Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This rule explains:
* Nonresident temporary use of watercraft in Washington waters
for sales and use tax purposes;
* Purchase and delivery of vessels in Washington by
nonresidents, and the application or exemption of retail sales and use
taxes;
* The vessel use permit, authorized by
RCW
82.08.700 and
82.12.700,
for one year in Washington waters by nonresident individuals for vessels 30
feet or longer;
* The nonresident vessel permit, authorized by
RCW
88.02.620, for individual persons extending
their stay an additional 60 days on Washington waters;
* The nonresident entity vessel permit, authorized by
RCW
88.02.620 and
82.32.865,
that allows for an additional 60 days on Washington waters; and
* The nonresident vessel repair affidavit required when vessels
are in Washington exclusively for repair.
RCW
88.02.570.
(a)
Examples. Examples found in
this rule identify a number of facts and then state a conclusion. These
examples should be used only as a general guide. The tax results of other
situations must be determined after a review of all the facts and
circumstances.
(b)
Other
rules that may be relevant.(i) WAC
458-20-136
Manufacturing, processing for hire, fabricating;
(ii) WAC
458-20-178
Use tax and the use of tangible personal property;
(iii) WAC
458-20-193
Interstate sales of tangible personal property;
(iv) WAC
458-20-19301
Multiple activities tax credits;
(v) WAC
458-20-145
Local sales and use tax; and
(vi)
WAC
458-20-211
Leases or rentals of tangible personal property, bailments.
(2)
Business and
occupation (B&O) tax. Retailing B&O tax is due on all sales of
watercraft to consumers if delivery is made within the state of Washington,
even though the sale may qualify for an exemption from retail sales tax. If the
seller also manufactures the vessel in Washington, the seller must report under
both the manufacturing and wholesaling or retailing classifications of the
B&O tax, and claim a multiple activities tax credit (MATC). For additional
information on manufacturing and the MATC, manufacturers should refer to WAC
458-20-136
and
458-20-19301.
(3)
Retail sales tax. The retail
sales tax generally applies to the sale of watercraft to consumers when
delivery is made within the state of Washington. Under certain conditions,
however, retail sales tax exemptions are available for sales of watercraft to
nonresidents of Washington, even when delivery is made within Washington.
(a)
Exemptions for sales of watercraft,
to nonresidents, requiring United States Coast Guard documentation and certain
sales of vessels to residents of foreign countries.
RCW
82.08.0266 provides an exemption from retail
sales tax for sales of watercraft to residents of states other than Washington
for use outside this state, even when delivery is made within Washington. The
exemption provided by
RCW
82.08.0266 is limited to sales of watercraft
requiring United States Coast Guard registration or registration by the state
of principal use according to the Federal Boating Act of 1958.
RCW
82.08.02665 provides a retail sales tax
exemption for sales of vessels to residents of foreign countries for use
outside this state, even when delivery is made in Washington. This exemption is
not limited to the types of watercraft qualifying for the exemption provided by
RCW
82.08.0266. The term "vessel," for the
purposes of
RCW
82.08.02665, means every watercraft used or
capable of being used as a means of transportation on the water, other than a
seaplane.
(i)
Exemption
requirements. The following requirements must be met to perfect any
claim for exemption under
RCW
82.08.0266 and
82.08.02665:
(A) The watercraft must not be used within
this state for more than 45 days from delivery;
(B) The seller must examine acceptable proof
that the buyer is a resident of another state or a foreign country;
and
(C) The seller, at the time of
the sale, must retain as a part of its records a completed exemption
certificate to document the exempt nature of the sale. This requirement may be
satisfied by using the department's "Buyer's Retail Sales Tax Exemption
Certificate," or another certificate with substantially the information as it
relates to the exemption provided by
RCW
82.08.0266 and
82.08.02665.
The certificate must be completed in its entirety, and retained by the seller.
A blank certificate is available on the department of revenue's (department)
website at dor.wa.gov.
The seller should not accept an exemption certificate if the
seller becomes aware of any information prior to the completion of the sale
that is inconsistent with the buyer's claim of residency, such as a Washington
address on a credit application.
