florida sales tax on yachts

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Florida Sales Tax and Outboard Engines

• Florida Sales Tax and Outboard…

As a luxury sportfish yacht and outboard boat brokerage serving South Florida for over 20 years, we’ve received a lot of great questions about boat purchases. One question we occasionally hear from our Evolution customers is: “When I buy a boat or tender from you, can I separate the engines from the hull for tax purposes?”. As a dealer, we cannot separate the engine from the hull. In fact, we are required by the state of Florida to collect sales tax on the full purchase price of the vessel.

Inboard engines on yachts or sportfish boats are always included in the full purchase of the vessel and can never be separated or itemized on a bill of sale. However, this does bring up some interesting questions about Florida sales tax law and outboard engines, along with ways that our customers may be able to maximize their tax savings.

Below we will outline the current Florida sales tax law, as it relates to outboard boat purchases for dealers and private sellers, and hopefully, bring some clarity to this often confusing topic.

An Overview of Florida Sales Tax Law

To start with, under the laws of the Florida Department of Motor Vehicles (DMV), every car/boat/plane must be registered with the DMV. With that in mind, the DMV is the entity responsible for ensuring that all motor vehicles are properly registered with the state and that sales tax and registration fees have been paid. If you’ve ever purchased a boat through a licensed dealer, you’ve likely never had to deal with the DMV until you paid your registration renewal fee (which is usually done by mail or online). That’s because the dealer collected and paid sales tax on your purchase.

Whether you purchase a boat from an individual seller or a licensed dealer, you are required to pay sales tax on the purchase price. But does that mean the sales tax law is the same in both instances? Not always! There is an interesting twist in the law. In some cases, boats with outboard motors can be potentially taxed differently, specifically when the two are listed separately on the bill of sale. Below we’ll go into detail on how this works.

When You Purchase from a Dealer

When you decide to purchase a vessel from a dealer, they are required by law to collect sales tax on the whole purchase price of all tangible personal property sold to you. The Internal Revenue Service may audit the dealer and hold the dealer responsible for the sales tax if such amounts are not collected from you at the time of sale. The DMV, on the other hand, has a more limited scope in what they are allowed to tax. This offers a unique potential for tax savings for those purchasing from a private seller. The bottom line: When you purchase a boat from a licensed dealer, you can expect to pay full sales tax for all items purchased at the time of sale.

When You Purchase from an Individual

If you opt to purchase a boat from a private or individual seller, you’ll find that for any purchase you make – whether it’s the boat, outboard motors, marine electronics etc. – the seller does not have to collect sales tax from you on any of these items. You, however, as the buyer are required to take the bill of sale over to your local DMV office and pay the sales tax directly to the DMV. The DMV is only required to collect sales tax on the vehicle (boat, car, etc.) that is required to be registered. In the state of Florida, engines are not required to be registered or titled. Any separately itemized goods (engines, life jackets, tackle, spare parts, etc) reflected on the bill of sale that is not the vehicle or boat hull the DMV is not required to or allowed to tax. So, at the end of the day, you’ll only pay tax for the hull of the boat to the DMV, not the engines or any accessories in the sale.

The Concept of Use Tax

The idea of use tax is important to mention. If you make a purchase online and the seller does not collect sales tax, you are actually supposed to remit the sales tax to the state yourself. This is called a Use Tax and it is sent out via a form called the DR-15MO (“MO” meaning mail order). You can find this form here on the Florida Department of Revenue website (https://floridarevenue.com/Forms_library/current/dr15mo.pdf). This form is useful when you are purchase non-vehicle itemized items (also subject to tax just like your online purchases).

Final Thoughts on Sales Tax Law

It’s important to note that with all this information, there’s a great opportunity for some tax planning for potential savings. If you happen to buy a boat with a high-priced outboard motor from a non-dealer, then be sure to ask the seller to separately itemize the motor (with the price listed) on the bill of sale. On that same note, because you are purchasing through a private seller, you have some flexibility in allocating the price between the boat and the motors. This can work to your advantage for additional tax savings. Keep in mind that all allocated values must be reasonable and honest.

