Purchasing a boat in Florida: sales taxes

I am starting a new thread on the issues of sales tax related to private sales. This is an important issue with significant consequences so I wanted it to stand out on its own.

I just spoke with my contact person at FDR, a long-time administrator with the Florida Department of Revenue, to confirm that my information posted in the other thread is correct. He spelled it out very clearly:

A private sale is considered an occasional sale or an isolated sale, meaning that it is not through a dealer. The very first paragraph of the Florida statue spells out that if an occasional or isolated sale is concluded in the State of Florida, meaning the new owner takes possession in Fl., then the appropriate sales tax is due (minimum of 6%, with additional taxes possible per county.)

The purchaser is required to and responsible for immediate payment of the sales tax.

In spite of my being a law-abiding citizen and a patriotic American, I couldn't help but ask: "How will the State know?" His response was a chuckle followed up by saying they have a number of ways. For one, he said that states share information. The implication is that when one goes to register in another state, if it is learned that the boat was sold in Florida, then that state rats the new owner out. He also told me they have numerous sources that also report. (I surmise that bridge tenders might be one source.)

If you have questions or need clarification, please call the Florida Department of Revenue. I did not ask the consequences, penalties, or fines that might be associated with the non-payment of sales tax in a private purchase.

Did you ask him the provision of titling in another state, even though he took possession in FL, and not pay tax?

Yes. Taking possession in Florida is what requires immediate payment of all Florida taxes due.

That's interesting. I would imagine that you would be credited for the tax paid back in your home State, so that 7% wouldn't be charged twice for example. However, if I lived in a low or tax-free State then I would insist on taking possession and conducting the closing either offshore or across the border. Obviously depends on how big your tax burden is.

Greetings,
Unless they've changed the regulations, I understand that you have 30 days to vacate the state (FL) before FL taxes are due.

Judy at JWY said:

Yes. Taking possession in Florida is what requires immediate payment of all Florida taxes due.

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I do not believe this to be true -- in absolute.

If the boat is sold in FL to a non-resident, one has 10 days to remove the boat from Florida and show proof (dockage receipt, etc.), and 30 days to register it in another state in order to be tax-exempt.

Quoted text from: https://www.flrules.org/gateway/ruleNo.asp?id=12A-1.007, Effective Date:8/15/2021


"(9) Boats.
(a) Effective September 1, 1992:
1. No sales or use tax is due on the sale in this state of a new or used boat which meets all the following conditions:
a. The boat is of a class or type which would be required to be registered, licensed, titled, or documented in this state or by the United States Government; and,
b. The sale is by or through a registered dealer who is the holder of a valid dealer’s certificate of registration issued by the Florida Department of Revenue. Where there is a listing broker for the seller and a broker for the purchaser, the purchaser’s broker shall be considered the selling dealer for purposes of this paragraph; and,
c. The purchaser removes the boat from this state within 10 days after the date of purchase or, if the boat is repaired or altered, within 20 days after completion of the repairs or alterations; and,
d. The purchaser at the time of taking delivery of the boat is not a resident of the State of Florida and does not make his permanent place of abode in Florida; and,
e. The purchaser, whether a natural person or a corporation, limited liability company, partnership, joint adventure, association, syndicate, business trust, trust, estate, or other form of artificial entity, is not engaged in Florida in any employment, trade, business, or profession in which the boat will be used; and,
f. The purchaser, if a corporation, has no officer or director who is a resident of, or makes his or her permanent place of abode in, Florida; and,
g. The purchaser, if an artificial entity other than a corporation, has no individual vested with authority to participate in the management, direction, or control of the affairs of the entity who is a resident of, or makes his or her permanent place of abode in, Florida. Artificial entities other than corporations include, but are not limited to partnerships, joint adventures, associations, syndicates, limited liability companies, business trusts, trusts, and estates; and,
h. The purchaser within 30 days of the boat’s departure from Florida furnishes the Department proof of timely removal of the boat from Florida. The documentary proof of removal may be in the form of invoices for fuel, dockage charges, or repairs issued by out-of-state vendors or suppliers, or other documentary evidence which specifically identify the boat and evidence its removal within the time period specified in sub-subparagraph c.; and,
i. The purchaser within 90 days of the date of purchase provides the Department with written proof that the boat was licensed, registered, titled, or documented outside this state; and,
j. The selling dealer obtains from the purchaser an affidavit in which the purchaser attests that he has read the law providing for the exemption, that he will remove the boat from this state within the time limit set in this paragraph, that no use will be made of the boat in this state other than to move the boat expeditiously out of Florida from the point of delivery or to a registered repair facility if repairs are to immediately follow the purchase of the boat, and that the boat will be removed from this state within 20 days (excluding tolled days) after completion of the repairs or alterations; and,
k. The seller provides to the Department within 30 days of the date of purchase a copy of the sales invoice, bill of sale and/or closing statement, and the original removal affidavit signed by the purchaser; and,
l. The seller maintains the sales invoice, bill of sale and/or closing statement, and a copy of the removal affidavit signed by the purchaser as part of his records for a period of at least 5 years or until tax imposed by Chapter 212, F.S., may no longer be determined and assessed under Section 95.091(3), F.S."

