When were commercial fishing vessels and parts bought outside or inside Florida exempt from sales and use tax under the vessel rules?

Plain-English summary

A commercial fishing vessel bought outside Florida would not be taxed under the first rule if it stayed outside Florida's registration requirement, was documented solely under federal law, operated in Florida waters no more than 90 consecutive days, and remained in the state no more than 183 aggregate days in a one-year period. Crossing those thresholds or becoming subject to Florida registration could change the result.

The Department also approved an independent interstate-or-foreign-commerce exemption method covering both vessels and their parts. Florida tax on qualifying purchases was prorated by the ratio of Florida mileage to total mileage. Travel from Florida's territorial limit to a dock and back was not treated as Florida mileage under the cited rule, so a zero Florida-mileage ratio could make even Florida purchases fully exempt.

If the company later accumulated Florida mileage, it would have to register as a Florida sales-tax dealer, remit tax on Florida purchases using reasonable revised estimates, and reconcile the first fiscal year to actual mileage through payment, refund, or credit.

What this means for you

The ruling offered two distinct paths. One focused on an out-of-state vessel purchase, documentation, registration, and time in Florida. The other used commercial-fishing status and mileage proration for vessels and parts used in interstate or foreign commerce.

Both depended on records and affidavits. The purchaser had to execute the vessel-use affidavit even when the mileage ratio produced a full exemption, and Florida part purchases required an affidavit delivered to the seller.

Common questions

Q: Did buying the vessel outside Florida automatically eliminate Florida tax? No. The result depended on federal documentation, Florida registration rules, and the 90-consecutive-day and 183-aggregate-day limits stated in the ruling.

Q: Did the commerce exemption cover vessel parts? Yes. The cited statute and rule covered qualifying vessels and their parts.

Q: How was the taxable share of Florida purchases calculated? Florida miles divided by total miles for vessels used in interstate or foreign commerce.

Q: Did travel from the territorial limit to a Florida dock count as Florida mileage? No, under the rule interpretation applied in this advisement.

Q: What happened before the company had a full year of mileage? It could use reasonable estimates, then reconcile to actual first-year mileage without interest or penalty on an additional liability if the estimates were reasonable.

Citations and references

• Fla. Stat. § 212.08(8) — partial exemption for vessels and parts used in interstate or foreign commerce
• Fla. Stat. §§ 327.10 and 327.16 — vessel registration and numbering provisions referenced by the rule
• Fla. Admin. Code r. 12A-1.007(9)(b) — tax treatment of boats bought outside Florida
• Fla. Admin. Code r. 12A-1.064(5) — mileage proration and commercial fishing vessels
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-063

Original ruling text

SUMMARY

A Corporation's purchase of a commercial fishing vessel outside of Florida will not be taxable unless it becomes subject to the registration and numbering requirements of section 327.10, F.S. If a commercial fishing vessel purchased outside Florida is not required to be registered and numbered in this state, is soley documented under federal law, does not operate in Florida waters for more than 90 consecutive days, and does not remain in Florida for more than 183 days in the agregate during any one year period, no Chapter 212, F.S., tax is due under the rule provisions of Rule 12A-1.064(5), F.A.C.

Sep 25, 1997

Re: Technical Assistance Advisement 97A-063 XXX ("Corporation") Commercial Fishing Vessels Section 212.08(8), F.S. Rules 12A-1.007(9)(b) and Rule 12A-1.064(5), F.A.C.

Dear :

Your letter of July 24, 1997, requested a Technical Assistance Advisement concerning the above referenced matter. This response constitutes a Technical Assistance Advisement (TAA) under Chapter 12-11, Florida Administrative Code, and is issued to you under the authority of s. 213.22, Florida Statutes.

REQUESTED ADVISEMENT

The issues under advisement herein are restated from your letter of July 24, 1997.

1. [Corporation's] purchases of commercial fishing vessels
   outside this State are not subject to Chapter 212 tax, provided the vessels are not required to be registered and

numbered in this State, are solely documented under federal law, and are not present within Florida waters for more than 90 consecutive days, or for more than 183 days in the aggregate in any year. Department Rule 12A-1.007(9)(b), F.A.C.

2. [Corporation's] purchases of commercial fishing vessels
   also qualify for the exemption in section 212.08(8), F.S. and Department Rule 12A-1.064(5), and this exemption also applies to vessel parts. No tax applies to purchases of vessels and parts thereof outside Florida. In calculating the mileage ratio for Florida purchases prior to the accumulation of mileage for a fiscal year, [Corporation] may use estimates. Mileage between a Florida dock and the Florida territorial limit is not considered Florida mileage for purposes of the ratio. If the ratio is zero, the purchases are fully exempt provided [Corporation] executes the appropriate affidavit. In addition, [Corporation] would not be required to register as a sales tax dealer under Chapter 212.

