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100 West Cypress Creek Road, Suite 930

Fort Lauderdale, FL 33309

Office (954) 761-3700

Fax (954) 761-1004

8875 Hidden river PKWY, Suite 230

Tampa, FL 33637

Office (813) 775-2131

Fax (866) 388-3029

3500 Financial Plaza, Suite 330

Tallahassee, FL 32312

Office (850) 250-3830

Fax (866) 388-3029


FL SALES TAX $60K CAP ON BOAT REPAIRS

The repair of a boat in Florida is generally subject to tax at a rate of 6% plus 0% to 2.5% county surtax. However, on each repair of a boat in Florida, the tax on the repair may not exceed $60,000. This sales tax cap translates to having approximately $1,000,000 in repairs performed. The Department has informally interpreted each individual "repair" of a boat to reach the conclusion all repairs to be performed on a boat must be completed in a single repair job (i.e., transaction) in order to take advantage of the cap.

For interpreting whether there is a single repair, the Department has also come up with a test. The Department’s analysis takes the customer's viewpoint. If a customer contracts with a single entity or individual to complete various repairs, then those repairs, regardless of whether the repairs are sub-contracted out to other repair facilities, are considered to be a single repair, based upon the Department’s conclusion. The repair facility, as well as any sub-contracted repairers, must maintain care, custody, and control of the boat for all repairs to constitute a single repair. According to the Department and if the repair facility does not maintain care, custody, and control, this may lead to additional repairs being subject to tax, as the repairs may no longer be considered to be a single repair. However, if the customer contracts with several entities or individuals for various separate repairs, or the repair facility does not maintain continuous care, custody, and control of the boat, then the Department’s position is each contract and/or resubmission of the boat to the repair facility will reset the $60,000 tax cap.

One way the Department recommends a repair facility may wish to evidence the care, custody, and control is through contractual statements. The example provided by the Department is a repair facility may explicitly state the repair facility must maintain care, custody, and control during all repairs. Furthermore, a repair facility may wish to demonstrate the allocation of the risk of loss while the boat is undergoing repairs and sea trials. This care, custody, and control analysis could prove critical in cases where the boat being repaired has a crew aboard during the repair process. A repair facility must meticulously demonstrate it, and not the crew, has care, custody, and control of the boat being repaired.

With the above analytical framework in mind, the Department believes the phrase "each repair of a boat" means a repair or series of repairs that are contracted by a single vendor to a customer. The Department does not care whether a single vendor does all of the repairs or sub-contracts some or all of the repairs to others.

If a repair facility engages in the repair of multiple aspects of the boat in a single contract with its customer, regardless of amendments (or other "discretionary demands") to the original contract, then each independent repair is aggregated to be a single repair, eligible for the $60,000 tax cap, according to the Department. The changes to the initial contract or additional work authorizations, per the Department, must relate back to the original contract and care, custody, and control must be maintained by the shipyard.

As a point of planning, the Department commented a boat owner may form a company ("New Co.") to act as a general contractor for the repairs. New Co. may extend its resale certificate to the sub-contracted repair vendors and then charge the applicable amount of tax, up to the sales tax cap, to the boat owner. Of course, New Co. must register with the Department for sales and use tax purposes. The Department expects New Co. to keep appropriate books and records to demonstrate that the repair of the boat at issue was a single repair and that the maximum amount of tax was properly collected and remitted.

In conclusion, boat owners have an opportunity to save money on their boat repairs. With the right planning, a boat owner can limit his or her sales tax on the boat repairs to $60,000. If a boat repair does not occur within the guidelines offered by the Department, a boat owner or repair facility may find they are on the hook for a substantial amount of sales tax.

undefinedAbout the author: David Brennan is an associate attorney with Moffa, Sutton, & Donnini, P.A. His primary practice area is multistate tax controversy. David received a B.S. in Accounting and Finance, with a minor in Computer Science, from Florida State University. He worked as an accountant for a CPA firm before attending law school at Regent University. He received his Juris Doctor in 2013 and was licensed to practice law in Florida in the same year. In 2015, David earned his Masters of Laws in Taxation from Boston University. While working for the Florida Department of Revenue as a Senior Attorney, David focused on boat sales and use tax issues, among various other areas. You can read his BIO HERE.

At the Law Office of Moffa, Sutton, & Donnini, PA, our primary practice area is Florida taxes, with a very heavy emphasis in Florida sales and use tax. We have defended Florida businesses against the Florida Department of Revenue since 1991 and have over 100 years of cumulative sales tax experience within our firm. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of the situation as well as the legal side. We represent taxpayers and business owners from the entire state of Florida. Call our offices today for a FREE INITIAL CONSULTATION to confidentially discuss how we can help put this nightmare behind you.

AUTHORITY

Section 212.05, F.S.

ADDITIONAL ARTICLES TO READ

FL SALES TAX - TAXABLE COMMERCIAL STORAGE OR BAILMENT, published November 10, 2015, by Matthew Parker, Esq.

FLORIDA USE TAX AUDIT LETTER?, published June 14, 2015, by James Sutton, CPA, Esq. and Jerry Donnini, Esq.

FL SALES TAX VS DMV - BOAT WITH OUTBOARD MOTOR, published May 3, 2015, by James Sutton, C.P.A., Esq.

BOAT CAR PLANE DEALERS: FL SALES TAX FORMS, published June 14, 2013, by Jerry Donnini, Esq.

FL TAX – VOLUNTARY DISCLOSURE CAN BE THE PERFECT SOLUTION, published October 5, 2012, by Jerry Donnini, Esq.

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