(ii)
Component parts and
repairs. The exemptions provided by
RCW
82.08.0266 and
82.08.02665
apply only to sales of watercraft. For the purposes of these exemptions, the
term "watercraft" includes component parts which are installed in or on the
watercraft prior to delivery to and acceptance by the buyer, but only when
these parts are sold by the seller of the watercraft. "Component part" means
tangible personal property which is attached to and used as an integral part of
the operation of the watercraft, even if the item is not required mechanically
for the operation of the watercraft. Component parts include, but are not
necessarily limited to, motors, navigational equipment, radios, depthfinders,
and winches, whether they are permanently attached to the watercraft or held by
brackets which are permanently attached. If held by brackets, the brackets must
be permanently attached to the watercraft in a definite and secure manner.
These exemptions do not extend to the sale of boat trailers,
repair parts, or repair labor. These exemptions also do not extend to a
separate seller of unattached component parts, even though these parts may be
manufactured specifically for the watercraft and/or permanently installed in or
on the watercraft prior to the watercraft being delivered to and accepted by
the buyer.
(b)
A one year "use permit" for vessels 30 feet or longer.
RCW
82.08.700 and
82.12.700
provide the retail sales and use tax exemptions for sales of vessels 30 feet or
longer to individuals who are nonresidents of Washington.
(i)
Exemption requirements. The
following requirements must be met for an individual to claim these exemptions:
(A) The individual must provide valid proof
of nonresidency at the time of purchase;
(B) The vessel purchased must measure at
least 30 feet in length; and
(C)
The individual must obtain a valid use permit from the vessel dealer authorized
to sell use permits.
(ii)
Valid proof of
nonresidency. An individual may prove nonresidency with identification
that:
(A) Includes a photograph of the
individual;
(B) Is issued by the
jurisdiction in which the individual claims residency;
(C) Includes the individual's residential
address; and
(D) Is issued for the
purpose of establishing an individual's residency in a jurisdiction outside
Washington state.
Acceptable identification includes a valid out-of-state
driver's license.
(iii)
Use permits. A use permit
is not renewable. It costs $500 for vessels 30 to 50 feet, and $800 for vessels
greater than 50 feet in length. The permit includes an affidavit from the buyer
declaring that the purchased vessel will be used in a manner consistent with
this exemption. The use permit also includes an adhesive sticker (sticker) that
must be displayed on the purchased vessel and is valid for 12 consecutive
months from the date of purchase. The sticker serves as proof of a validly
issued use permit. Vessel dealers are not obligated to issue use permits to any
individual. Buyers must elect this exemption irrevocably and may not elect
additional exemptions under
RCW
82.08.0266 and
82.08.02665
for the same period. Individuals must wait 24 months from the expiration of a
use permit before claiming the use tax exemption for their vessel pursuant to
RCW
82.12.0251.
(iv)
What are the obligations of vessel
dealers? A vessel dealer electing to issue a use permit under this
subsection must:
(A) Examine and determine, in
good faith, whether the individual has valid proof of nonresidency.
(B) Use the department's approved use
permits. Use permits are available on the department's website at
dor.wa.gov.
(C) Retain copies of
issued use permits in their records for the statutory period. For information
about the statutory period and maintaining records, please refer to WAC
458-20-254.
(D) Provide copies of issued use permits to
the department on a quarterly basis. Copies of issued permits must be sent to:
Taxpayer Account Administration Division, Department of Revenue, P.O. Box
47476, Olympia, Washington 98504-7476.
(E) Collect, remit, and report use permit
fees. Dealers report use permit fees on their excise tax returns and remit in
accordance with
RCW
82.32.045.
(F) Electronically file all returns, as
described in
RCW
82.32.080, with the department.
Nonelectronically filed returns are not deemed filed unless approved by the
department for good cause shown.
(v)
Liability for retail sales
tax.(A) A nonresident individual may
purchase a vessel in Washington without paying retail sales tax and remain in
the state for 12 consecutive months, from the date of issuance, by obtaining a
use permit under
RCW
82.08.700 from the vessel dealer. If the
nonresident individual uses that vessel in Washington after the use permit
expires, the individual will be liable for retail sales tax on the original
selling price of that vessel (along with interest from the date of purchase at
the rate provided in
RCW
82.32.050) .
