Does Missouri sales tax apply to renting floating dock or boat slip space at a marina, including on multi-year leases, and can a long-term renter claim a permanent-resident exemption?

Subject

Taxability of Floating Docks

Plain-English summary

The Missouri Department of Revenue ruled that a long-time marina customer's rental of floating dock (boat slip) space is subject to Missouri sales tax, resolving three separate questions the Applicant raised after a lessor started charging sales tax on the annual dock rental.

The Applicant had rented floating dock space from a lessor for ten years, with the lease renewed and billed annually. For the last two billing cycles, the lessor started charging sales tax on the rental, prompting the Applicant to ask the Department whether that tax was proper.

First, the Department held that floating boat docks are tangible personal property (citing Siverly v. Director of Revenue), and that rentals of tangible personal property are taxable under Section 144.020.1(8), RSMo, unless the lessor already paid sales or use tax when it purchased the dock. Because the Applicant did not show the lessor had paid tax on the dock's purchase, the rental was taxable.

Second, the Department held that every lease payment is taxable, even under a long-running lease billed annually over many years -- there is no exception in Missouri law for payments under a multi-year lease of a year or more.

Third, the Department held that the Applicant is not a "permanent resident" exempt from the hotel/motel-style rental tax, because the dock space is not a "room" and the Applicant could not actually live on the dock space itself as a guest for thirty consecutive days or more, which is what the permanent-resident exemption requires.

What this means for you

Marina customers renting dock or slip space

If you rent floating dock or boat slip space from a marina in Missouri, expect your lessor to charge sales tax on that rental unless the lessor can show it already paid sales or use tax when it purchased the dock structure itself. This applies even if you've had the same lease for years and it renews annually -- length of tenancy doesn't create an exemption.

Marina owners and lessors of floating docks

Floating docks are treated as tangible personal property, not real estate, for Missouri sales tax purposes. That means renting them out is taxable like any other tangible personal property rental under Section 144.020.1(8), RSMo, and 12 CSR 10-108.700 -- unless you already paid tax when you bought the dock. If you haven't been charging tax on dock rentals, this ruling signals the Department expects that tax to be collected on each rental payment.

Long-term renters hoping for a "permanent resident" exemption

Don't expect the permanent-resident exemption that applies to hotel and motel rooms (12 CSR 10-110.220) to extend to dock space. That exemption is built around a person actually residing in a room as a guest for 30 or more consecutive days. Dock space isn't a room, and a boat slip renter isn't living aboard the dock itself, so the exemption doesn't apply no matter how long the rental relationship has lasted.

Common questions

Q: Are floating dock and boat slip rentals subject to Missouri sales tax?
A: Yes. The Department treats floating docks as tangible personal property, and rentals of tangible personal property are taxable under Section 144.020.1(8), RSMo, and 12 CSR 10-108.700, unless the lessor already paid sales or use tax when purchasing the dock.

Q: If I've paid for the same dock lease for ten years, does the tax stop applying after a while?
A: No. Each lease or rental payment is subject to tax, and there is no exception for payments made under a long-term lease of a year or more, even one billed annually over many years.

Q: Can a long-term dock renter claim the "permanent resident" exemption used for hotels and motels?
A: No. A permanent resident is someone who contracts in advance for a room and actually stays as a guest for 30 or more consecutive days. Dock space is not a room, and the renter cannot live on the dock space itself as a guest, so the exemption doesn't apply.

Q: Whose responsibility is it to charge and collect this tax -- the renter or the marina?
A: Based on the facts described, the lessor (marina) charged the Applicant sales tax on the dock rental payments, consistent with how tax on tangible personal property rentals is typically collected from the lessee at the time of payment.

Q: Can another dock renter rely on this ruling for their own situation?
A: Not automatically. This is a Missouri letter ruling, binding on the Department only with respect to the requesting Applicant, only for three years from its date, and only so long as the facts and the underlying law don't change. A different renter should confirm their own facts match those described here and consult a tax professional before relying on this result.

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8236

Original ruling text

Dear Applicant:

This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated February 17, 2023.

The facts as presented in your letter ruling request are summarized as follows:

Applicant has rented floating dock space from a Lessor for ten years, with the lease renewal and billing cycle being done annually.  The Lessor has charged the Applicant sales taxes on the dock space rental for each of the last two billing cycles.

ISSUE 1:

Are Applicant's receipts from the rental of boat spaces and slip covers subject to Missouri sales tax?

RESPONSE 1:

Yes.  The Applicant's rentals of dock space are subject to Missouri sales tax.

Section 144.020.1, RSMo, imposes a sales tax on sales of tangible personal property and certain enumerated services.  Section 144.020.1(8), RSMo, provides:

A tax equivalent to four percent of the amount paid or charged for rental or lease of tangible personal property, provided that if the lessor or renter of any tangible personal property had previously purchased the property under the conditions of sale at retail or leased or rented the property and the tax was paid at the time of purchase, lease or rental, the lessor, sublessor, renter or subrenter shall not apply or collect the tax on the subsequent lease, sublease, rental or subrental receipts from that property.

For the purpose of sales tax, floating boat docks are tangible personal property.  See Siverly v. Director of Revenue , Case No. 11-1431 RS (Mo. Admin. Hearing Comm'n, May 13, 2014).  Payments for the lease of tangible personal property are subject to tax unless the lessor paid tax on the purchase of the property.  Section 144.020.1(8), RSMo; 12 CSR 10-108.700.  The statutory language referencing previously paid taxes operates similarly to a sale for resale exemption for leases.  In other words, had Lessor paid sales or use taxes on the tangible personal property, the subsequent lease to the Applicant would not be taxed.  Here, the Applicant has not alleged that the Lessor paid taxes on the property purchases.  Therefore, the Applicant's lease is subject to sales tax on the rental of boat spaces at the marina.

ISSUE 2:

Is the Applicant required to pay sales taxes upon each lease payment, even if separated by a year or more?

RESPONSE 2:

Yes. Each of the Applicant's payments under a multi-year rental or lease are subject to tax.

As noted above, payments for the lease of tangible personal property are subject to tax unless the lessor paid tax on the purchase of the property.  Section 144.020.1(8), RSMo; 12 CSR 10-108.700.  All lease and rental payments are subject to this tax, no exception is made for payments under a long-term lease of a year or more.  Id. , see also , Section 12 CSR 10-108.700(4)(B) (sales taxes imposed on rental payments made over three years).  Here, the Applicant's long-term lease remains taxable as there is no statute exempting the lease payments from taxation due to the length of the lease.

ISSUE 3:

Is the Applicant a permanent resident of the dock space, and therefore not subject to a tax on the lease payments?

RESPONSE 3:

No. The Applicant's lease of the dock space does not qualify the Applicant as a permanent resident.

Payments made for the lease and rental of hotels and motels are generally subject to tax.  Section 144.020.1(6), RSMo; 12 CSR 10-110.220(1).  On the other hand, permanent residents of a hotel or motel are not subject to tax on their lease or rental payments. 12 CSR 10-110.220(3)(B).  A permanent resident is an individual who contracts in advance for a room for a period of thirty consecutive days or more and who actually remains as a guest for thirty consecutive days or more. 12 CSR 10-110.220(2).

In this instance, the Applicant is not a permanent resident because the dock space is not a room, and the Applicant could not have lived on the dock space itself as a guest for thirty consecutive days or more.

This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals.  If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change.  For this reason, the interpretation set forth above should be reviewed on a regular basis.  Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

Should additional information be needed, please contact Legal Counsel Nathan Jefferson, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.

Sincerely,

Wayne Wallingford