4461629 Gross Sales Tax on Boat Tours and Boat Rentals, and on Food, Drink and Beverages Sold Thereon

OFFICE OF TAX AND REVENUE

 

NOTICE OF PROPOSED RULEMAKING

 

The Deputy Chief Financial Officer of the District of Columbia Office of Tax and Revenue (OTR) of the Office of the Chief Financial Officer, pursuant to the authority set forth in D.C. Official Code § 47-2023 (2005 Repl.), Section 201(a) of the 2005 District of Columbia Omnibus Authorization Act, approved October 16, 2006 (120 Stat. 2019; P.L. 109-356, D.C. Official Code § 1-204.24d (2012 Supp.)), and the Office of the Chief Financial Officer Financial Management and Control Order No. 00-5, effective June 7, 2000, hereby gives notice of its intent to amend Chapter 4, SALES AND USE TAXES, of Title 9, TAXATION AND ASSESSMENTS, of the District of Columbia Municipal Regulations (DCMR), by adding Section 476, Admissions to Boat Tours and Boat Cruises, Rentals of Boats, and Sales of Food and Drink or Alcoholic Beverages on Boats.

 

The newly proposed Section 476 provides that sales tax is due on admissions fees for boat tours and boat cruises, provides that sales tax does not apply to boat charters which include the services of a captain, and provides guidance for the application of the sales tax exemption for food and drink or alcoholic beverages sold on a boat that is in the course of commerce between the District and a state.  The guidance that would be provided by this rulemaking is necessary to provide clarity to taxpayers attempting to comply with District sales and use tax statutes and would aid in the fair and efficient administration of District laws.

 

OTR gives notice of its intent to take final rulemaking action to adopt these regulations in not less than thirty (30) days from the date of publication of this notice in the D.C. Register.

 

Chapter 4 (SALES AND USE TAXES) of Title 9 (TAXATION AND ASSESSMENTS) DCMR is amended as follows:

 

Section 476, Admissions, Rentals of Boats, and Sales of Food, Drinks, and Beverages, is added to read as follows:

 

476                  ADMISSIONS to boat tours and boat cruises, RENTALS OF BOATS, AND SALES OF FOOD, DRINKS, AND BEVERAGES on boats

 

476.1                              The charges for admission to boat tours and boat cruises shall be subject to the gross sales tax.  If taxable food and drink or alcoholic beverages are sold on a boat or included in the admissions fee to a boat tour or boat cruise, the fee charged for admissions to the boat tour or boat cruise will be subject to the tax rate imposed on the food and drink or alcoholic beverages.

                       

                        Examples:

(a)        A charge to a comedy show on a boat shall also be subject to the gross sales tax.

 

(b)        The entire charge, including the admission charge, for a dinner cruise on a boat that is taxable under § 476.4 shall be subject to the gross sales tax at the rate imposed on taxable food and drink or alcoholic beverages.

(c)        The entire charge, including the admission charge, shall be subject to the gross sales tax for admission and boat tours where all of the sale of food and drink or alcoholic beverages is exempt under § 476.4, regardless of whether food and drink or alcoholic beverages are included within the admission charge.

 

476.2               If the services of a captain or operator are provided as part of the fee for the charter of any boat, no rental of the boat has occurred.  If the boat is rented from one person and the services of the captain or operator rented from another, the gross sales tax shall apply to the boat rental.

 

476.3               A boat rented without the services of a captain or operator, including a bareboat charter, is a sale in which possession of tangible personal property is transferred, and the gross sales tax shall apply to such rentals.

 

476.4               The taxability of food and drink or alcoholic beverages sold on a boat is determined as follows:

 

(a)        Gross receipts from the sales of food and drink or alcoholic beverages if made in any boat operating within the District in the course of commerce between the District and a state are exempt from the gross sales tax.  Generally, a boat is operating in the course of commerce between the District and a state if the boat ties up at a dock outside of the District where any or all passengers or crew disembark or if any or all of the boat’s passengers or crew disembark the boat by other means and go ashore outside of the District. 

 

Example: A boat that departs and returns to the same or different location in the District and does not tie up at a dock or allow passengers to disembark at a location outside of the District shall not be considered to be in the course of commerce between the District and a state, even if the boat enters another jurisdiction’s waters.

 

(b)        In order to substantiate the exemption, a taxpayer must prove, via his or her books and records, that a boat is in the course of commerce between the District and a state.  To the extent the taxpayer’s books and records do not substantiate that a boat is in the course of commerce between the District and a state, all sales of food and drink or alcoholic beverages allocated to the District shall be presumed taxable.

 

(c)        For boats not operating in the course of commerce between the District and a state, a taxpayer shall substantiate in his or her books and records the allocation of sales of food and drink or alcoholic beverages to the District.  All such allocations must be reasonable.  To the extent the allocation of sales of food and drink or alcoholic beverages cannot be substantiated by the taxpayer’s books and records or the allocation on the taxpayer’s books is unreasonable, the Deputy Chief Financial Officer shall allocate the sales to the District. 

 

476.5               For the purposes of this Section, the following definitions apply.

 

(a)                “Bareboat charter” means providing a boat only, exclusive of crew.

 

(b)               “Boat” means a vessel for transport by water and includes, but is not limited to, ships, yachts, sailboats, rowboats, motorboats, kayaks, paddleboats, and canoes.

 

(c)                “Captain or operator” means a person who is master or commander of a boat with passengers or crew, or both.

 

(d)               “Dock” means a structure or group of structures involved in the handling of boats or ships, on or close to a shore and includes piers and wharfs.

 

Comments on this proposed rulemaking should be submitted to Jessica Brown, Assistant General Counsel, Office of Tax and Revenue, no later than thirty (30) days after publication of this notice in the D.C. Register.  Jessica Brown may be contacted by: mail at DC Office of Tax and Revenue, 1101 4^th Street, SW, Suite 750, Washington, DC 20024; telephone at [phone]; or, email at [e-mail]. Copies of this rule and related information may be obtained by contacting Jessica Brown as stated herein.