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Use Tax Owed on Vessel Moored in New York State

  • Dec 15, 2014 | Gail Cole

 You can't outrun the taxman--no matter how fast the boat.

The New York Department of Taxation and Finance was unable to verify payment of New York sales tax on a yacht moored in New York State. Likewise, there was no evidence that compensating use tax had been paid on the first use of the vessel in the state. An investigation therefore ensued.

The owner of the vessel (the petitioner) informed the division that the vessel was purchased in Florida (without sales tax) in 2004 and brought into New York for charter use in 2006. The petitioner claimed that he was a resident of California at the time of purchase and that the vessel was purchased for use as a “commercial vessel primarily engaged in interstate or foreign commerce.” As a result, he said, neither sales nor use tax was owed to the State of New York.

The division continued with the investigation and learned that the petitioner and his wife had owned a home in Sandy Creek, New York, since 1987. Two other boats were registered to that address.

Ultimately, the division assessed a total sales and use tax charge of $18,606.55 (including penalty and interest) for the first use of the vessel in New York, on May 1, 2005.

The matter then ended up at the Tax Appeals Tribunal, which affirmed the determination of the Administrative Law Judge:

  • The vessel is not subject to New York sales tax because it was purchased in Florida.
  • The vessel is not exempt from use tax as a commercial vessel primarily engaged in interstate or foreign commerce; to be eligible for that exemption, the petitioner needed to show that 50% or more “of the receipts from the vessel’s activities are derived from interstate or foreign commerce.” The petitioner failed to do so.
  • A “’resident’ for use tax purposes includes “any person while engaged in any manner in carrying on in [New York] any… business….” The petitioner stated that he used the vessel commercially and was based in New York. A resident is also any person who maintains a permanent place of abode in New York, which the petitioner does not contest.
  • The vessel became subject to New York use tax on the date the vessel entered New York waters, which was May 2005.

Additional details are available in the Tax Appeals Tribunal decision.

Sales or use tax is due on the sale or use of taxable goods and services. Perhaps an auditor won’t notice the untaxed purchase of a book or even a sofa for your home (although consumer use tax applies). When the item purchased costs six figures, you can bet some auditor will notice at some point that taxes haven’t been paid.

Automated sales and use tax software as a service (SaaS) helps businesses remit the proper amount of sales and use taxes owed. Learn more.

photo credit: wayupnorth2010 via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.