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Virginia Administrative Code
Title 23. Taxation
Agency 10. Department of Taxation
Chapter 230. Watercraft Sales and Use Tax
2/26/2024

23VAC10-230-80. Exemptions and exclusions.

A. Governments, insurance companies. The watercraft sales and use tax does not apply to sales to or use by the United States or any of the governmental agencies thereof, the Commonwealth of Virginia or any political subdivision thereof, or sold to an insurance company for the sole purpose of disposition when such insurance company has paid the registered owner of the watercraft on a total loss claim, nor does the tax apply to ships or vessels used or to be used exclusively in interstate or foreign commerce.

For sales to the United States, the Commonwealth of Virginia or any political subdivision to be exempt from the tax, the purchases must be pursuant to required official purchase orders to be paid for out of public funds. Sales to governmental employees for their own use are taxable. If pursuant to an official purchase order, the tax will not apply to sales to or use by officers' clubs, noncommissioned officers' clubs, officers' messes, noncommissioned officers' messes, and post exchanges organized, operated and controlled under Department of Defense regulations. The exemption does not cover individuals or organizations operating on a military reservation in their own right. No person is relieved from liability for payment of, collection of, or accounting for the tax on the ground that the sale or use occurred in whole or in part within a federal area.

In the first sentence of this section, the phrase "use by" relates to the exempt use in the Commonwealth of any watercraft purchased without this state by a governmental agency as set out above. It has no application in cases where the renter, lessee, or other user is a governmental agency.

B. Commercial watermen. Any watercraft constructed by a commercial waterman for his own use in extracting fish, bivalves or crustaceans from waters for commercial purposes is exempt from the Watercraft Sales and Use Tax so long as such watercraft is used solely and exclusively for such purposes. If such watercraft is used primarily for exempt purposes but also for nonexempt purposes, it will be subject to tax on a pro rata portion of its value based on the percentage of non-exempt use; if not used primarily for exempt purposes, its entire value will be subject to tax. For purposes of this subsection the term "used primarily" means used more than 50% for exempt purposes.

C. United States Coast Guard marine documentation. Vessels with valid marine documentation do not meet the definition of "watercraft" (see 23VAC10-230-30). Marine documentation is issued by the United States Coast Guard to the owner(s) of vessels as evidence of ownership in such vessels. Valid documentation becomes void upon sale and must be reinstated in the name(s) of the purchaser(s). Therefore, for purposes of this chapter, no watercraft will be considered to have a valid marine document when purchased either new or used.

D. See § 58.1-1404 of the Code of Virginia for additional exemptions.

E. The exemptions of this section do not apply with respect to rentals, leases or charters in the case of a dealer who pays a gross receipts tax under the dealer exclusion, as the gross receipts tax is levied on the dealer and not upon the renter, lessee, or other user.

Statutory Authority

§ 58.1-203 of the Code of Virginia.

Historical Notes

Derived from VR12.3.58-685.45, eff. July 30, 1982; amended, Virginia Register Volume 25, Issue 8, eff. March 8, 2009.

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