If [Corporation] accumulates Florida mileage and seeks partial exemption of Florida purchases, it must register as a Florida sales tax dealer and begin reporting and remitting tax on such purchases based upon revised mileage estimates. The ratio is the total Florida miles divided by the total miles everywhere. After the first fiscal year of operations, [Corporation] will calculate the actual mileage ratio for the fiscal year, and any difference between its actual tax liability and amounts paid during the fiscal year will be resolved by additional payment, refund or credit. No interest or penalty will be applied to any additional tax liability, provided the mileage estimates during the year were reasonable. The mileage ratio to be applied in any future year will be based upon the mileage experience during the immediately preceding fiscal year.

A copy of the affidavit [Corporation] plans to use for vessel purchases is attached hereto. Please confirm this is acceptable, and please also identify the locations to which
[Corporation] should direct the originals and copies of such

affidavits. Note that there will be no state registration number for federally documented vessels. Note also that sellers outside Florida may not be registered as dealers for purposes of Chapter 212, Florida Statutes.

RELEVANT FACTS

Your letter imparts the following information regarding the issues under advisement herein:

[Corporation] is a Florida corporation, with its principal place of business in..., Florida.... It is not a registered dealer under Chapter 212. [Corporation] contemplates purchasing vessels to be used exclusively for commercial fishing. The vessels will be designed, constructed, and used in a regular and recurring course of business to catch seafood for the commercial purpose of selling such seafood at wholesale. A contract to purchase the first vessel is pending. [Corporation] expects to take title and possession to the first vessel outside Florida. No sales or use tax is expected to be due or paid with respect to the purchase of the vessels in any other state. The vessels will be documented solely under federal law. It is not anticipated that Florida vessel registration and numbering requirements will apply to such vessels.

The commercial fishing will occur in waters outside Florida's territorial limits. [Corporation] will record the locations of all fishing activities (by latitude and longitude). The vessels will enter Florida waters only to facilitate sales of fish products, required maintenance, and replenishment of fuel and other supplies necessary to return to non-Florida waters and engage in commercial fishing. It is not anticipated that the vessels will be present in Florida waters except for mileage from the Florida territorial limit to dockside and return to non-Florida waters. The vessels will not be present in Florida waters for more than 90 consecutive days, or for more than 183 days in the aggregate in any one year. [Corporation] has owned no other vessels or otherwise accumulated any vessel mileage within or without the territorial waters of Florida in the

past.
Depending upon the product fished, a single fishing trip lasts from several days to several weeks (on-board freezers preserve the catch). The vessels will not return to the same dock after each trip. Rather, they will proceed to whatever destination provides optimum market conditions for sale of the product. In general, this will not be known until the vessel is ready to return to land. Product caught within the Gulf of Mexico may be taken for sale ("landed") in any of several states; product from Atlantic waters will in most cases be landed somewhere in Florida.

DISCUSSION

As provided in your letter, [Corporation] has identified two bases for maintaining that no tax is due with respect to its purchases of vessels. The first applies only to vessels, and only to purchases outside the state; the second applies to vessels and also to parts of vessels.

Rule 12A-1.007(9)(b) provides in pertinent part:

1.a. A boat, purchased by its current owner outside this state, using the waters of this state and required to be registered and numbered in this state within 20 days after purchase by the owner, pursuant to s. 327.10, F.S., is subject to tax on the sales price of the boat within 20 days after purchase by the owner.

b. A boat, purchased by its current owner outside this state, operating on the waters of this state in excess of 90 days, which is solely documented under operative federal law, or which is registered, licensed, or titled pursuant to a federally approved numbering system of another state as described in s. 327.16, F.S., is subject to tax on the sales price of the boat at the time the requirements of s. 327.16, F.S., have been met.

2. Effective September 1, 1992, any boat which remains in
   this state for more than an aggregate of 183 days in any 1year period shall be presumed to be commingled with the

general mass of property of this state, and tax shall be due on the sales price of the boat, except under the following circumstances....

Pursuant to these provisions, [Corporation's] purchase of a vessel outside Florida will not be taxable unless it becomes subject to the registration and numbering requirements of section 327.10, F.S., or the conditions of paragraphs 1.b. or 2. above are met. If a vessel purchased outside Florida is not required to be registered and numbered in this state, is solely documented under federal law, does not operate in Florida waters for more than 90 consecutive days, and does not remain in Florida for more than 183 days in the aggregate during any one year period, no Chapter 212, F.S., tax is due under the quoted rule provisions.