boathealer said:

I do not believe this to be true -- in absolute.

If the boat is sold in FL to a non-resident, one has 10 days to remove the boat from Florida and show proof (dockage receipt, etc.), and 30 days to register it in another state in order to be tax-exempt.

Quoted text from: https://www.flrules.org/gateway/ruleNo.asp?id=12A-1.007, Effective Date:8/15/2021


"(9) Boats.
(a) Effective September 1, 1992:
1. No sales or use tax is due on the sale in this state of a new or used boat which meets all the following conditions:
a. The boat is of a class or type which would be required to be registered, licensed, titled, or documented in this state or by the United States Government; and,
b. The sale is by or through a registered dealer who is the holder of a valid dealer’s certificate of registration issued by the Florida Department of Revenue. "

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I have the relevant words underlined and bolded. Your quote excerpted the exemptions related to purchasing through a dealer. I don't mean to belabor the point, but it exemplifies my insistence on hiring professionals rather than assuming your own interpretations have validity. Please call the Florida DPR.

Looks like the transaction has to be conducted by a broker, not an individual. So, run the boat out to international waters, and do the deal.


Or have it delivered out of state.


Lots of options.

boathealer said:

I do not believe this to be true -- in absolute.

If the boat is sold in FL to a non-resident, one has 10 days to remove the boat from Florida and show proof (dockage receipt, etc.), and 30 days to register it in another state in order to be tax-exempt.

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Its this bit here that gets you on private sales, which is what the OP mentioned. No dealer?, then pay tax immediately. The so-called "Broker protection clause..."



b. The sale is by or through a registered dealer who is the holder of a valid dealer’s certificate of registration issued by the Florida Department of Revenue. Where there is a listing broker for the seller and a broker for the purchaser, the purchaser’s broker shall be considered the selling dealer for purposes of this paragraph; and,


E.

Judy at JWY said:

If you have questions or need clarification, please call the Florida Department of Revenue. I did not ask the consequences, penalties, or fines that might be associated with the non-payment of sales tax in a private purchase.

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I always call the foxes when I need hen house information.

Brooksie said:

I always call the foxes when I need hen house information.

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Ha! Many years ago I got a speeding ticket in Kansas as I was headed home to Colorado. I forgot about it until I tried renewing my Colorado driver's license a couple years later. I had no idea where in Kansas I received the ticket so I called my local small-town police department for advice. They put me on hold and promptly sent a deputy out to arrest me. Not quite the assistance I was looking for. Judge was out herding sheep so I did an afternoon of hard time in a Civil War Era brig that was the Cripple Creek jail (now a museum). Not making this up - Andy Griffith was on the TV as I entered, replete with whistling intro music. Jeesh...

Peter

mvweebles said:

Ha! Many years ago I got a speeding ticket in Kansas as I was headed home to Colorado. I forgot about it until I tried renewing my Colorado driver's license a couple years later. I had no idea where in Kansas I received the ticket so I called my local small-town police department for advice. They put me on hold and promptly sent a deputy out to arrest me. Not quite the assistance I was looking for. Judge was out herding sheep so I did an afternoon of hard time in a Civil War Era brig that was the Cripple Creek jail (now a museum). Not making this up - Andy Griffith was on the TV as I entered, replete with whistling intro music. Jeesh...

