vs. ) CASE NO. 76-1729
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled case on January 10, 1978 at Fort Lauderdale, Florida.
For Respondent: Paul R. Regensdorf, Esquire
By Petition for Formal Proceeding filed September 10, 1976, Oceania Charters, Inc. contests the Revised Notice of Assessment of Tax dated July 29, 1976 by Department of Revenue (DOR). By this assessment DOR seeks to recover
$38,785.21 in use tax plus penalty and interest on the motor yacht Captiva II owned by Respondent. Respondent admits that $38,785.21 represents 4 percent of the purchase price of the Captiva II but contends that no use tax is owed to the state. Two witnesses testified on behalf of Respondent and three exhibits were admitted into evidence.
Frank O. Sherrill is the sole stockholder of Oceania Charters, Inc. and is a resident of North Carolina from where he directs the operations of Oceania Charters, Inc. The principal, if not sole, asset of Oceania Charters, Inc. is the 101 foot motor yacht Captiva II.
The Captiva II was built in Amsterdam, the Netherlands, pursuant to contract between the shipbuilder and Oceania Charters, Inc. and/or Frank Sherrill entered into in 1972. Sherrill purchased the vessel for the intended purpose that it be used as a charter vessel hired to various charterers for short or longer-term cruises. This is the fourth or fifth vessel that Respondent has owned and used in the charter business. The evidence was
uncontradicted that the purpose of acquiring the Captiva II was to place it in charter service.
The vessel was originally scheduled for completion in the summer of 1973 and it was intended to have the Captiva II proceed from Amsterdam to North Carolina under her own power. The vessel was not completed until late fall or early winter and the insurers would not insure the Captiva II if it proceeded across the North Atlantic under her own power at that time of year.
Arrangements were made to ship the Captiva II from Amsterdam to Bermuda via freighter to off-load the Captiva II there and proceed under her own power to Wilmington, North Carolina for custom clearance and documentation. While loading the Captiva II damage was done to one stabilizer and to the hull. Upon arrival of the ship carrying the Captiva II at Bermuda, excess costs involved in off-loading and repairing there were weighed against the carrier's offer to off- load the Captiva II at the next port of call, Miami, and facilities at the latter port. It was then decided that the Captiva II should stay aboard for the voyage from Bermuda to Miami and there be off-loaded and repaired. This was done and upon arrival in Miami the Captiva II was off-loaded, repaired and fitted out for charter operations. Berthing arrangements were made and, except for charter trips, trips to Palm Beach soliciting charters, and sea trials the Captiva II has been moored at Miami.
Mr. and Mrs. Sherrill stayed on board the Captiva II during the period she was being outfitted for charter operations and on several of the sea trials the vessel underwent. They were not on board during any of the charter trips and did not use the Captiva II for cruises themselves or make her available for use by their friends unless pursuant to a charter party. These facts were undisputed.
CONCLUSIONS OF LAW
Petitioner contends that since the vessel was purchased overseas and proceeded directly to Florida where it has since been used, it is subject to the Florida use tax. Respondent, on the other hand, contends that since the owner is not a resident of Florida and the vessel was not purchased for use in this State, the vessel is not subject to the Florida use tax. Secondarily, Respondent contends that even if the vessel were otherwise subject to the use tax, it is exempt from such use tax by virtue of its sole use as a charter vessel.
Section 212.05 F.S. provides in pertinent part that: "It is hereby declared to be the legislative
intent that every person is exercising a
taxable privilege who ... stores for use or consumption in this state any item or article of tangible personal property as defined herein .... For the exercise of said privi- lege a tax is levied on each taxable trans- action or incident and shall be due and payable ....
Occasional or isolated sales of boats and other vehicles in this state which are documented by the United States government or which are required to be registered, licensed or titled in this state, shall be
subject to tax at the rate provided in this subsection.
At the rate of 4 percent of the cost price of each item or article of tangible personal property when the same is not sold, but is used, consumed, distributed or
stored for use or consumption in this state.
The vessel is tangible personal property as defined in Chapter 212 F.S. and, unless excluded from the sales or use tax by any provision of Chapter 212 and the regulations issued pursuant thereto, is subject to the tax.
The use tax is complementary to the sales tax and is intended to place out-of-state and intrastate purchases of personal property in exactly the same position when both are used in this state. Green v. Pederson, 99 So.2d 292 (Fla. 1957).