(B) Vessel dealers are personally liable for
retail sales tax if the dealer either does not collect retail sales tax when
making sales to individuals without valid identification establishing
nonresidency, or fails to maintain records of sales as provided under (b)(iv)
of this subsection.
(4)
Deferred retail sales or use
tax. If Washington retail sales tax has not been paid, persons using
watercraft on Washington waters are required to report and remit to the
department sales tax (commonly referred to as deferred retail sales tax) or use
tax, unless the use is specifically exempt by law. A credit against
Washington's use tax is allowed for retail sales or use tax previously paid by
the user or the user's bailor or donor with respect to the property to any
other state of the United States, any political subdivision thereof, the
District of Columbia, and any foreign country or political subdivision thereof,
prior to the use of the property in Washington. For additional information on
use tax refer to WAC
458-20-178.
(a)
Purchased and used within
Washington for more than 45 days. Tax is due on the use by any
nonresident of watercraft purchased from a Washington seller and first used
within this state for more than 45 days if retail sales or use tax was not paid
by the user. Tax is due notwithstanding the watercraft qualified for a retail
sales tax exemption at the time of purchase.
(b)
Temporary use. Use tax does
not apply, for the first 60 days, for temporary use or enjoyment of watercraft
brought into this state by nonresidents while temporarily within this state.
(i) For watercraft owned by nonresident
entities (i.e., corporations, limited liability companies, trusts,
partnerships, etc.), it will be presumed that use within Washington exceeding
60 days in any 12-month period is more than temporary use and use tax is due,
except as otherwise provided in this rule. For vessels at least 30 feet in
length, but no more than 200 feet in length, see subsection (e) of this
subsection.
(ii) Nonresident
individuals (whether residents of other states or foreign countries) may
temporarily bring watercraft into this state for 60 days before they are
required to obtain a nonresident vessel permit, from the department of
licensing, to continue their use or enjoyment without incurring liability for
the use tax.
RCW
88.02.620. Such use may not exceed a total of
six months in any 12-month period. Eligibility for this six-month exemption
period is conditioned on the following requirements:
(A) The watercraft must be issued a valid
number under federal law or by an approved authority of the state or county of
principal operation, be documented under the laws of a foreign country, or have
a valid United States customs service cruising license issued under
19 C.F.R. Sec.
4.94. Failure to meet the applicable
documentation and identification requirements will result in a loss of the
exemption.
(B) The watercraft must
be used in Washington only for the following purposes:
(I) Personal use;
(II) Chartering a vessel with a captain or
crew, as long as individual charters are for at least three or more consecutive
days in duration, excluding the transit time described in (b)(ii)(B)(III) of
this subsection; or
(III) Necessary
transit to or from the start or end point of a charter described in
(b)(ii)(B)(II) of this subsection.
(c)
Repair, alteration, or
reconstruction of watercraft in Washington. Watercraft owned by
nonresidents and in this state exclusively for repair, alteration, or
reconstruction are exempt from the use tax if removed from this state within 60
days.
RCW
88.02.570 and
82.12.0251.
If repair, alteration, or reconstruction cannot be completed within this
period, the exemption may be extended by filing with the department's
compliance division an affidavit as required by
RCW
88.02.570 verifying the vessel is located on
the waters of this state exclusively for repair, alteration, reconstruction, or
testing. This document, titled "Nonresident Vessel Repair Affidavit," is
effective for 60 days. If additional extensions of the exemption period are
needed, additional affidavits must be sent to the department prior to the
expiration date. Failure to file this affidavit can result in requiring that
the vessel be registered in Washington and subject to the use tax.
(d)
One year "use permit" for
nonresident individuals - Use tax exemption for vessels 30 feet or
longer.
