On July 1, 2010, the Florida cap on yacht sales and use tax went into effect. The maximum amount of tax now collected is $18,000 – which means that yachts over $300,000 will have no extra tax collected (including county surcharges). Previously, Florida taxed yachts at 6% of the purchase price. When you consider that a $1,000,000 yacht paid $60,000 in sales tax alone, this drove many owners to alternative flags and states to escape paying this tax.
Florida is regarded as a premium area in which to station a yacht, making this new sales/use tax cap very attractive. Here are reasons why many yacht owners choose to keep their yachts in this state:
• Centrally located for many destinations such as the Florida keys, the Bahamas and the Caribbean
• Plenty of private and resort dockage
• Ideal climate for year-round yachting lifestyle
• Home to every yacht support and product imaginable
• A central hub for marketing and sales
Prior to this sales tax cap, many owners of expensive yachts would avoid paying the 6% sales tax by registering the yacht in a foreign country, such as the British Virgin Islands or Cayman Islands – allowing them to enter Florida under a cruising permit. This act also eliminates paying US duty (1.5% of the value of the yacht). The downside to this registration is:
• The need to export the vessel yearly to re-obtain another cruising permit
• Expenses to set up and maintain a foreign registry are not cheap
• Restrictions on sale-ability – thus “not available for sale to US residents while in US waters”
Non-residents can avoid paying the Florida sales and use tax provided that they remove the boat from Florida waters within a prescribed time period after purchase. If they register in another US jurisdiction and keep the boat out of Florida for 6 months; they can then bring the boat back into Florida without taxation (although they must register it in Florida after being in state waters for a certain time period). However, if they wish to sell the boat in Florida – they are restricted to placing the vessel under the care/custody of a broker and may not use the boat.
By curtailing the relatively high taxation of yachts and capping the amount, Florida has opened the door for many yachts to stay in its waters and enjoy not only year-round cruising opportunities, but allowing for long-term usage and unencumbered selling and chartering. This will encourage many owners to stay in Florida thus stimulating the service businesses which the yachts depend on.