We want to reiterate that paying taxes to the DMV is REQUIRED and an important responsibility. If you do not feel comfortable handling this task on your own, we recommend using a licensed dealer to handle the sale for you as you will not be able to title or register your boat in your name until taxes are paid. In the future, when you are ready to sell the vessel, you will not be able to transfer ownership to the next buyer until taxes are paid and the boat’s title and registration are in your name.

To sum up the concepts, you can expect to pay sales tax in its entirety when you purchase your boat from a licensed boat dealer (like MacGregor Yachts and Evolution). By law, a licensed dealer must collect sales tax on the full purchase price of the vessel (and they cannot split or remove itemized parts to adjust sales tax). If you opt to purchase from a private seller, you can separate and put a value on the motor and/or other accessories on the bill of sale to be taxed solely on the hull, if you wish to do so. There’s also some flexibility in how you structure the price between the boat and motor for additional tax savings. Ultimately, with the right planning and tax know-how, you can expect some sales tax savings on your boat purchase.

Again, paying taxes to the DMV is an extremely important responsibility. If you do not feel comfortable handling the paperwork and DMV visit, we recommend using a licensed dealer to do it for you. Hopefully, this article has helped clear up your options when it comes to tax savings during a boat purchase.

If you’re considering purchasing a boat, MacGregor Yachts is your first step. Give us a call to get in touch with our knowledgeable and friendly team at (561) 799-6511 or contact us through our website. We can help clarify the existing tax laws and point you in the right direction!

Additional resources: https://www.flhsmv.gov/motor-vehicles-tags-titles/vessels/ https://www.boats.com/boat-buyers-guide/boat-taxes-basics/ https://floridarevenue.com/Forms_library/current/gt800005.pdf https://legalbeagle.com/6894531-florida-boat-sale-laws.html

Ready to make a boat purchase but unsure of the tax laws? Call MacGregor Yachts today at (561) 799-6511 or contact us through our website and we’ll help you navigate!

Author:  MacGregor Yachts Team

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How Much Is Sales Tax On A Boat In Florida? [Cost Comparision]

July 26, 2019 12:55 pm

What boat buyers should know about florida sales tax.

If you are looking into the costs of purchasing a boat, you are in the right place. Taxes are an inevitable cost to factor in when budgeting your boat purchase.

Sales taxes and caps vary in each state. Some might be a little more and others a little less, but Florida has a flat sales tax rate of 6%. Depending on which county the boat is delivered to, Discretionary Taxes come into play.

Those prices range from 0.5%-1.5%, but cap at $5,000. If you are looking into a superyacht purchase, the cap for sales tax in Florida is $18,000.00.

A few other popular boat-buying state’s taxes are:

California: Varies between 7% to 9% on purchase depending on homeport, plus personal property tax may also be due. Find your CA Rate by address or by location . Connecticut: 2.99% Delaware: 0% Florida: 6% state tax plus 0.5% to 2.5% surtax on the first $5,000. Find your FL surtax rate here. Illinois: 6.25% Maryland: 5%, with a tax cap of $15,400 Michigan: 6% North Carolina: 3%, with a tax cap of $1,500 New Jersey: 3.5%, with a tax cap of $20,000 New York: Varies between 8% to 10% depending on homeport . Find your NY rate here . Rhode Island: 0% South Carolina: 6%, with a tax cap of $500 Washington: 10.1% primarily, however, some cities may be less.

Contact your Denison broker today for a more accurate estimate on your boat’s sales tax.

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Rules of the Road: A review of taxes that apply to Florida boat sales

Rules of the Road: by Capt. Jake Desvergers

It’s that time of year again: boat show season. Events at Cannes, Genoa and Monaco previewed the strong sentiment that is expected at Fort Lauderdale, Antigua, and Miami.

With the recent proliferation of trade tariffs between the United States and the European Union, many colleagues and clients have inquired as to their effect on taxes. This is a very complicated issue and must always be discussed with one’s own attorney and accountant. Every situation and yacht are different.