RCW
82.12.700 provides an exemption from use tax
for the purchase of vessels 30 feet or longer used in Washington by nonresident
individuals. This exemption is available to nonresident individuals in any of
the three following situations: The vessel is purchased from a vessel dealer
and a use permit is obtained in accordance with subsection (3)(b) of this rule;
the vessel is purchased in Washington from someone other than a vessel dealer
and within 14 days of purchase the nonresident individual obtains a use permit
under this subsection; the vessel is acquired outside Washington and the
nonresident individual, within 14 days of bringing the vessel into Washington,
buys a use permit as provided under this subsection. Any vessel dealer that
issues permits under subsection (3)(b) of this rule must also issue permits
under this subsection.
(i)
What are the
obligations of vessel dealers? Vessel dealers that issue use permits
have the same obligations as those described in subsection (3)(b)(iv) of this
rule. Vessel dealers may not issue use permits under this subsection where a
nonresident individual has already obtained a use permit under subsection
(3)(b) of this rule.
(ii)
Valid proof of nonresidency. Nonresident individuals must meet the
same identification requirements described in subsection (3)(b)(ii) of this
rule.
(iii)
Use
permits. The use permit is not renewable and costs $500 for vessels 30
to 50 feet and $800 for vessels greater than 50 feet in length. This use permit
must be displayed on the vessel and is valid for 12 consecutive months from the
date of issuance. Nonresident individuals must obtain a use permit from a
vessel dealer; however, vessel dealers are not obligated to issue these use
permits. Nonresident individuals must elect this exemption irrevocably and may
not elect exemption under
RCW
82.08.0266 and
82.08.02665
for the same period. The nonresident individual must wait 24 consecutive months
from the expiration of a use permit before claiming exemption for a vessel
under
RCW
82.12.0251.
(iv)
Liability for use tax.
(A) If a nonresident individual's vessel is
in Washington after their use permit expires, that individual is liable for use
tax under
RCW
82.12.020. Liability for use tax will be
based on the value of the vessel at the time it was either purchased or first
brought into Washington. Interest will accrue from the date of purchase or
first use in Washington at a rate set by
RCW
82.32.050.
(B) Vessel dealers are personally liable for
use tax where a dealer either issues a use permit to a nonresident individual
who does not hold valid proof of nonresidency, or fails to maintain records for
each use permit issued showing the type of identification accepted, the
identification numbers, and expiration date.
(e)
Permits for nonresident entity
owned vessels 30 feet - 200 feet. A nonresident entity vessel owner that
is not a natural person, or a nonresident vessel owner who is a natural person
who intends to charter the vessel with a captain or crew as described in
(b)(ii)(B)(II) of this subsection, may qualify to receive a nonresident vessel
permit from the department of licensing under
RCW
88.02.620.
(i) This permit applies only to vessels at
least 30 feet in length, but no more than 200 feet in length.
(ii) An application must be filed, prior to
the 61st day of use in this state, to obtain a nonresident vessel permit.
Application must be made directly to the department for written approval in
accordance with
RCW
82.32.865.
(iii) To qualify, no Washington resident may
own the vessel or be a principal of the nonresident entity. For the purpose of
this subsection, "principal" means a natural person that owns, directly or
indirectly, including through any tiered ownership structure, more than a one
percent interest in the nonresident person applying for a nonresident vessel
permit.
(iv) The "Nonresident
Vessel Permit Approval Application" can be found on the department's website at
dor.wa.gov.
(5)
Examples. In all applicable
examples, retailing B&O tax is due from the seller for all sales of
watercraft and parts, and all charges for repair parts and labor.
(a)
Example 1. Mr. Kelley, a
resident of California, pilots his cabin cruiser that is registered in that
state into Puget Sound for his enjoyment. On the 60th day of his stay, Mr.
Kelley obtains a 60-day nonresident vessel permit for the cabin cruiser under
RCW
88.02.620 from the department of licensing.
To further extend his stay in Washington waters, he applies for a second permit
within the prescribed period. In the middle of his fifth month on Puget Sound,
Mr. Kelley departs and returns the cabin cruiser to its home port in
California. The stay would not subject Mr. Kelley to use tax. The same would be
true if Mr. Kelley were a resident of Vancouver, British Columbia, with a cabin
cruiser registered in Canada, as long as he timely obtains and displays the
permit required by
RCW
88.02.570 and
88.02.620
to allow his temporary use of the cabin cruiser in Washington.