Peter

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Thread drift I am afraid. Reminds me of a fast drive on I-10 in Texas in 1981. I was new to the US and when pulled over I showed him my UK driving license and kept my US license in my wallet. He said no problem and told me to follow him to the courthouse in Schulenburg where a judge was sitting. Told the constable to empty my pockets, assessed me the cash in my pocket less $5 and sent me on my way. On the wall of the courtroom was a tear-off calendar stuck on July 1975. ~A

You have a certain number of days to move the boat from Florida before you must pay the sales tax assuming you are moving it. IF not, you have to pay at the time of the sale. When you attempt to register the boat in another state, that state will charge a sales tax (or its equivalent even though called something else). If you paid the sales tax elsewhere, you will get credit for that.

Some states do not require registering a boat if it has USCG documentation. Some. In that case, you would not have to pay the state sales tax unless you reported the sale.

Any property tax will be based on where the boat is anchored or kept--not where it is registered or where you claimed its home port when documenting it. Property tax varies by state and county. Some states do not have it; some do and it is uniform, and some leave it to counties where it varies from no tax to a lot. Do your research ahead of time to avoid an unpleasant surprise.

Some states/counties will purchase the USCG documentation list annually and go after boats that have a home port in that jurisdiction. You have to show the assessor proof you keep the boat elsewhere. A contract with a marina for a slip will suffice or proof you paid the tax at that locale. If your aunt Mazie lets you keep your boat at her slip on the Pocomo River which is out of your state/jurisdiction, and you do not pay the tax to the Pocomo jurisdiction, then your local jurisdiction just might rat you out if they get that documentation list.

Some jurisdictions base the tax roll on where the boat is kept on 1 January each year. Virginia does this, and people move their boats to marinas in no tax counties at that time of the year. The counties with boat taxes send collectors to each marina to get the roster of people with slip contracts as well as boat yards for the same. Other locations simply tax the boat if it is there for more than 180 days. Gets the folks who winter in Florida or the Bahamas.

Finally, the USCG will not document a tender or dinghy, so no matter what size you have, you will need to register the tender or dinghy in some state and get those numbers and decal stenciled on it--and pay the appropriate sales and annual property tax. In other words, when buying a boat, get a separate bill of sale for the tender/dinghy, not one that combines both vessels.

As the initial starter of the first thread that has now grown to 3 this is another reason if your are dealing with a boat purchase in the 150-200K or more range to spend a few hundred dollars for professional advice. Tax avoidance is not tax evasion and if you are really a Florida non-resident that has no intention of leaving the boat in FL and come from a state that is capped at say $500 for boat sales (SC) or $1500 (NC) and you pay up to $18K to Florida then you are very likely not handling your transaction in a way that is most favorable to you. There are a number of firms, to include law firms, that understand how to handle these transactions in a legal manner that is most favorable for you. Boats move so the transfer does not need to occur in Florida if that is what is takes. Life would be so easy if you sell your Florida based boat to a Florida resident. Problem solved.



And Florida is not always a bad deal. That same boat they want to tax at up to $18K if you take possession in Florida can stay outside Florida for 6 months and 1 day or longer and then come back to Florida with no sales tax due. And the Florida DofR boat section is actually helpful when local county DMV offices get confused about the 6 month and 1 day rule. Blessing for cruising boaters from low tax states that want to winter in Florida. Otherwise the 90 day registration rule would trigger sales taxes even on a boat you may have owned for years or decades the first time you obtain FL registration. And some advice from personal experience. Damn sure have your registration and/or slip rental agreements from another state outside FL showing you were not in the state for the 6 months if you are documented.


From the courts:



When it comes to tax avoidance, we have been guided not by the invisible hand or the guilty hand but by Judge Learned Hand, who famously wrote: “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes.”

EdSpiffy said:

Its this bit here that gets you on private sales, which is what the OP mentioned. No dealer?, then pay tax immediately. The so-called "Broker protection clause..."

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That is a fairly cynical interpretation of the rule. Another interpretation is that a brokered deal will be on the record, while the private party deal might be somewhat under the radar. That makes the private party deal much more difficult to track for enforcement of the tax regs. The requirement for immediate tax payment is likely in observance of the challenges of enforcing the exemption requirements in private party deals.

Captain_Michael said:

You have a certain number of days to move the boat from Florida before you must pay the sales tax assuming you are moving it.

