When provinces instituted the HST tax to replace the federal (GST 5%-7%) and provincial sales tax (PST 6%-10%), boaters suddenly started paying much more tax on previously exempt services. (Provincial taxes) For example, a cost of $5,000 increased from $5,250 to $5,650 after taxes in Ontario. HST cut costs for businesses, but of course savings were never passed down to customers. Here's a list of marine services affected:
Starting September 1, 2022, boats 2019 and newer that are sold in by a Canadian dealer may be subject to a luxury tax. The tax is either 10% of the contract value or 20% of the excess of $250,000, whichever is less. The luxury tax is payable only once for the same boat. Existing taxes (GST/PST/QST) apply to the entire cost of the boat plus the new luxury tax - basically a tax on a tax. An individual can sell an expensive boat without paying the luxury tax since a broker is not involved. Boats owned by an individual and already registered in Canada (taxes in order) are excluded.
The luxury tax also applies to planes and cars worth more than $100,000. Other pricey items such as RVs are not being taxed — unless they are classed as cars. The tax is expected to raise $163 million in new revenue per year, an amount that will certainly be negated by administration costs. (This amount would be a rounding error in many federal programs.) The worst effect will definitely be a large reduction in economic activity in the marine and tourism industries.
There is a dangerous misconception among non-boaters that boaters do not pay their fair share for government services such as navigation buoys, Coast Guard, Search & Rescue, marine radio and weather forecasts. Non-boaters and legislators wrongly think that boaters do not pay taxes and therefore should be targetted for new revenue.
Boaters pay many kinds of taxes and fees, such as VHF licence fees and fees to use federal harbours and heritage canals. Less obvious are the portion of mooring fees charged by marinas to pay the rent that government charges for recreational harbours.
When it comes to taxes, it is easier to see where boaters are paying. All boaters in Canada now pay Goods and Services Tax on their marina fees, club fees, mooring fees, boat insurance premiums, boat repairs, and all other services.
Canadians in most provinces pay a combination of GST (federal goods and services tax) and PST (provincial sales tax) when buying a new boat and or boat equipment. In most provinces this adds a hefty amount to the price. The only way to save money on a new boat is with a trade-in, if you only need to pay sales tax on the difference.
Amazingly, most provinces continue to collect a provincial sales tax (PST) each and every time a boat is sold on the used market. Alberta there is no sales tax at all! Nova Scotia, New Brunswick and Newfoundland joined their PST with the GST in 1997 and residents in those provinces now pay a 13% HST (harmonized sales tax). When Ontario joins this group, their boaters will start to pay an extra 8% on previously exempt costs: dockage, winter storage, mast stepping, haulout, holding tank pumpout, fuel and brokerage fees.
Boaters pay tax when they buy fuel for their boat. This may not add up to much for sailboats, but owners of powerboats with large engines will end up paying a tidy sum to governments for an afternoon on the water. There is no break on fuel tax for boaters in Canada, even though they do not use roads, bridges and ferries, the purpose of fuel taxes. Farming and construction vehicles can buy less expensive gas, because these vehicles are not using the roads, but this is not made available to boaters. Why not? (Boaters should complain to their MP/MPP.)
None of the taxes - GST, PST, sales and fuel taxes - are directed towards funding of any recreational boating services. Despite charging boaters fees and taxes, the government does not provide many services specifically for the recreational boating community. In fact, there has been a recent rash of cutbacks in services used by recreational boats such as navigational aids, weather forecasting, and vessel towing. This is because commercial ships with electronic navigation and charting equipment no longer require the services used by pleasure boats and do not want to pay for them.
In the U.S., boaters who pay fuel tax may be able to get a refund of all or part of a 'Highway Use Tax' depending on the state in which the fuel was purchased, according to the American Boating Association. Many states use the tax for boating programs, but ten states refund part of the tax paid by boaters. The remaining states and all Canadian provinces need to be reminded that taxing fuel that is not used for highways (such as fuel sold to boats) is unfair.
Federal and provincial governments regularly propose new boat operator and vessel licence and registration fees. It is easy to imagine future increases -- and the money would not necessarily be used to provide boating services.
Oddly enough, many boaters seem to think licences are a good idea, arguing that "regulation" will provide fewer idiots on the water. Boaters in Canada are almost completely unorganized, which makes them particularly vulnerable to new government fees and taxes. Boaters know the public thinks of them as "rich boaters", but they don't really realize that public policy is built on these misconceptions.
Another casualty of the governments' revenue generating plans may be the willingness of volunteers in organizations to continue donating their time to teach boating courses, set and mark exams, just so students can get an operator's licence. With civil servants being "downsized", the volunteers who work for these organiztions might well ask themselves how much of the government's work they are willing to do.
The federal government has exclusive authority when it comes to dealing with boating (more specifically, "Navigation and Shipping") in Canada. Parliament will probably delegate the administration of matters coming under its jurisdiction to the provinces, but they cannot delegate the legistative authority.
To stay informed or fight government proposals, you should do the following:
PST (provincial sales tax) only applied to goods (boats, equipment), whereas HST applies to both goods and services (boats, repairs, dockage, storage) in most cases. Here is a timeline of provincial taxes.