(b)
Example 2. Company A sells a
yacht to John Doe, an Oregon resident, who takes delivery in Washington. The
yacht is required to be registered by the state of Oregon. The vessel is
removed from Washington waters within 45 days of delivery. Company A examines a
driver's license confirming John Doe is an Oregon resident, and records this
information in the sales file. Company A does not complete and retain the
required exemption certificate.
The sale of the yacht is subject to the retail sales tax. The
exclusive authority for granting a retail sales tax exemption for this sale is
provided by
RCW
82.08.0266. Completion of an exemption
certificate is a statutorily imposed condition for obtaining this exemption.
Company A has not satisfied the conditions and requirements necessary to grant
an exemption under this statute. The exemption provisions under
RCW
82.08.0273 for sales to nonresidents of
states having less than three percent retail sales tax may not be used for
purchases of vessels which require United States Coast Guard documentation, or
registration in the state of principal use. If the exemption certificate had
been properly completed at the time of sale, this sale would have qualified for
the retail sales tax exemption.
(c)
Example 3. Mr. Jones, a
California resident, contracts Company B to manufacture a pleasure yacht. Mr.
Jones purchases a boat motor from Company Y with instructions that delivery be
made to Company B for installation on the yacht. The yacht is required to be
registered with the state of California, which has assumed the registration and
numbering function under the Federal Boating Act of 1958. Company B examines
Mr. Jones' driver's license to verify Mr. Jones is a nonresident of Washington,
and retains the proper exemption certificate at the time of sale. Delivery is
made in Washington, and Mr. Jones removes the yacht from Washington waters
within 45 days of delivery.
The sale of the yacht by Company B to Mr. Jones is not subject
to the retail sales tax, as the requirements and conditions for exemption have
been satisfied. Retail sales tax does apply to the sale of the motor by Company
Y to Mr. Jones. The exemption provided by
RCW
82.08.0266 does not extend to a separate
seller of unattached component parts, even though the parts are installed in
the yacht prior to delivery.
(d)
Example 4. Mr. Smith, a
resident of British Columbia, Canada, brings his yacht into Washington with the
intention of temporarily using the yacht for personal enjoyment. Mr. Smith
obtains the required 60-day nonresident vessel permit issued by the department
of licensing. After four months of personal use, the yacht experiences
mechanical difficulty. The yacht is taken to a repair facility and due to the
extensive nature of the damage the yacht remains at the repair facility for six
months being repaired. As explained in subsection (4)(c) of this rule, Mr.
Smith timely files each required "Nonresident Vessel Repair Affidavit." An
employee of the repair facility is on board the yacht during all testing, and
there is no personal use by Mr. Smith during this period. Upon completion of
the repairs and testing, Mr. Smith takes delivery at the repair facility.
Mr. Smith obtains a second 60-day nonresident vessel permit so
he may personally use the yacht in Washington waters for up to two months after
taking delivery of the repaired yacht. He will not incur liability for use tax
because the instate use of the yacht for personal enjoyment will not exceed six
months in a 12-month period. The time the yacht is at the repair facility
exclusively for repair does not count against the period of time Mr. Smith is
considered to be "temporarily" using the yacht in Washington for personal
enjoyment because he properly filed the repair affidavit with the department.
Retail sales tax is due, and must be paid, on all charges for repair parts and
labor. The exemption from sales tax for purchases of vessels does not extend to
repairs.
Statutory Authority:
RCW
82.32.300,
82.01.060(2),
82.08.0266, and
82.08.02665. 08-14-022, §
458-20-238, filed 6/20/08, effective 7/21/08. Statutory Authority:
RCW
82.32.300. 00-23-003, § 458-20-238,
filed 11/1/00, effective 12/2/00; 95-24-103, § 458-20-238, filed 12/6/95,
effective 1/6/96; 83-21-061 (Order ET 83-7), § 458-20-238, filed 10/17/83;
83-08-026 (Order ET 83-1), § 458-20-238, filed 3/30/83; Order ET 70-3,
§ 458-20-238 (Rule 238), filed 5/29/70, effective
7/1/70.