However, with the Fort Lauderdale International Boat Show in full swing at the publishing of this column, a summarized refresher of taxes affecting boat sales in Florida is timely.

Sales and use tax

Under Florida law, all boats sold, delivered, used or stored in the state are subject to sales and use tax. Dealers and brokers are required to collect tax from the buyer at the time of sale or delivery.

Maximum tax

Thanks to the efforts of the Interna­tional Yacht Broker’s Association (formerly FYBA), the maximum tax on the sale of a vessel is $18,000. This limit was set back in 2010 and has proved to be very advantageous for both the state and yacht owners.

The maximum tax on the repair of a boat or vessel is $60,000. This cap is to be applied to each boat repair occurring in Florida. Subsequent and separate repairs are each subject to a $60,000 cap.

When is tax due?

Unless a yacht is exempt, it must be titled or registered with taxes paid within 30 days of the purchase date or the date the boat entered Florida; and within 90 days after the boat enters Florida when it is documented, licensed, titled, or registered in another state.

Specific exemptions

• Boats sold to nonresidents :  A boat sold by or through a registered dealer or broker to a purchaser who is a nonresident of Florida at the time of taking delivery of the boat in Florida is exempt. This exemption applies to the sale of a boat, including any accessories, but does not apply to the sale of a boat trailer. There are certain time deadlines wherein the boat must leave Florida waters. These limits range from 10 to 180 days. Important to note is that this exemption does not apply to a Florida resident, an entity where the controlling person is a Florida resident, or a corporation in which any officers or directors are Florida residents.
• Foreign-flagged vessels: Foreign-flagged vessels holding a valid “License to Cruise in the Waters of the United States,” issued by U.S. Customs pursuant to 19 Code of Federal Regulations 4.94, are not subject to Florida use tax.
• Boats imported for sale:  A boat that is brought into Florida for the sole purpose of sale at retail by a registered boat dealer or broker is exempt from Florida use tax. The boat must be under the care, custody and control of the dealer or broker, and personal use of the boat is not permitted.
• Boats temporarily docked in Florida:  When Florida sales or use tax has not been paid on a boat brought into Florida, the boat is not subject to use tax when the boat remains in a registered facility that rents dockage or slippage.   That period of time cannot exceed a total of 20 days in any calendar year. The 20-day period begins on the day the boat is docked at the facility. If the boat enters Florida for repairs or modifications at a registered repair facility, it may remain in Florida tax-exempt until the repairs or modifications are completed. The 20-day period is not in effect while the boat is being repaired or modified. Once the repairs are complete, the owner has the balance of the 20-day period to remove the boat from Florida. Storage of a boat at a registered repair facility does not qualify for tolling of the 20-day time period.

Penalty and interest

For those who feel they can avoid or circumvent these rules, be aware that the monetary penalties are severe. A buyer who attempts to evade tax by submitting a fraudulent affidavit is subject to the tax due, interest and a mandatory 200 percent penalty. The buyer is also subject to a fine of $5,000 and 5 years in prison.

Capt. Jake DesVergers is chief surveyor for International Yacht Bureau ( yachtbureau.org ). Comments are welcome below.

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An Inside Look at Florida Sales Tax & Outboard Engines

• An Inside Look at Florida…

As a luxury sportfish yacht, center console and outboard boat brokerage serving South Florida for over 20 years, we’ve received a lot of great questions about boat purchases. One question we occasionally hear from our Evolution customers is: “When I buy a center console or tender from you, can I separate the engines from the hull for tax purposes?”. As a dealer, we cannot separate the engine from the hull. In fact, we are required by the state of Florida to collect sales tax on the full purchase price of the vessel. Inboard engines on yachts or sportfish boats are always included in the full purchase of the vessel and can never be separated or itemized on a bill of sale. However, this does bring up some interesting questions about Florida sales tax law and outboard engines, along with ways that our customers may be able to maximize their tax savings. 

Below we will outline the current Florida sales tax law, as it relates to outboard boat purchases for dealers and private sellers, and hopefully, bring some clarity to this often confusing topic. 

