Sales and Use Tax TAA 17A-012 Boats
June 28, 2017
TAX: Sales and Use Tax
TAA NUMBER: 17A-012
ISSUE: Taxpayer provides yacht charter services with crew furnished by the owner.
STATUTE CITE(S): 212.02; 212.05; 212.21, Florida Statutes (“F.S.”)
RULE CITE(S): 12A-1.071, Florida Administrative Code (“F.A.C.”)
QUESTION:
Taxpayer requests confirmation that the crewed yacht charter services
it offers are exempt from Florida sales tax.
ANSWER:
Because Taxpayer provides yacht charter carriage or transportation services
with crew furnished by the Taxpayer, and the charterer does not have any
direction or control over the vessel’s operation, the charter agreement
constitutes a service transaction and is exempt.
Re: Technical Assistance Advisement 17A-012 Florida Sales and Use Tax
– Boats
Sections: 212.02; 212.05; 212.21, Florida Statutes (F.S.)
Rule: 12A-1.071, Florida Administrative Code (F.A.C.) Petitioner: XXXX
(“Taxpayer”) FEI: XXX Dear XXXX:
This letter is a response to your petition received on XXXX, for the Department
of Revenue’s (“Department”) issuance of a Technical
Assistance Advisement ("TAA") concerning the abovereferenced
petitioners and matter. Your petition has been carefully examined, and
the Department finds it to be in compliance with the requisite criteria
set forth in Chapter 12-11,
Technical Assistance Advisement Page 2
Florida Administrative Code (“F.A.C.”). This response to your
request constitutes a TAA and is issued to you under the authority of
Section (“s.”) 213.22, Florida Statutes (F.S.).
FACTS PRESENTED
Your petition provides in part:
… [Taxpayer] is the owner of a XXX yacht that is offered for charter
with the crew provided by the owners. The yacht is a US-flagged USCG documented
vessel with a coastwise endorsement and is manned by US citizen crewmembers,
including a USCG licensed captain authorized to conduct passenger carrying
operations. When the yacht is chartered a contract with the charterer
is executed whereby the charterer has no control over the operation of
the yacht; operational control remains solely with the captain provided
by the owner. However, the charterer, in consultation with the captain,
may request the charter itinerary and times, subject to legal restrictions
and the terms of the charter contract XXX. At all times compliance with
applicable laws rests solely with the captain provided by the owner; this
is both a contractual and USCG requirement. Typical charter fees are XXX
per charter day, plus expenses, regardless of the number of passengers
onboard. Under USCG regulations, our XXX yacht is limited to carrying
XX passengers….
A sample charter agreement was submitted with the petition. Of interest
are XX and XX.
A. The OWNER shall provide a professional captain and crew for the Vessel….
A. The captain, together with the CHARTERER, will direct the course of
the voyage and mutually agree regarding the management, operation, and
movement of the Vessel, wind, weather, and other circumstances permitting.
B. However, the captain will not be bound to comply with any order or
request by the CHARTERER which, in the reasonable opinion of the captain,
might result in (i) the Vessel’s moving to any port or place that
is not safe and proper for it to be in; (ii) the CHARTERER’s failing
to Re-Deliver the Vessel upon the expiration of the Charter period; or
(iii) the breach of XXX….
REQUESTED ADVISEMENT
Taxpayer requests confirmation that the crewed yacht charter services
it offers are exempt from Florida sales tax.
TAXPAYER ARGUMENT
Your petition provides in part:
… We believe Rule 12A-1.071(15), F.A.C. is applicable to these
owner-furnished crewed yacht charters, which states “When a boat
or vessel is chartered with crew furnished, for the carriage or transportation
of persons or property from one point to another and the charterer does
not have any direction or control over its operation, the contract constitutes
a service transaction and not the rental of tangible personal property
and is exempt.” (Taxpayer’s emphasis).
By analyzing this rule clause by clause, first, the vessel is being chartered
with the crew furnished by the owner; the charterer has no right to select
the crew or to operate the yacht himself. Second, the vessel is carrying
or transporting persons from one point (the port of embarkation) to other
places, and may or may not return to the original port of embarkation.
Finally, the charterer does not have any direction or control over the
operation of the yacht - this right remains solely with the owner-furnished
captain, who can neither be selected nor replaced by the charterer.
We believe the charterer’s limited ability to suggest to the captain
the charter times and itinerary, subject to the captain’s concurrence
(in his sole discretion), does not constitute direction or control over
the operation of the yacht. Under applicable USCG regulations, passengers
on these crewed yacht charters of US registered vessels are prohibited
from exercising operational control.
… Based on the above, we believe these crewed yacht charters are
exempt from Florida sales taxes….
LAW AND DISCUSSION
The legislature has declared its intention in s. 212.21(2), F.S., that
each and every sale, use, storage, consumption, or rental of tangible
personal property1 in Florida is taxable, subject only to the exemptions
and exclusions contained within Chapter 212, F.S.
Rule 12A-1.071(1)(a), F.A.C., provides in part, “the term ‘lease’
includes … a transaction under which a person secures for a consideration
the temporary use of tangible personal property which, although not on
his premises, is operated by or under the direction or control of the
person or his employees.”
Taxpayer provides yacht charter services with captain and crew furnished
by the Taxpayer. “When a boat or vessel is chartered with crew furnished,
for the carriage or transportation of persons or property from one point
to another and the charterer does not have any direction or control over
its operation, the contract constitutes a service transaction and not
the rental of tangible personal property and is exempt.” See Rule
12A-1.071(15), F.A.C.
In the present case, the charter agreement states that the Taxpayer shall
provide a captain and crew for the vessel. Although the charterer could
direct the course of the voyage, the charterer does not have independent
direction or control over the vessel. Taxpayer will provide a captain
whose discretion determines whether the charterer may have any direction
or control of the vessel.
CONCLUSION
Because Taxpayer provides yacht charter carriage or transportation services
with crew furnished by the Taxpayer, and the charterer does not have any
direction or control over the vessel’s operation, the charter agreement
constitutes a service transaction and is exempt.
This response constitutes a Technical Assistance Advisement under s. 213.22,
F.S., which is binding on the Department only under the facts and circumstances
described in the request for this advice, as specified in s. 213.22, F.S.
Our response is predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or administrative rule
changes, or judicial interpretations of the statutes or rules, upon which
this advice is based, may subject similar future transactions to a different
treatment than expressed in this response.
You are further advised that this response, your request and related backup
documents are public records under Chapter 119, F.S., and are subject
to disclosure to the public under the conditions of s. 213.22, F.S. Confidential
information must be deleted before public disclosure. In an effort to
protect confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement, the backup
material and this response, deleting names, addresses and any other details
which might lead to identification of the taxpayer. Your response should
be received by the Department within 10 days of the date of this letter.
Sincerely,
Taylor Feldscher, Esq. Senior Attorney Technical Assistance & Dispute
Resolution Florida Department of Revenue
Record ID: 213127
End Notes:
1 Tangible personal property is defined as including “personal property which may be seen, weighed, measured, or touched or is in any manner perceptible to the senses ....” See s. 212.02(19), F.S.