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I bought a used $100,000 boat in Florida to ultimately bring up to NY state to use as a retirement business for yacht chartering in the 1000 islands on the St. Lawrence River back and forth into Canada. The boat was used along the Atlantic coast for a year and off the coast of NJ an engine failed and had to be replaced. Being late in the year meant having to winter it and lose a full year’s use of the boat. A new engine cost $28,000 but a hole had to be cut into the boat to remove the old engine and install the new so extensive repairs had to be made to the boat itself just to accommodate the engine exchange. At this point I figured the damaged boat was only worth half what I paid for it since anyone buying it would have to make the same repairs and wait a year before having use of it. NY state said if the boat had been brought into NY in that condition it would have been assessed for $50,000 but because I restored the boat tax is due on the full amount. I argued that by having the work done in NJ and paying 8% sales tax there, I also made myself liable for 8% use tax on the same $50,000 increment. To make matters worse, before the boat reached its destination in upstate NY just after the above repairs, while it was being delivered it struck a shoal within NY State that tore up the props, rudders, shafts, struts, transmissions and engines. The transmissions were ripped right off the engines. Now there were repairs that came to $80,000 plus tax. I felt that the value of the boat now was only $5,000 since it had no running gear at all and had to go through everything being replaced taking over a year to complete the work. Now I’ve lost a 2nd year’s income from not having the boat in charter. I argued that the boat was damaged during delivery and had not reached its destination so I did not feel sales tax would be due on the full value of the boat since doing nothing meant it is only worth $5,000 but making the repairs meant I’d pay tax on $80,000. 1. Is tax due on the full value even though the boat did not reach its destination and was damaged on its way? 2. Am I liable for both NJ sales tax and NY use tax on the $50,000 repair increment paid in NJ? 3. Is the attorney handling the matter correct saying I owe the tax on the repaired value of the boat at the time it entered NY or is it due upon delivery to the destination? What if I bought a computer over the internet and the Fed Ex delivery plane crashed in NY state prior to delivery and I had a damaged computer. Is full tax due? The analogy is the same. 4. What options do I have or what strategy can I use to minimize the tax. I’ve lost so much money on the boat with fuel prices doubling and the economy turning sour to the point I only get 2 - 3 charters a year for the last 5 summers since the repairs were made. The boat has been up for sale but there are no buyers and it is eating me alive. I obtained a bank loan to pay the original $100,000 purchase price but on the first repairs the insurance company would not cover it so that was out of pocket. Hope you have some good answers. Stan XXX@XXXXXX.XXX
I have a court hearing in 2 weeks so I can't wait too long.
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Hello and thank you for using Just Answer,1. Is tax due on the full value even though the boat did not reach its destination and was damaged on its way? Yes, sales tax is calculated on the sales price of property2. Am I liable for both NJ sales tax and NY use tax on the $50,000 repair increment paid in NJ? You are responsible for the sales tax in the state where the vessel is registered. Boats that are not operated in NJ for more than 180 days are not required to be registered in NJ. If the boat was there for more than 180 days but was not being used then you are not required to register and would not be liable in NJ. The sales tax on the repairs would still apply in NJ where applicable.
3. Is the attorney handling the matter correct saying I owe the tax on the repaired value of the boat at the time it entered NY or is it due upon delivery to the destination? What if I bought a computer over the internet and the Fed Ex delivery plane crashed in NY state prior to delivery and I had a damaged computer. Is full tax due? The analogy is the same. The sales tax in NY is calculated based on the sales price. Delivery is an insurance issue unfortunately. The sales tax is due upon registration and is based on sales price.
Your attorney appears to be on top of the correct tax situation and I wish I could advise differently. I do thank you for your patience but sometimes it is difficult for experts to respond when we know the asker is not going to receive an answer that is positive for their situation even though the answer is correct.