Sales and Use Tax

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The lawyers at Perry and Neblett provide legal insight and counsel on the impact of sales and use tax in vessel transactions. Resale certificates, charter companies, vessel acquisitions and yacht finance are all issues that require an intricate understanding of sales and use tax law.

Interesting to note, the State of Florida has recently passed a law capping sales tax at $18,000. This tax cap is a significant advantage for vessel owners whose vessels are valued in excess of $300,000. Essentially, any vessel owner who is willing to pay the sales tax cap of $18,000 can simply maintain the vessel in the state of Florida year-round without any further tax consequences.

Unfortunately, foreign nationals cannot avail themselves of this tax cap because they cannot document the vessel with United States Coast Guard or obtain a cruising permit. Unbeknownst to many, a vessel owned by a non-US citizen that is titled/registered in a state such as Florida or Delaware takes on the “citizenship” of the vessel’s beneficial owner. If a Venezuelan citizen owns a vessel that is registered in Delaware, United States authorities will treat the vessel as though it is a Venezuelan flag vessel. As such, the vessel cannot freely move in and around the territorial waters of the state of Florida and/or the United States.

There are many new pros and cons with the Florida sales tax. Please feel free to contact Jim Perry for free consultation on the new law and how it may affect your purchase.

Is it possible to buy a vessel tax free? Yes, there are many tax exemptions available to a buyer.

Generally speaking,  almost every state has laws in place that provide that the purchase or rental of a yacht or vessel is taxable unless the transaction is specifically exempt.

Use tax applies when a vessel enters into the territorial waters of a particular state and “uses” the waters for a period of time. Most states allow a vessel to “use” the waters for a period of time to encourage short term visits for tourism. Longer periods of time are discouraged with the use tax. Use tax rates are typically applied in the same manner as sales tax.

The use tax rate and sales tax rate are the same in Florida, including discretionary sales surtax, if applicable. Use tax is due on yacht purchases made out of state and brought into Florida within 6 months of the purchase date. The “use” component of the sales and use tax provides uniform taxation on items that are purchased outside Florida but are used or stored in the state.

If the item brought into Florida is subject to tax, a credit for lawfully imposed taxes paid to another state, a U.S. territory, or the District of Columbia is permitted.

Credit is not given for taxes paid to another country.

If you have a legal or tax question involving the acquisition and/or taxation of vessels, please contact Jim Perry at the maritime law offices of Perry & Neblett.