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Only under certain circumstances. As mentioned above, including the quoted passages from the law, if it is a private sale completed within Florida then sales tax is due immediately. The exception for moving it out within a period of time ONLY applies to brokered sales.


Of course, you will hear anecdotal stories about people who completed a private sale in Florida, then moved the boat out of state, and did not pay Florida sales tax. Yes, that happens. The odds of getting caught are relatively low. The consequences if you happen to be the one who DOES get caught, however, will not be pleasant. Do you really want to take that chance? It's your choice.

Interesting law.

Don`t use a broker, the State benefits immediately,and you lose. Use a broker, pay the broker, that buys you time to get the boat interstate to avoid tax.


Do FL brokers have the ear of FL Govt? Is the sales tax more or less than the brokers fee?

BruceK said:

Do FL brokers have the ear of FL Govt? Is the sales tax more or less than the brokers fee?

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FL state tax is 6% and most counties tack on their bit (up to an additional 1% IIRC) - Paid by the buyer.

Standard brokerage commission is 10% - Paid by the Seller

DWJensen said:

FL state tax is 6% and most counties tack on their bit (up to an additional 1% IIRC) - Paid by the buyer.

Standard brokerage commission is 10% - Paid by the Seller

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The maximum tax is $18,000. The State calculated how much revenue they were losing due to "foreign flagging" and "offshore registry" and decided by the time the corp is set up, attorneys' fees paid, etc., the new owner would find it easier and faster to just pay the sales tax. I don't have the figures, but the number of boats subsequently registered is dramatic. The Florida Yacht brokers Assoc. put hard effort into getting this tax cap passed for the benefit of buyers.

So if you are buying a boat in Florida for $300,000+, think about paying the state sales/use tax before you invest in the hassle of offshore delivery and the subsequent rules required. Brokers usually call 3 miles for offshore legality, but I believe in So. Fl., the legal distance is 12 miles. I have found that when clients have used attorneys for offshore delivery, most attorneys require transfer in a foreign country, requiring the boat and representatives to go to the Bahamas and the new owners to go separately. A major "pita" for the day of closing as well as expensive (one-way flights, etc.)

A cap of $18,000 seems like a really regressive sales tax, and “unfair” to lesser boaters who are under the cap.

* fairness here as the sales tax is unrelated to the actual value or services provided by Florida or use costs the boater imposes that needs to be recovered, so seems to be a revenue generating mechanism that hurts lower income people harder (given mega yachts are bought by definition by the super rich).

BruceK said:

Do FL brokers have the ear of FL Govt?

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Florida is one of only two states that require brokers to be licensed and bonded (California being the other). I suspect that this exception for brokered sales was a trade-off that the legislature came up with to get them on-board.

You know, something like... "You have to pay for a license, but we'll give you a special deal that will encourage people to use brokers."

bowball said:

A cap of $18,000 seems like a really regressive sales tax, and “unfair” to lesser boaters who are under the cap.

* fairness here as the sales tax is unrelated to the actual value or services provided by Florida or use costs the boater imposes that needs to be recovered, so seems to be a revenue generating mechanism that hurts lower income people harder (given mega yachts are bought by definition by the super rich).

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As already mentioned revenue is up as a result of the cap and no longer encouraging Floridians to register their boat out of state or country.

Btw, other states such as Maryland have adopted the tax cap concept recognizing that less Marylanders would register out of state or country.

Ted

Just went thru this. If the sale is in Florida but the boat is leaving Florida there is no sales tax due. Florida gives you 10 days to leave Florida after the sale. Longer if repairs are being made. Florida is lenient on that 10 days but wants actual proof that you left.

If the boat stays in Florida then sales tax is due even if the sale is a private one. They find you when new owner registers in Florida. If new owner leaves Florida they really have no way to even know a sale occurred let alone find you in your new state. But if a Florida broker was involved they will report the sale and likely collect the tax.

We bought our current boat in 2019 in Florida in a private sale directly from the owner. and were bringing it back to our home in NC. My husband called the state tax office in Florida and asked them about it and we were told that we did NOT have to pay sales tax, that the state looked at is a something like a garage sale and not taxable unless it went through a broker. Prior to receiving that information, we were told that if we bought the boat through a broker, conducted the settlement offshore (3 or 7 miles, depending on whether or not it was the east coast or the west coast of Florida) then no sales tax was due since the sale was not in Florida.