Kentucky boat tax may drive away business

CINCINNATI – Kentucky marinas may lose business to neighboring states due to a new push from the state’s Department of Revenue to collect taxes from boat owners, the Cincinnati Post reported in recent story on its Web site.

The Revenue Department gained new access to Coast Guard boat registration lists this summer, and Kentucky officials sent out tax bills totaling $2.5 million to about 3,000 owners of large watercraft, typically houseboats and cabin cruisers longer than 25 feet, for 2005 taxes averaging about $700 per boat owner.

Although the tax was already on the books, it was rarely enforced because Kentucky had no way to know who owned a boat, or where that boat was docked, the Post reported.

And while Revenue Department officials are only starting with 2005 tax bills, they have the legal authority to impose back-taxes up to five years. Department spokeswoman Jill Midkiff told the newspaper that the state hasn’t made a decision whether to do that.

However, the tax applies only to boats registered with the Coast Guard as being docked in Kentucky, regardless of the owners’ place of residence. Ohio has a small permit fee for individual boat owners and docking fees, but no annual property tax on boats. Neither do other states bordering Kentucky, such as Indiana and Tennessee.

“You could relocate to Ohio, and that’s been an element we’ve had questions about,” said Karen Chrisman, an attorney with the Lexington law firm of McBrayer Mcginnis Leslie and Kirkland, which is working with tax opponents.

“These folks went through a federal procedure (to register with the Coast Guard). They want to be in Kentucky because of our lake system, but it could come to that. It’s going to have an impact on tourism.”

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