Texas Charges Tax on Out-of-State Boat Purchase, Rendering Fishing More Expensive
- Nov 23, 2012 | Gail Cole
Texas boat-purchasing entities beware. It might be time to expand your lines of business (bowling or scrapbooking, anyone?). The Texas Comptroller of Public Accounts has ruled that a boat purchased out-of-state and brought into Texas is subject to Texas sales and use tax.
In this precedent-setting case, the Texas Comptroller of Public Accounts determined that the purchaser of the boat -- a limited liability company (Petitioner) registered to conduct business in Texas -- brought the boat into the state for use by the Petitioner and the Petitioner's members, all of whom reside in Texas.
According to applicable Texas Tax Code, the state may impose a use tax on a "taxable boat or motor purchased at retail outside this state and used in this state or brought into this state for use by a Texas resident or other person who is domiciled or doing business in this state."
Arguing for an exemption under the New Resident Tax rule, the Petitioner was overruled by the Comptroller. In the argument against letting the LLC claim "new resident" status, the Comptroller cited the date of Petitioner's authorization to transact business in Texas; a date two weeks prior to bringing the boat across state lines for a competitive sports fishing tournament, thereby nullifying the company's new resident status.
What a difference two weeks makes.
Furthermore, the Petitioner did not register the boat in another state -- or indeed anywhere else -- before bringing it to Texas. Pursuant to section 160.023 of the Texas Tax Code:
"A use tax is imposed on a new resident of this state who brings into this state for use in this state a taxable boat or motor that has been purchased and owned by the new resident in any other state or foreign country." (Emphasis mine).