Were a utility's purchase and simultaneous Rhode Island resale of a self-unloading bulk-carrier vessel subject to sales or use tax?

Plain-English summary

Neither the Utility's purchase nor its simultaneous resale of the bulk-carrier vessel was subject to Rhode Island sales or use tax. The Division applied the statutory exemption for new and used boats and treated the vessel as a boat because the quoted dictionary definition included a ship or vessel.

The Utility generated electricity and used the vessel under a time charter to carry coal from mid-Atlantic ports to power plants in Salem and Somerset, Massachusetts. After terminating the charter, the Utility agreed to buy the vessel from its current owner and immediately resell it to a new owner.

The Utility acted as purchaser and seller only to facilitate the owner change. The parties intended for the 38,234-long-ton self-unloading bulk carrier to be received from the current owner and simultaneously delivered to the new owner in Rhode Island.

The Division read R.I.G.L. § 44-18-30 (XX), as printed on the official page, to exempt the sale, storage, use, or other consumption of any new or used boat. On that basis, both legs of the transaction were exempt.

What this means for you

Vessel buyers and sellers

The ruling treated a large commercial ship as a boat for the exemption. Document the vessel and each transfer when purchase and resale occur back-to-back.

Utilities and charterers

The exemption applied even though the Utility briefly appeared as both buyer and seller solely to unwind the charter and replace the vessel owner.

Accountants and tax professionals

This is a transaction-specific 1995 order. Confirm the current text and scope of Rhode Island's boat exemption before applying the same treatment to another vessel transfer.

Common questions

Was the Utility's purchase taxable? No. The Division treated the vessel as an exempt boat.

Was the immediate resale taxable? No. The final ruling expressly exempted both the purchase and the simultaneous sale.

Why did the Utility enter the chain of title? To facilitate termination of the existing time charter and replacement of the vessel's owner.

Where was the transfer intended to occur? The vessel was to be received from the current owner and simultaneously delivered to the new owner in Rhode Island.

Did the order identify the precise boat-exemption subsection? No. The official page prints the citation as § 44-18-30 (XX).

Citations and references

• R.I. Gen. Laws § 44-18-30 (XX) — boat or vessel exemption as printed in the official ruling.

Source

• Landing page: Rhode Island Declaratory Rulings
• Declaratory order: Declaratory Order 1995-01

Original ruling text

Ruling Request No. 95-01

Declaratory Rulings

Ruling Request No. 95-01

Re: Request for Ruling Regarding the Sales/Use Tax on Boats

Request for Ruling

On behalf of your client, ("Utility"), you request a declaratory ruling regarding the application of the sales/use tax to the purchase, use or resale of a vessel in Rhode Island

Facts

Utility is a regulated public utility engaged in the business of generating electricity. Utility currently contracts under a time charter with the present owner of the vessel to transport coal from ports in the mid-Atlantic states to Utility's power plants in Salem and Somerset, Massachusetts.

On November 1, 1994, Utility gave notice of termination of the time charter. Pursuant to the time charter termination, Utility has entered into agreements to purchase the vessel and simultaneously resell it. The vessel is a 38,234 Long Tons total deadweight capacity Self-Unloading Bulk Carrier and is 665 feet long, 95 feet wide, 56 feet deep with a draft of 34 feet.

The purpose of the purchase and simultaneous sale is to terminate the related time charter contract with the present owners of the vessel who will be replaced by the new owner. Utility acts as purchaser and seller only to facilitate the transaction. The vessel is intended to be received from the present owner and simultaneously delivered to the new owner in the State of Rhode Island.

Ruling Requested

Utility respectfully petitions for a declaratory ruling that neither the purchase nor the simultaneous sale of the vessel will be subject to Rhode Island sales or use taxes.

Discussion

Rhode Island General Law 44-18-30 (XX) entitled "Boats or vessels generally" exempts from taxation the sale, storage, use or other consumption in this state of any new or used boat. "Boat" is defined in Webster's Dictionary, second edition (unabridged), as including "ship" or "vessel." Therefore, the purchase of the vessel falls within the exemption granted by R.I.G.L. 44-18-30 (XX).

Ruling

Neither the purchase nor the simultaneous sale of the vessel will be subject to the Rhode Island sales or use taxes.

This ruling may be relied upon by this taxpayer and shall be valid until the applicable statutory provisions are amended in a manner requiring a different result.

**R. Gary Clark

Tax Administrator

March 28, 1995**