Shopping is done discreetly in the high-toned showroom at Euro Motorcars Inc. in Bethesda. In a place that sells Rolls-Royce and Mercedes-Benz, no one admits to bargain-hunting. But bargains there are, especially if you consider that prospective purchasers of a $220,000 Rolls-Royce Corniche III could save $19,000 by buying now, instead of after Jan. 1.
The date marks the start of a luxury tax, designed to raise $1.9 billion as part of a larger plan to reduce the federal budget deficit. It works like this: A 10 percent levy will be added to the amount that the purchase prices of cars, boats, airplanes, jewelry and furs exceed certain levels. For cars, the tax affects prices above $30,000. For boats and yachts, it kicks in at prices above $100,000; and it affects airplanes costing more than $250,000. The triggering price for jewelry and furs is $10,000.
Retailers, not ones to miss a marketing opportunity, have started urging buyers to shop now before the new levy goes into effect. "Beat the Luxury Tax Increase," some BMW dealers are advising in local newspaper ads. Others are taking the more subtle approach of gently raising the tax issue with customers to help close a deal.
"We have many men coming in here for Christmas shopping," said Debbie Williams, office manager of Furs of Kiszely in McLean. "They don't seem to be worried about the tax, but they know about it and we mention it."
That sales approach seems to be working well in the luxury car market. Euro Motorcars in recent weeks has been doing a brisk business in its Mercedes cars priced above $30,000. But the shop's crown jewels are its Rolls-Royce and Bentley cars, beginning at a stratospheric $145,800 and soaring to the outer limits at $220,100.
"Are we getting customers because of the tax? There's no question about it," said Matthew Smith, the Rolls-Royce sales manager at Euro Motorcars. "I've sold four cars -- two Rolls-Royce and two Bentley -- in four weeks," double the normal rate for such models.
"People are telling us with their checkbooks and their pocketbooks that they want to buy now before the tax takes effect," Smith said.
Salespeople at Anton Motors Inc. in Rockville, which sells Mercedes-Benz autos, also have seen an increase in business from customers seeking to avoid the tax, which hits hardest at European luxury cars, the bulk of which are priced over $30,000. Ditto at the Lexus dealership in Rockville, where the luxury Lexus LS400 -- costing between $35,000 and $40,000 -- is getting increased buyer attention.
"We have people coming in and the first or second thing out of their mouths is about the tax," said John Jaffe, vice president and general manager of the Lexus dealership.
But, so far, the preemptive tax-dodge is doing nothing to move boats and yachts, which have been stuck on a fiscal sandbar for almost a year.
"We're not getting anybody wanting to buy now, mostly because people don't have the money," said Dick Zimmerman, owner of Hartge Yacht Sales Inc. in Galesville, Md. "People are nervous about the economy. There are people in the boat business who are still selling some things, but they don't include me."
Furs, however, are another matter. "Our higher-end customers, the buyers of sable and chinchilla, are making a move now to beat the 10 percent tax," said Jay Gartenhaus, owner of the area's Gartenhaus fur store chain. "Those buyers are very savvy," Gartenhaus said, "but the majority of our furs are below $10,000, which means that they are not affected by the tax."
However, like the luxury car dealers who are doing well now, Gartenhaus said that he is concerned that beat-the-tax sales may be stealing buyers from the first quarter of 1991.
"There will probably be some short-term downturn in our higher-end sales" when the calendar turns, Gartenhaus said. "But there will still be people out there who will want the more expensive furs and we will accommodate them."
Jewelry, too, appears to be something of a mixed picture. Several jewelry stores surveyed said that they were not terribly concerned about the tax, mostly because the majority of their inventories fall below the $10,000 trigger price. However, Jim Rosenheim, owner of Tiny Jewel Box Inc. on Connecticut Ave., said that the tax could force some upscale jewelry stores into an unwanted competition with overseas merchants.
"The people who can afford jewelry costing $50,000 or more also can afford to travel," Rosenheim said. "They don't have to pay the excise tax. They can simply go out of the country and buy."