Was an owner-crewed yacht charter exempt from Florida sales tax when the charterer lacked operational control?

Plain-English summary

The Florida Department of Revenue treated this owner-crewed yacht charter as an exempt service transaction rather than a taxable rental of tangible personal property.

The yacht owner supplied a licensed captain and crew. The charterer could suggest an itinerary and timing, but the captain retained discretion and operational control, including responsibility for legal compliance and vessel safety.

Because the vessel carried or transported passengers with crew furnished by the owner and the charterer did not independently direct or control its operation, Rule 12A-1.071(15) applied.

What this means for you

Yacht and boat-charter operators

The contract and actual operation should show who supplies the crew and who controls navigation, safety, legal compliance, and vessel operation. Owner-furnished crew alone is not the only fact; retained operational control mattered.

Charter customers

Suggesting destinations or timing did not create operational control where the captain could reject requests and retained final authority.

Accountants and tax professionals

Distinguish a transportation service from a bare or controlled vessel rental. Rule 12A-1.071 defines a lease to include temporary use of property operated under the customer's direction or control.

Common questions

Q: Could the charterer propose the route?
A: Yes, but only subject to the captain's concurrence and discretion.

Q: Who supplied the captain and crew?
A: The yacht owner.

Q: Was the charter treated as a rental of tangible personal property?
A: No.

Citations and references

• Fla. Stat. §§ 212.02(19), 212.21(2), and 213.22
• Fla. Admin. Code r. 12A-1.071(1)(a) and (15)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 17A-012

Original ruling text

Executive
Director
Leon M. Biegalski

June 28, 2017
SUMMARY
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,
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

www.floridarevenue.com
Florida Department of Revenue
Tallahassee, Florida 32399-0100

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.
…XX
A. The OWNER shall provide a professional captain and crew for the Vessel….
XX
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:

Technical Assistance Advisement
Page 3

… 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
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.

Technical Assistance Advisement
Page 4
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