Tax Type
Retail Sales and Use Tax
Description
Transportation equipment; Vehicles, vessels; Foreign-registered yacht exempt
Topic
Taxability of Persons and Transactions
Date Issued
05-18-1998
May 18, 1998
Dear*************:
In your letter of April 24, 1998, you request a ruling concerning the application of the sales and use tax to a foreign registered vessel owned by your client.
FACTS
The client is a resident of Virginia and is purchasing an eighty-six-foot yacht. The yacht will be registered in a foreign country and will operate in the United States under a one year United States cruising permit. The client maintains a vacation home in the state of Florida where the yacht will be docked for most of the year. The yacht may be brought to Virginia for a couple of months.
You indicate that the yacht will not be subject to the Florida sales and use tax because of its foreign registration and one year cruising permit. You ask whether the yacht would be subject to the Virginia sales and use tax upon entering Virginia territorial waters.
RULING
In Virginia, watercraft are subject to either the watercraft sales and use tax (2% tax rate) or the retail sales and use tax (4.5% tax rate). Code of Virginia Sec. 58.1-609.1(9) provides an exemption from the retail sales and use tax for "watercraft' as defined in Code of Virginia Sec. 58.1-1401. This code section defines the term "watercraft' as:
The watercraft sales and use tax is imposed on the sales price of each watercraft sold in Virginia as well as on the sales price of each watercraft not sold in Virginia but required to be titled in Virginia. If the watercraft is first required to be titled in Virginia six months or more after its purchase, the tax is imposed on the fair market value of the watercraft at the time it is titled.
It is our understanding that the United States Coast Guard does not issue one year United States cruising permits. Rather, the Bureau of Customs is authorized to issue the type of cruising permit you mention. Assuming that your client's vessel is powered by a motor and that the United States Coast Guard will not be issuing a marine titling document, this vessel constitutes a watercraft as defined by Sec. 58.1-1401 and qualifies for the exemption from the retail sales and use tax provided by Code of Virginia Sec. 58.1-609.1(9). The vessel is subject to the provisions of the watercraft sales and use tax.
Although a watercraft may be subject to the watercraft sales and use tax, this tax will not apply to your client's watercraft if it is not required to be titled in Virginia. Pursuant to Code of Virginia Sec. 29.1-710, a watercraft is exempt from Virginia's marine numbering and titling requirements if it meets one of the following exceptions:
Based on the foregoing and the facts presented, it appears that your client's vessel would be exempt from Virginia's marine numbering and titling requirements. As such, the client's vessel will not be subject to either the watercraft sales and use tax or the retail sales and use tax.
If you have a question about whether your client's vessel is required to be titled when it is used in Virginia waters, please contact the Department of Game and Inland Fisheries, Post Office Box 11104, Richmond, Virginia 23230-1 104. Their telephone number for boat registration and titling information is (804) 367-0939.
This ruling is based on the facts presented in your letter. Accordingly, if the circumstances change, it may affect the application of the tax. In such instances, you may want to seek another ruling. If you have any questions about this ruling, please contact ***** of my tax policy staff at *****.
Dear*************:
In your letter of April 24, 1998, you request a ruling concerning the application of the sales and use tax to a foreign registered vessel owned by your client.
FACTS
The client is a resident of Virginia and is purchasing an eighty-six-foot yacht. The yacht will be registered in a foreign country and will operate in the United States under a one year United States cruising permit. The client maintains a vacation home in the state of Florida where the yacht will be docked for most of the year. The yacht may be brought to Virginia for a couple of months.
You indicate that the yacht will not be subject to the Florida sales and use tax because of its foreign registration and one year cruising permit. You ask whether the yacht would be subject to the Virginia sales and use tax upon entering Virginia territorial waters.
RULING
In Virginia, watercraft are subject to either the watercraft sales and use tax (2% tax rate) or the retail sales and use tax (4.5% tax rate). Code of Virginia Sec. 58.1-609.1(9) provides an exemption from the retail sales and use tax for "watercraft' as defined in Code of Virginia Sec. 58.1-1401. This code section defines the term "watercraft' as:
-
- any vessel propelled by machinery whether or not the machinery is the principal source of propulsion. The term shall also include any sail-powered vessel which is in excess of eighteen feet in length measured along the centerline. The term shall not include a seaplane on the water or a watercraft which has a valid marine titling document issued by the United States Coast Guard.
The watercraft sales and use tax is imposed on the sales price of each watercraft sold in Virginia as well as on the sales price of each watercraft not sold in Virginia but required to be titled in Virginia. If the watercraft is first required to be titled in Virginia six months or more after its purchase, the tax is imposed on the fair market value of the watercraft at the time it is titled.
It is our understanding that the United States Coast Guard does not issue one year United States cruising permits. Rather, the Bureau of Customs is authorized to issue the type of cruising permit you mention. Assuming that your client's vessel is powered by a motor and that the United States Coast Guard will not be issuing a marine titling document, this vessel constitutes a watercraft as defined by Sec. 58.1-1401 and qualifies for the exemption from the retail sales and use tax provided by Code of Virginia Sec. 58.1-609.1(9). The vessel is subject to the provisions of the watercraft sales and use tax.
Although a watercraft may be subject to the watercraft sales and use tax, this tax will not apply to your client's watercraft if it is not required to be titled in Virginia. Pursuant to Code of Virginia Sec. 29.1-710, a watercraft is exempt from Virginia's marine numbering and titling requirements if it meets one of the following exceptions:
-
- A motorboat which has been awarded a number pursuant to federal law or a federally approved numbering system of another state if the boat has been within Virginia for less than ninety consecutive days.
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- A motorboat from a country other than the United States temporarily using the waters of Virginia.
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- A vessel which has a valid marine document issued by the Bureau of Customs of the United States government or any federal agency successor thereto.
Based on the foregoing and the facts presented, it appears that your client's vessel would be exempt from Virginia's marine numbering and titling requirements. As such, the client's vessel will not be subject to either the watercraft sales and use tax or the retail sales and use tax.
If you have a question about whether your client's vessel is required to be titled when it is used in Virginia waters, please contact the Department of Game and Inland Fisheries, Post Office Box 11104, Richmond, Virginia 23230-1 104. Their telephone number for boat registration and titling information is (804) 367-0939.
This ruling is based on the facts presented in your letter. Accordingly, if the circumstances change, it may affect the application of the tax. In such instances, you may want to seek another ruling. If you have any questions about this ruling, please contact ***** of my tax policy staff at *****.
Rulings of the Tax Commissioner