New York Bill Revises Sales And Use Tax Laws For Vessels

By Steven A. Clark

An exciting change for yacht owners and marine industry constituents in the State of New York was recently signed into law - the new legislation essentially caps the combined state and county sales/use tax liability for the purchase or use of a vessel in the State of New York. New subdivision (JJ) of Section 1115 of the New York Tax Law, to be effective June 1, 2015, will exempt from taxation receipts in excess of $230,000 from every sale or use of a vessel. By way of example, a $1,000,000 yacht that is taxable under the current law (assuming taxable in Suffolk County, a popular yachting destination) would be taxed at 8.625% for a tax liability of $86,250. Under the "new" law, only the first $230,000 of the $1,000,000 would be subject to tax, resulting in a tax liability of $19,837.50; clearly a significant savings.

We wish to caution vessel owners, however, that sales/use tax liability in the State of New York still remains a complicated matter, especially if a vessel owner has previously operated their vessel in New York waters (i.e. prior to June 1, 2015). Prior presence could subject the vessel owner to potential sales/use tax liability under the old law, which as exemplified, can be a much more significant number.

We wish to further caution vessel owners that any advice to quickly register a vessel with the State of New York and pay sales/use tax under the new law could be misguided and might result in unexpected (and needless) additional tax liability. Each situation must be carefully analyzed.

Our firm would be happy to discuss/review with you the new law, the facts concerning your current ownership and operation of your yacht, the potential implications of the new law based on your situation, and ultimately provide guidance as to how best to address any potential tax liability (and hopefully, tax savings).