An Overview of Florida Sales Tax Law

To start with, under the laws of the Florida Department of Motor Vehicles (DMV), every car/boat/plane must be registered with the DMV. With that in mind, the DMV is the entity responsible for ensuring that all motor vehicles are properly registered with the state and that sales tax and registration fees have been paid. If you’ve ever purchased a center console through a licensed dealer, you’ve likely never had to deal with the DMV until you paid your registration renewal fee (which is usually done by mail or online). That’s because the dealer collected and paid sales tax on your purchase. 

Whether you purchase a center console from an individual seller or a licensed dealer, you are required to pay sales tax on the purchase price. But does that mean the sales tax law is the same in both instances? Not always! 

There is an interesting twist in the law. In some cases, center console with outboard motors can be potentially taxed differently, specifically when the two are listed separately on the bill of sale. Below we’ll go into detail on how this works. 

When You Purchase from a Dealer

When you decide to purchase a center console from a dealer, they are required by law to collect sales tax on the whole purchase price of all tangible personal property sold to you. The Internal Revenue Service may audit the dealer and hold the dealer responsible for the sales tax if such amounts are not collected from you at the time of sale. The DMV, on the other hand, has a more limited scope in what they are allowed to tax. This offers a unique potential for tax savings for those purchasing from a private seller.  

The bottom line: When you purchase a center console from a licensed dealer, you can expect to pay full sales tax for all items purchased at the time of sale. 

When You Purchase from an Individual

If you opt to purchase a center console from a private or individual seller, you’ll find that for any purchase you make – whether it’s the boat, outboard motors, marine electronics etc. – the seller does not have to collect sales tax from you on any of these items. You, however, as the buyer are required to take the bill of sale over to your local DMV office and pay the sales tax directly to the DMV. The DMV is only required to collect sales tax on the vehicle (boat, car, etc.) that is required to be registered. In the state of Florida, engines are not required to be registered or titled. Any separately itemized goods (engines, life jackets, tackle, spare parts, etc) reflected on the bill of sale that is not the vehicle or boat hull the DMV is not required to or allowed to tax. So, at the end of the day, you’ll only pay tax for the hull of the boat to the DMV, not the engines or any accessories in the sale. 

The Concept of Use Tax

The idea of use tax is important to mention. If you make a purchase online and the seller does not collect sales tax, you are actually supposed to remit the sales tax to the state yourself. This is called a Use Tax and it is sent out via a form called the DR-15MO (“MO” meaning mail order). You can find this form here on the Florida Department of Revenue website . This form is useful when you are purchase non-vehicle itemized items (also subject to tax just like your online purchases). 

Final Thoughts on Sales Tax Law

It’s important to note that with all this information, there’s a great opportunity for some tax planning for potential savings. If you happen to buy a center console with a high-priced outboard motor from a non-dealer, then be sure to ask the seller to separately itemize the motor (with the price listed) on the bill of sale. On that same note, because you are purchasing through a private seller, you have some flexibility in allocating the price between the center console and the motors. This can work to your advantage for additional tax savings. Keep in mind that all allocated values must be reasonable and honest. 

We want to reiterate that paying taxes to the DMV is REQUIRED and an important responsibility. If you do not feel comfortable handling this task on your own, we recommend using a licensed dealer to handle the sale for you as you will not be able to title or register your boat in your name until taxes are paid. In the future, when you are ready to sell the vessel, you will not be able to transfer ownership to the next buyer until taxes are paid and the boat’s title and registration are in your name. 

Hopefully, this article has helped clear up your options when it comes to tax savings during a center console purchase. To sum up the concepts, you can expect to pay sales tax in its entirety when you purchase your boat from a licensed boat dealer (like EVOLUTION by MacGregor Yachts). By law, a licensed dealer must collect sales tax on the full purchase price of the vessel (and they cannot split or remove itemized parts to adjust sales tax). If you opt to purchase from a private seller, you can separate and put a value on the motor and/or other accessories on the bill of sale to be taxed solely on the hull, if you wish to do so. There’s also some flexibility in how you structure the price between the boat and motor for additional tax savings.

