Is sales tax on a ferry boat purchase limited to the first $230,000 of the price in New York?

Plain-English summary

A company that runs ferry service within New York City under a contract with the NYC Economic Development Corporation planned to buy ten or more ferry boats and asked whether sales/use tax would be limited to the first $230,000 of each vessels price, and whether a refund/credit applies.

The Office of Counsel concluded:

• Tax Law section 1115(jj) (effective June 1, 2015) exempts the receipts over $230,000 from the sale of a vessel (including any outboard motor or trailer sold with it). So tax is computed only on the first $230,000 of each vessels price.
• The $230,000 figure includes the vessel and the property it is equipped/outfitted with that is necessary for normal operation (furniture, fixtures, built-in appliances, window coverings, climate control, navigation and entertainment systems) plus any seller shipping/delivery charge. It excludes accessories like deck furniture, decor, tableware, glassware, or cookware (TSB-M-15(2)S).
• The vessels may also qualify for a refund or credit under section 1119(b) — available for vessels with seating capacity over 20 passengers carried for hire and used to provide local transit service — with the amount based on the vessels local transit service percentage, claimed on Form AU-11.

What this means for you

Buyers of larger boats and vessels

The $230,000 cap is a meaningful break: you pay sales/use tax only on the first $230,000 of the vessels price (including operation-necessary equipment), and everything above that is exempt. Buy the vessel and its operating equipment under that umbrella.

Know what counts toward the cap

Operation-necessary equipment counts toward the first $230,000; lifestyle accessories (decor, tableware, etc.) do not count — so they fall outside the taxable base computation as described in TSB-M-15(2)S.

Transit operators: stack the refund

If your vessel carries more than 20 passengers for hire in local transit service, you may also recover tax via the section 1119(b) refund/credit (including on parts, fuel, maintenance), proportional to your local transit percentage.

Common questions

Q: How much of a $1 million ferry is taxed?
A: Only the first $230,000 (including operation-necessary equipment); the receipts above $230,000 are exempt under section 1115(jj).

Q: Do decor and tableware count toward the $230,000?
A: No. Accessories such as deck furniture, decor, tableware, glassware, and cookware are not included in the price used to compute the cap.

Q: Can the operator also get a refund?
A: Possibly. Section 1119(b) provides a refund/credit for vessels seating more than 20 passengers for hire used in local transit, based on the local transit service percentage; apply with Form AU-11.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law section 1115(jj) (partial exemption: receipts over $230,000 from a vessel sale are exempt)
• Tax Law section 1119(b) (refund/credit for vessels carrying more than 20 passengers for hire used in local transit)
• TSB-M-15(2)S (how to compute the $230,000 vessel cap)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2017.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a17_6s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-17(6)S
Sales Tax
May 1, 2017

Office of Counsel
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S160303A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTED REDACTED REDACTED REDACED REDACTED RE (“Petitioner”). Petitioner asks
whether the tax imposed on its purchase of ferry boats in the State of New York will be limited to and
computed on the first $230,000 of the consideration paid for the vessel. We conclude that Petitioner’s
purchases are eligible for the partial exemption in Tax Law § 1115(jj) for all receipts in excess of
$230,000. Petitioner’s purchases may also be eligible for a refund or credit under § 1119(b), which
includes parts, equipment, maintenance, fuel, and lubricants.
FACTS
Petitioner supplies ferry service exclusively within the City of New York. Petitioner entered
into a contract with the New York City Economic Development Corporation (EDC) to facilitate
waterfront, maritime and other transportation development projects through the City of New York. To
further this contract, Petitioner will purchase ten or more ferry boats to be used to provide ongoing
ferry service to the public on various routes and locations within the City of New York. All of the
vessels will be purchased after June 1, 2016. Petitioner will also purchase vessels with a seating
capacity of more than 20 passengers for the transportation on water of passengers for hire, pursuant to
a contract, franchise or consent between Petitioner and the City of New York or an agency of the City.
The rates for Petitioner’s ferry boat service are exclusively regulated by the EDC. In addition, the
EDC has the sole discretion to make any adjustment to the base fare charged by Petitioner to its
customers pursuant to the Metropolitan Transportation Authority fare listings.
Petitioner asks whether the amount on which sales or use tax is imposed upon the purchase of
the ferry boats is limited to $230,000 of the purchase price or consideration paid for the purchase of
each vessel, not including consideration paid for accessories added to or included in the purchase of
each vessel such as deck furniture, items of décor, tableware, glassware or cookware (TSB-M-15(2)S).
Petitioner also asks whether the taxable first $230,000 cap includes the items necessary for its normal
use. Finally, Petitioner asks about the applicability of the refund or credit under Tax Law § 1119(b).
ANALYSIS
Part SS of Chapter 59 of the Laws of 2015 amended the Tax Law to provide an exemption
from State and local sales and use tax for receipts or consideration in excess of $230,000 from the sale
of a vessel, including any outboard motor or trailer sold in conjunction with the vessel. See Tax Law
§1115(jj). This exemption took effect on June 1, 2015.

-2-

TSB-A-17(6)S
Sales Tax
May 1, 2017

The price of the vessel for purposes of the $230,000 cap and the amount in excess of $230,000
is computed including 1) the price of the vessel itself, including property affixed to the vessel for “its
equipping, such as furniture, fixtures, built-in appliances, window coverings, climate control systems,
navigation equipment, or entertainment systems” and “property that the vessel is outfitted with at the
time of sale that is necessary for its normal operation” 2) the price of any outboard motor sold with the
vessel; 3) the price of any trailer sold with the vessel; and 4) any charges by the seller for shipping or
delivery. See TSB-M-15(2)S.
Petitioner’s vessels were or will be purchased after the effective date of Tax Law § 1115(jj).
Therefore, State and local sales and use tax will be computed only on the first $230,000 of the
purchase price or consideration paid for the vessel and the items necessary for its normal operation, as
described above. Property that cannot be included in the price or consideration for the vessel for
purposes of computing when the $230,000 cap is reached includes certain accessories such as deck
furniture, items of décor, tableware, glassware or cookware or other items not necessary for the normal
operation of the vessel. See TSB-M-15(2)S.
Petitioner’s vessels also may qualify for a refund or credit under Tax Law § 1119(b), which
applies to the sale to or use by a vessel operator “of a vessel with a seating capacity of more than
twenty passengers used for the transportation on water of passengers for hire, and of parts, equipment,
lubricants, diesel motor fuel, maintenance, servicing or repair purchased and used in the operation of
any such vessel by such operator.” In order to qualify for the refund or credit provided by this section,
Petitioner’s vessels must be used to provide a local transit service. The amount of refund or credit
available will depend on the vessel’s “local transit service percentage.” See Tax Law § 1119(b); TSBM-04(8)S. If eligible, Petitioner can use Form AU-11, Application for Credit or Refund of Sales or
Use Tax, to apply for a refund under Tax Law § 1119(b) for taxes paid on property or services.

DATED: May 1, 2017

/S/
DEBORAH R. LIEBMAN
Deputy Counsel
NOTE:

An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts
set forth therein and is binding on the Department only with respect to the person or entity
to whom it is issued and only if the person or entity fully and accurately describes all
relevant facts. An Advisory Opinion is based on the law, regulations, and Department
policies in effect as of the date the Opinion is issued or for the specific time period at issue
in the Opinion. The information provided in this document does not cover every situation
and is not intended to replace the law or change its meaning.