Sales and Use Tax in Florida
About Sales and Use Tax on Boat in Florida
The sales and use taxes on boats are sometimes confused with duty and importation tax, but it is not the same system. Unlike duty, which is imposed by the federal government at the boat’s port of entry, the sales and use taxation is assessed at the state and local level and applied at the time the boat is purchased.
State sales tax is typically collected at the time of purchase if the vessel was acquired through a dealer or broker. If not paid at this time, it is remitted at the time of registration as a use tax. Although this process sounds straightforward, there are complicated issues surrounding ownership and use of boats that have been manufactured outside the U.S. and/or are foreign-flagged.
People generally opt to flag or register their boats offshore for one of the following reasons:
To avoid paying the state sales and use tax
The owner is not a U.S. citizen (only Americans may document their vessel with the Coast Guard)
The boat is over 300 gross tons, making it subject to difficult and impractical local regulations
Foreign-flagged boats normally receive a cruising license from U.S. Customs and Border Protection, which prevents most states from trying to collect use tax when the vessel is in state waters. This step also exempts the boat from formal clearance and entry procedures.
Yacht owners are therefore exempt from use tax by registering their boats offshore and bringing it to Florida under a cruising license. BUT if they decide to sell, Florida state law does not allow vessels under a cruising license to be put on the market unless the relevant use tax is paid or a registered brokerage assumes care and control of the boat. This is a complication that many boat owners are unaware of until they attempt to sell.
Florida offers a tax exemption to non Florida residents. This exemption can only be offered by licensed Florida brokers who have a Florida Resale Certificate. It consists of the buyer signing a Tax Affidavit and purchasing a tax exempt decal from the broker. This allows the buyer to keep the boat in Florida for 90 days. When removed, the buyer must provide the state of Florida proof of removal. Florida also offers an additional exemption which can be purchased through the Florida broker for $425. This allows an additional 90 days to remove the boat for a total of 180 days. Keep in mind with this option, the boat must be removed in 180 days and proof of removal provided to the state.
Sales and use tax can pose challenges for all buyers. If you find yourself in a challenging tax situation or require assistance with the importation of a boat manufactured overseas, contact an experienced title/documentation agent or a custom’s agent. It is a complex subject and requires expert advice.