Ultimately, with the right planning and tax know-how, you can expect some sales tax savings on your center console purchase.  Again, paying taxes to the DMV is an extremely important responsibility. If you do not feel comfortable handling the paperwork and DMV visit, we recommend using a licensed dealer to do it for you. 

If you’re considering purchasing a center console, EVOLUTION by MacGregor Yachts is your first step. Give us a call to get in touch with our knowledgeable and friendly team at (561) 799-6511 or contact us through our website. We can help clarify the existing tax laws and point you in the right direction! 

Ready to make a center console purchase but unsure of the tax laws? Call EVOLUTION by MacGregor Yachts today at (561) 799-6511 or contact us through our website and we’ll help you navigate!

Additional resources:

• https://www.flhsmv.gov/motor-vehicles-tags-titles/vessels/
• https://www.boats.com/boat-buyers-guide/boat-taxes-basics/
• https://floridarevenue.com/Forms_library/current/gt800005.pdf
• https://legalbeagle.com/6894531-florida-boat-sale-laws.html

Author:  MacGregor Yachts Team

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Sales Tax on a Boat: Can You Avoid it?

Trying to navigate what the best options are, as they relate to taxes and registering your new yacht can be a difficult feat if you are new to boating. Uncle Sam's rules vary state by state and we are here to shed a little light.

This article is designed to provide prospective yacht owners with an overview of state sales tax. It should not be considered guidance. As in all things that are related to taxes, we recommended that you consult a tax professional for advice.

Registering by state

Regarding the US, the state you keep your boat in is the state that is going to want their sales tax. It can also be called a use tax, taking into consideration you are using the waters of that state.  It does not matter where you are documented or registered, it is where your boat resides. Since July of 2010, Florida caps sales tax on a vessel at $18,000. Meaning, no matter the purchase price of the yacht, you will not pay more than $18,000 in taxes. If you are planning to keep your boat in Florida, for that kind of money, it simply doesn't make sense to register your boat offshore. In New York, you would pay taxes on the first $230,000 of the boat's purchase price. North Carolina’s boat sales tax is 3% and capped at $1,500!  In Maryland, the maximum out of pocket in sales tax is $15,000, while not too far away in Virginia the boat sales tax is 2% and capped at a measly $2,000.

Always a different set of rules

As mentioned before, the state in which your boat is used is where you will have to pay sales tax. If you were to purchase a boat in different state, there would be a limit on how long that boat can remain in that state before you must pay sales tax. Each state has a limit of how long you can stay before they require state sales tax payment, and each state has a different requirement. Florida is six months when you file an exemption and pay a fee at purchase, but then you cannot come back for six months. That is why it is also called a use tax rather than a state sales tax. For example, you did not buy your boat in New York, but if you stay in New York they will require you to pay their sales tax / use tax, same amount, minus any state sales tax you paid in another state.

Why do people do offshore closings?

Offshore closings are usually done to avoid Florida tax stamps on a boat mortgage.   In order to achieve this you must go three miles of shore into international waters. Then you sign your loan documents in front of a loan officer.  Then we will take a photo of today’s paper and the GPS coordinates. Once we've done that, the captain signs an acknowledgement of what has transpired.  This will also avoid Florida sales tax because the transaction took place out of Florida waters. But remember, if you intend to keep your boat in Florida you can't get around Uncle Sam.

Foreign Flag Registry

If you are a foreign flagged yacht you will need to obtain a cruising permit and you will have to clear in and out.  This is not necessary if the vessel is US flagged. If you have a foreign flagged vessel in the US, you may hire foreign staff who possess specific types of visas to work on your yacht. If it is a US flagged yacht, you may hire U.S. citizens or people with U.S. work permits only.

At the end of the day it call comes down to what your cruising plan is. Once you have established your first few months up to a year of ownership and consulted a tax professional, the decision on state registration and sales tax should be much more clear.

Topics: Boat Buying Process , FAQ

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