LR 8236
Taxability of Floating Docks
May 04, 2023
Dear Applicant:
This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated February 17, 2023.
The facts as presented in your letter ruling request are summarized as follows:
Applicant has rented floating dock space from a Lessor for ten years, with the lease renewal and billing cycle being done annually. The Lessor has charged the Applicant sales taxes on the dock space rental for each of the last two billing cycles.
ISSUE 1:
Are Applicant's receipts from the rental of boat spaces and slip covers subject to Missouri sales tax?
RESPONSE 1:
Yes. The Applicant's rentals of dock space are subject to Missouri sales tax.
Section 144.020.1, RSMo, imposes a sales tax on sales of tangible personal property and certain enumerated services. Section 144.020.1(8), RSMo, provides:
A tax equivalent to four percent of the amount paid or charged for rental or lease of tangible personal property, provided that if the lessor or renter of any tangible personal property had previously purchased the property under the conditions of sale at retail or leased or rented the property and the tax was paid at the time of purchase, lease or rental, the lessor, sublessor, renter or subrenter shall not apply or collect the tax on the subsequent lease, sublease, rental or subrental receipts from that property.
For the purpose of sales tax, floating boat docks are tangible personal property. See Siverly v. Director of Revenue, Case No. 11-1431 RS (Mo. Admin. Hearing Comm'n, May 13, 2014). Payments for the lease of tangible personal property are subject to tax unless the lessor paid tax on the purchase of the property. Section 144.020.1(8), RSMo; 12 CSR 10-108.700. The statutory language referencing previously paid taxes operates similarly to a sale for resale exemption for leases. In other words, had Lessor paid sales or use taxes on the tangible personal property, the subsequent lease to the Applicant would not be taxed. Here, the Applicant has not alleged that the Lessor paid taxes on the property purchases. Therefore, the Applicant's lease is subject to sales tax on the rental of boat spaces at the marina.
ISSUE 2:
Is the Applicant required to pay sales taxes upon each lease payment, even if separated by a year or more?
RESPONSE 2:
Yes. Each of the Applicant's payments under a multi-year rental or lease are subject to tax.
As noted above, payments for the lease of tangible personal property are subject to tax unless the lessor paid tax on the purchase of the property. Section 144.020.1(8), RSMo; 12 CSR 10-108.700. All lease and rental payments are subject to this tax, no exception is made for payments under a long-term lease of a year or more. Id., see also, Section 12 CSR 10-108.700(4)(B) (sales taxes imposed on rental payments made over three years). Here, the Applicant's long-term lease remains taxable as there is no statute exempting the lease payments from taxation due to the length of the lease.
ISSUE 3:
Is the Applicant a permanent resident of the dock space, and therefore not subject to a tax on the lease payments?
RESPONSE 3:
No. The Applicant's lease of the dock space does not qualify the Applicant as a permanent resident.
Payments made for the lease and rental of hotels and motels are generally subject to tax. Section 144.020.1(6), RSMo; 12 CSR 10-110.220(1). On the other hand, permanent residents of a hotel or motel are not subject to tax on their lease or rental payments. 12 CSR 10-110.220(3)(B). A permanent resident is an individual who contracts in advance for a room for a period of thirty consecutive days or more and who actually remains as a guest for thirty consecutive days or more. 12 CSR 10-110.220(2).
In this instance, the Applicant is not a permanent resident because the dock space is not a room, and the Applicant could not have lived on the dock space itself as a guest for thirty consecutive days or more.
This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.
Should additional information be needed, please contact Legal Counsel Nathan Jefferson, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.
Sincerely,
Wayne Wallingford