The second basis for concluding that no tax is due is independent of the first, and applies to the vessels and also to parts thereof. In the event a vessel is subject to Florida registration and numbering requirements, section 212.08(8), F.S. (1996 Supp.), and Rule 12A-1.064(5), F.A.C., would become applicable to the purchase. The statute provides as follows:

(8) PARTIAL EXEMPTIONS; VESSELS ENGAGED IN INTERSTATE OR FOREIGN COMMERCE.-(a) The sale or use of vessels and parts thereof used to transport persons or property in interstate or foreign commerce is subject to the taxes imposed in this chapter only to the extent provided herein. The basis of the tax shall be the ratio of intrastate mileage to interstate or foreign mileage traveled by the carrier's vessels which were used in interstate or foreign commerce and which had at least some Florida mileage during the previous fiscal year. The ratio would be determined at the close of the carrier's fiscal year. This ratio shall be applied each month to the total Florida purchases of such vessels and parts thereof which are used in Florida to establish that portion of the total used and consumed in intrastate movement and subject to the tax at the applicable rate. Items, appropriate to carry out the purposes for which a vessel is designed or equipped and used, purchased by the owner, operator, or agent of a vessel for use on board such vessel shall be

deemed to be parts of the vessel upon which the same are used or consumed. Vessels and parts thereof used to transport persons or property in interstate and foreign commerce are hereby determined to be susceptible to a distinct and separate classification for taxation under the provisions of this part. Vessels and parts thereof used exclusively in intrastate commerce do not qualify for the proration of tax. (b) The partial exemption provided for in this subsection shall not be allowed unless the purchaser signs an affidavit stating that the item or items to be partially exempted are for the exclusive use designated herein and setting forth the extent of such partial exemption. Any person furnishing a false affidavit to such effect for the purpose of evading payment of any tax imposed under this part is subject to the penalties set forth in s. 212.12 and as otherwise provided by law.

The Department's Rule 12A-1.064(5), F.A.C., interpets the statute to apply to commercial fishing vessels:

Commercial fishing vessels which are designed, constructed, and used in a regular and recurring course of business to catch seafood or in the taking or gathering of sponges for the predominant commercial purpose of selling such seafood or sponges at wholesale or retail qualify for proration of tax to the extent provided in paragraph (a).

Based upon the policy interpetation announced in the rule, the
[Corporation's] purchases of vessels and parts thereof qualify for exemption under the statute and rule. The ratio is applied only to Florida purchases, and purchases of vessels and parts thereof outside the State of Florida are therefore fully exempt. With respect to Florida purchases, [Corporation] would calculate its mileage ratio based upon estimates until it accumulates actual mileage for a fiscal year. Because mileage from the Florida territorial limit to dockside and back to non-Florida waters is not considered Florida mileage under the Rule, even Florida purchases will be fully exempt provided [Corporation] accumulates no other mileage in Florida waters.

If [Corporation] accumulates other Florida mileage and seeks to exempt Florida purchases, it will be required to register for sales tax purposes and begin remitting tax on such purchases based upon revised estimates. At the end of its first fiscal year, it will compute its actual mileage ratio and adjust its tax liability for the prior year by additional payment, refund, or credit. The ratio to be applied to Florida purchases in any future year will be based upon the mileage accumulated during the immediately preceding fiscal year.

Regardless of whether the exemption claimed for a purchase under section 212.08(8), F.S., and Rule 12A-1.064(5), F.A.C., is partial or total, [Corporation] would be required to complete an affidavit in substantial conformity with the Rule. The affidavit submitted with your letter of July 24, 1997, is acceptable for
[Corporation] to use for vessel purchases, with the following exceptions:

1. That the word "fishing" be added to the first sentence of
   the first paragraph, since the vessel will be used exclusively for commercial fishing. The sentence should read, "This is to certify that the commercial [fishing] vessel described below will not be used...."
2. That the word "none" be deleted from the line for State
   Registration Number under the Description of Boat. Department of Highway and Safety Motor Vehicles will need to determine whether or not the vessel will be required to be registered and numbered in this State.

The original and the first copy of the affidavit should be sent to the Department of Revenue, Boat Enforcement Unit, P.O. Box 6417, Tallahassee, Florida 32314-6417. The affidavit for use when making Florida purchases of parts is provided only to the seller.

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 that 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 and your request are public records under Chapter 119, F.S., which are subject to disclosure to the public under the conditions of s. 213.22, F.S. Your name, address, and any other details which might lead to identification of the taxpayer must be deleted by the Department before disclosure. In an effort to protect confidential information, we will make the proposed deletions in accordance with your request submitted with your letter of July 24, 1997.

Sincerely,

Vicki Allen
Tax Law Specialist
Technical Assistance & Dispute Resolution (850) 922-4846

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