))
REAL ESTATE CONVEYANCE TAX
Sale of maritime-related real property for more than $2,000 is subject to the real estate conveyance tax on the same basis as other taxable sales, except that sale of land classified as maritime heritage land (see above) is exempt (CGS § 12-504c (13)).
ADMISSION AND DUES TAXES
Admission charges to boat shows and other places or events offering marine or boating-related entertainment, recreation, or amusement are subject to the 10% admission tax on the same basis as admission charges to other taxable entertainment, recreation, or amusements (CGS § 12-540 (3)).
Yacht, sailing, rowing, and other marine-related clubs that charge annual dues of $100 or more are subject to the 10% dues tax on the same basis as other taxable clubs dues (CGS § 12-543).