It is the use in this state of out-of-state purchases and not the fact that they were purchased by a Florida resident that subjects the personal property to tax. Section 212.05 F.S. refers to the specific legislative intent that every person is exercising a taxable privilege who stores tangible personal property for use or consumption in this state, and not just residents of Florida. As stated by the Supreme Court in Scripto Inc. v. Carson, 105 So.2d 775 (Fla. 1958) at p. 779:
"The use tax, which is the one here involved, is levied on the privilege of using, storing or consuming property purchased. The use
tax was developed as a device to complement the sales tax in order to prevent evasion of the payment of the sales tax by the completion of purchases in a non-taxing state and ship- ment by interstate commerce into a taxing forum. It also evolved as a protective measure for the benefit of retail merchants
in the taxing state who would be placed at a competitive disadvantage as against ship- ments in interstate commerce from a non- taxing state. Obviously also the primary objection to be accomplished by these two
complementary forms of taxation is to produce revenues for the operation of the government that protects the exercise of the privilege of making the purchase in one instance and
of using, storing or consuming the property purchased in the other instance."
Respondent's contention that the use tax is imposed only on Florida residents and that, since Respondent is not a Florida resident it is not subject to use tax, is not supported by the authorities and is certainly not supported by our every day experience with sales taxes which the use tax complements.
Such taxes are collected from the consumer or user in Florida regardless of his domicile.
In Scripto, supra, the court, in discussing the aspects of personal property purchased without the state and brought into the state, said:
"We should have in mind that an aspect of the theory supporting the use tax is that it is an impost on the privilege of using personal property which might have been shipped into the state through interstate commerce but which has come to rest in the taxing forum and has become a part of the mass of property with a taxing situs. The tax is imposed on the use after transit in interstate commerce has come to an end.
The levy, of course, in actuality is
imposed upon and collected from the ultimate Florida consumer who as a Florida resident enjoys the use of the property because of the opportunity afforded by the laws of the State of Florida to exercise this privilege regardless of the source from whence the property came."
It is the ultimate consumer in Florida that is assessed the tax whether he is domiciled in this state or is a visitor. Although property which is temporarily brought into the state for use is not subject to the use tax, when the Captive II came to rest in Florida following its out-of-state transportation, it obtained a taxing situs in Florida independent of the domicile or residence of the owner.
The Captiva II is being used in Florida as a charter vessel, i.e. its use is rented to the charterer. Such rental is subject to the Florida sales tax.
Section 212.081(3)(b) F.S. with respect to legislative intent, provides in pertinent part:
"It is also the legislative intent that there shall be no pyramiding or duplication of excise taxes levied by the state under this chapter ....
This legislative intent is carried out in Petitioner's rules pertaining to rentals of tangible personal property. Rule 12A-1.71 (2) F.A.C. provides:
"Equipment purchased solely for rental purposes is exempt at the time of its acquisition."
The case of Wanda Marine Corporation v. State, 305 So.2d 65 (Fla. 1st DCA 1974) relied upon by Petitioner is clearly distinguishable from the instant case. In Wanda Marine the similarity of facts between that and this case stops with the intent of the respective owners and the use to which the vessel was put. In Wanda Marine the tax payer used the vessel in Europe for six months although his ultimate intent was to use the vessel in Florida. Upon arrival in Florida he occasionally allowed its use by his friends although it was primarily used for his own pleasure. Such use was clearly not exempt from taxation by
Rule 12A-1.7(2) F.A.C. above quoted. Here, the taxpayer's intent in purchasing the vessel was to place it in charter service and there was no evidence that it was used for other than charter purposes.
Petitioner contends that Mr. Sherrill's presence on board the vessel
,during the time the vessel was being outfitted for charter service, on some occasions when the vessel was undergoing sea trials, and to West Palm Beach to be shown to prospective charters takes the vessel out of the exception to the use tax above quoted. However, someone had to supervise the outfitting of the vessel and, the person who was to pay for such services, establish rates to be charged for charters, and conditions under which the vessel would be chartered, can hardly be considered as using the vessel for a purpose unassociated with the charter business in conducting such supervision. Likewise Sherrill's presence on board during sea trials, which are required to ascertain if repairs and alterations have been satisfactorily completed, can not be said to be unrelated to the charter service in which the Captiva II was engaged.
Since the rentals obtained for charters are subject to a sales tax it would be a duplication and a pyramiding of such taxes if a use tax were levied and a sales tax collected on each charter in Florida.
From the foregoing it is concluded that no use tax is owed by Oceania Charters, Inc. on the M/V Captiva II because the vessel is used only in the charter business and each Florida charter is subject to a sales tax. It is therefore
RECOMMENDED that the Revised Notice of Assessment dated July 29, 1976 in the amount of $38,785.21 plus penalties and interest be dismissed.
DONE and ENTERED this 31st day of January, 1978, in Tallahassee, Florida.
K. N. AYERS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304
Paul R. Regensdorf, Esquire Post Office Drawer 7028
