Is a chartered ocean-liner business conference held in international waters subject to New York sales tax?

Plain-English summary

Richmond Events plans to charter an ocean liner for two-day, three-night business conferences that sail out of New York harbor into international waters. Invited guests (senior officers of public companies) attend for free, while technology vendor executives pay a flat rate to set up meeting areas in the ship's lounge, hold business meetings, and participate in strategic conferences, workshops, and networking events. The flat rate covers accommodations and use of the ship's social and entertainment facilities (though not onboard drinks or travel to/from the ship), and Richmond Events licenses use of the ship's facilities directly to the paying executives. Critically, every event -- including all meals -- happens only after the ship has left New York waters. Richmond Events asked whether its flat-rate charges to the executives are subject to New York sales and use tax.

New York's sales tax reaches specific categories of transactions -- tangible property sales, certain enumerated services, prepared food and drink, hotel occupancy, admissions, and dues -- but only when those transactions actually occur within New York and its territorial waters. Because everything that might otherwise be taxable here (like the sale of meals, or use of the ship's social facilities) happens entirely outside New York State and its territorial waters once the ship is underway, Richmond Events' flat-rate charge for the conference program isn't subject to New York sales tax. The Department did flag one caveat: if Richmond Events ever sells tangible property or provides a taxable service while the ship is still docked in New York or navigating through New York waters, that specific transaction would have to be taxed.

What this means for you

Businesses running conferences, events, or charters on ships that leave state waters

Structuring your program so that all potentially taxable activity (meals, facility use, admissions) happens only after leaving state waters can keep the whole charge outside New York's sales tax -- but any sale or taxable service that occurs while still docked or in-state waters remains taxable.

Charter companies and event planners working with cruise lines or chartered vessels

Track precisely when and where each taxable-category activity (food service, ticketed access, etc.) actually occurs relative to the vessel's position -- the tax outcome for an otherwise-identical event can differ sharply based on whether it happens in New York waters or beyond them.

Accountants and tax professionals

This ruling is a clean illustration of New York's territorial reach for sales tax purposes applied to a maritime conference/charter business model -- useful for any client running events, cruises, or excursions that begin in New York but conduct their taxable-category activities offshore.

Common questions

Q: Is a conference held entirely in international waters subject to New York sales tax just because the ship departs from New York?
A: No -- what matters is where the potentially taxable activity (meals, facility use, etc.) actually takes place, not where the voyage begins.

Q: What would make part of this kind of charter's charges taxable?
A: Any sale of tangible property or taxable service that occurs while the ship is still docked in New York or navigating through New York State waters.

Q: Does the fact that attendance is free for some guests affect the analysis?
A: No -- the analysis turns on where the taxable-category activities occur, not on who is or isn't charged for attending.

Q: Does this ruling apply to my chartered vessel or offshore conference business?
A: Not automatically. An Advisory Opinion binds the Department only for the taxpayer and facts it was issued to, and it can't be relied on by anyone else. Your own itinerary and activities would need their own analysis.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1997.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a97_50s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-97(50)S
Sales Tax

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S970321A

On March 21, 1997, the Department of Taxation and Finance received a
Petition for Advisory Opinion from Richmond Events, Inc., 305 Madison Avenue, New
York, New York 10165-3109.
The issue raised by Petitioner, Richmond Events, Inc., is whether amounts
charged to its customers are subject to the New York State and local sales or use
taxes.
Petitioner submits the following facts as the basis for this Advisory
Opinion.
Petitioner intends to hold business conferences on ocean liners that sail
into international waters from New York harbor.
Petitioner will charter an ocean liner for a two-day, three-night period.
During that time, Petitioner will run a number of events, where invited guests,
who are senior officers of public companies, will meet with senior executives
from a variety of technology product and service vendors. All of the events,
including meals, will take place after the ship has left New York waters.
Attendance for the invited guests will be free of charge and by invitation
only. The executives, who will be charged a flat rate, will be permitted to set
up meeting areas in the ship’s lounge, hold business meetings with guests, and
participate in a program of strategic conferences and workshop sessions and
networking activities.
The flat rate will also include the charges for
accommodations and the use of the ship’s social and entertainment facilities.
(Drinks on board and travel to and from the ship are not included.) Petitioner,
as indicated, will charter the ocean liner, and will enter into a license
agreement directly with the executives for their use of the ship’s facilities.
Section 525.2(a)(1) of the Sales and Use Tax Regulations states that:
The sales tax is imposed on the receipts, unless specifically
exempt, from every retail sale of tangible personal property, from
every retail sale of specifically enumerated utility services, from
every retail sale of other specifically enumerated services and from
the sale of prepared or ready to be eaten food, for consumption on
or off premises, drinks, restaurant and catered meals, and from
charges for hotel occupancy, admissions and dues.
Each of the
various types of transactions has statutory exemptions, exceptions
and limitations.

-2­
TSB-A-97(50)S
Sales Tax

Since all events on the ship which might be subject to sales tax (such as
the sale of meals) occur outside of New York State and its territorial waters,
Petitioner’s flat rate charges for the use of the ship’s facilities are not
subject to sales tax.
However, if Petitioner sells any tangible personal
property or provides any services subject to tax while the ship is docked in New
York or underway in New York waters, it must collect the New York State and local
sales and use tax.

DATED: August 14, 1997

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau

The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.