Did Illinois Watercraft Use Tax apply to a privately purchased used sailboat brought to Illinois after an occasional sale?

Plain-English summary

Illinois Watercraft Use Tax applied to the privately purchased used sailboat even if the underlying sale qualified as an occasional sale under the ordinary sales-and-use-tax rules. The watercraft law had no isolated or occasional-sale exemption.

The tax applied to watercraft acquired by gift, transfer, or non-retail purchase after September 1, 2004 and used in Illinois, whether or not registered under the Boat Registration and Safety Act.

The historical tax rate was 6.25% of purchase price. The tax base could not be lower than fair market value on the purchase date or the date the boat was brought into Illinois, whichever was later, unless the purchaser documented a different reasonable value.

What this means for you

Do not stop after determining that a private seller made an occasional sale. Boats, aircraft, and vehicles can have separate Illinois use-tax regimes.

Common questions

Q: Did buying directly from the prior owner avoid all Illinois tax?
A: No. The separate Watercraft Use Tax could still apply.

Q: Was the $5,000 stated purchase price automatically the tax base?
A: No. The GIL required at least fair market value unless a different value was documented as reasonable.

Citations and references

• 35 ILCS 158/15-15
• 86 Ill. Adm. Code 153.105 and 153.110
• 86 Ill. Adm. Code 130.110 and 150.101(d)
• 86 Ill. Adm. Code 130.101 and 150.101

Subject

Watercraft Use Tax

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2010.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2010/st-10-0015.pdf

Original ruling text

ST 10-0015-GIL 03/02/2010 WATERCRAFT USE TAX
The Watercraft Use Tax is a privilege tax imposed on the privilege of using, in this State,
watercraft acquired by gift, transfer, or non-retail purchase after September 1, 2004. 86 Ill.
Adm. Code 153.105. (This is a GIL.)

March 2, 2010

Dear Xxxxx:
This letter is in response to your undated letter received by the Legal Services Office on
August 14, 2009, in which you request information. The Department issues two types of letter rulings.
Private Letter Rulings (“PLRs”) are issued by the Department in response to specific taxpayer
inquiries concerning the application of a tax statute or rule to a particular fact situation. A PLR is
binding on the Department, but only as to the taxpayer who is the subject of the request for ruling and
only to the extent the facts recited in the PLR are correct and complete. Persons seeking PLRs must
comply with the procedures for PLRs found in the Department’s regulations at 2 Ill. Adm. Code
1200.110. The purpose of a General Information Letter (“GIL”) is to direct taxpayers to Department
regulations or other sources of information regarding the topic about which they have inquired. A GIL
is not a statement of Department policy and is not binding on the Department. See 2 Ill. Adm. Code
1200.120. You may access our website at www.tax.illinois.gov to review regulations, letter rulings
and other types of information relevant to your inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
My name is NAME, I am Hungarian citizen and I live in Hungary. In February 2009 I
purchased a sailboat on Ebay. The sailboat is still in the state of Michigan. I would like
to register and title this sailboat in the state of Illinois and use it there but to make the
registration I have to take care of the taxes related to this sailboat. My case is a little bit
complicated because I am Hungarian, I do not live in the USA and I do not have Social
Security Number either. I only go to Illinois for vacations. In my case how does the tax
work?
Some details about the watercraft:
29 feet sailboat, 1971, purchase price was $5,000.00, I bought it from the previous
owner directly.
Could you please tell me how would it be possible to pay the taxes and how much it
would be?
My stepdaughter lives in CITY so please, consider her address as my mailing address:
ADDRESS

My permanent address in Hungary is:
ADDRESS
I am looking forward to hear from you.

DEPARTMENT’S RESPONSE:

The Illinois Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in
the business of selling tangible personal property to purchasers for use or consumption. See 86 Ill.
Adm. Code 130.101. In Illinois, Use Tax is imposed on the privilege of using, in this State, any kind of
tangible personal property that is purchased anywhere at retail from a retailer. See 86 Ill. Adm. Code
150.101. These taxes comprise what is commonly known as "sales" tax in Illinois. If the purchases
occur in Illinois, the purchasers must pay the Use Tax to the retailer at the time of purchase. The
retailers are then allowed to retain the amount of Use Tax paid to reimburse themselves for their
Retailers' Occupation Tax liability incurred on those sales. If the purchases occur outside Illinois,
purchasers must self assess their Use Tax liability and remit it directly to the Department.
A person does not incur Retailers' Occupation Tax liability on the gross receipts from an
isolated or occasional sale. See 86 Ill. Adm. Code 130.110 regarding "Occasional Sales."
Consequently, the purchaser of that tangible personal property does not incur a corresponding Use
Tax liability on that purchase. See 86 Ill. Adm. Code 150.101(d). As a general proposition, the
occasional sale exemption is only available when a person (as defined in Section 1 of the Retailers’
Occupation Tax Act, 35 ILCS 120/1) purchases an item and then, after using the item, disposes of it
by selling it. See 86 Ill. Adm. Code 130.110. However, the sale will not qualify as an isolated or
occasional sale if the person holds himself out as being engaged in the retail sale of that item or
similar type of tangible personal property.
Even though a purchaser may not incur a Use Tax liability on a purchase of tangible personal
property in an occasional sale transaction, the purchaser of specific types of tangible personal
property may still incur a tax liability in this State under the Aircraft Use Tax Law (35 ILCS 157/10-1
et. seq.), Watercraft Use Tax Law (35 ILCS 158/15-1 et. seq.), or Vehicle Use Tax (625 ILCS 3/31001 et. seq.).
The Watercraft Use Tax is a privilege tax imposed on the privilege of using, in this State,
watercraft acquired by gift, transfer, or non-retail purchase after September 1, 2004. The tax is
imposed on the use of watercraft in this State regardless of whether the watercraft is actually
registered under the Boat Registration and Safety Act. The rate of tax is 6.25% of the purchase price
for each watercraft that is subject to tax under the Law. 35 ILCS 158/15-15. However, the purchase
price shall not be less than the fair market value of the watercraft on the date the watercraft is
purchased or the date the watercraft is brought into the State, whichever is later, unless the
purchaser can document that a different value is reasonable. See 86 Ill. Adm. Code 153.110. The
Watercraft Use Tax does not contain an exemption for isolated or occasional sales.
Watercraft Use Tax is reported on Form RUT-75, Aircraft/Watercraft Use Tax Transaction
Return. This form is a multi-part (carbon) form that is not available on the Department’s website. To
obtain this form, please call the Department’s Forms Order Hotline at 1-800-356-6302.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.

Very truly yours,

Debra M. Boggess
Associate Counsel
DMB:msk