Does South Carolina treat a jet ski or other personal watercraft as a boat for the maximum tax?

Plain-English summary

South Carolina Revenue Ruling #18-4 classifies a personal watercraft such as a jet ski as a boat for the state's maximum-tax rules.

The ruling relies on the ordinary meaning of boat and South Carolina's watercraft statutes. Those statutes define a boat as a vessel, a vessel as watercraft used or capable of use for transportation on water, and a personal watercraft as a qualifying boat under 16 feet whose operator and passengers ride on the outside surface. The definition expressly includes vessels commonly known as jet skis.

Because the personal watercraft is a boat, its sale is subject to the maximum sales and use tax in § 12-36-2110. For transactions after June 30, 2017, the rate is 5% with a $500 cap.

A qualifying lease is taxed on payments until total tax reaches $500, unless the taxpayer pays the total earlier. The lease must be written, state a term longer than 90 continuous days, and remain in force for that period.

What this means for you

Dealers and buyers

Treat a qualifying jet ski or similar personal watercraft as a boat when applying the maximum-tax rule. Do not apply the ordinary uncapped state and local rate merely because the craft is small or ridden rather than sat inside.

Lessors

Verify the written term. A rental or lease of 90 days or less does not meet the ruling's conditions for the $500 lease cap.

Private-party transactions

The ruling also says a personal watercraft is a boat under the casual excise tax statutes. Apply the separate casual-excise rules governing purchaser liability, titling, prior tax, and exemptions.

Common questions

Q: Is a jet ski legally a boat for this tax rule?
A: Yes. The ruling says the statutory personal-watercraft definition expressly includes it.

Q: What is the maximum tax?
A: Five percent, not exceeding $500, under the rule effective July 1, 2017.

Q: Does every short-term rental receive the cap?
A: No. The lease must exceed 90 continuous days and meet the written-agreement conditions.

Citations and references

• S.C. Code Ann. § 12-36-2110 — maximum tax on boats
• S.C. Code Ann. §§ 50-21-10 and 50-21-870 — boat, vessel, and personal-watercraft definitions
• S.C. Code Ann. §§ 12-36-1710 through 12-36-1740 — casual excise tax classification noted by the ruling

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR18-4.pdf

Original ruling text

STATE OF SOUTH CAROLINA

DEPARTMENT OF REVENUE
300A Outlet Pointe Blvd., Columbia, South Carolina 29210
P.O. Box 12265, Columbia, South Carolina 29211

SC REVENUE RULING #18-4

SUBJECT:

Personal Watercrafts - Maximum Sales and Use Tax Provisions
(Sales and Use Tax)

EFFECTIVE DATE: July 1, 2017
SUPERSEDES:

SC Revenue Ruling #04-10 and all previous documents and any oral
directives in conflict herewith.

REFERENCES:

S. C. Code Ann. Section 12-36-2110 (2014; Supp. 2017)
S. C. Code Ann. Section 50-21-10 (Supp. 2017)
S. C. Code Ann. Section 50-21-870 (2008)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2014)
S. C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the public. It is
an advisory opinion issued to apply principles of tax law to a set of facts
or general category of taxpayers. It is the Department’s position until
superseded or modified by a change in statute, regulation, court decision,
or another Department advisory opinion.

Purpose of Update:
The purpose of this advisory opinion is to update SC Revenue Ruling #04-10 to address the
increase in the maximum sales and use tax on boats as part of Act No. 40 of 2017, “The South
Carolina Infrastructure and Economic Development Reform Act.” The Act increased the
maximum sales and use tax on boats from 5% but not more than $300, to 5% but not more than
$500. The increase became effective on July 1, 2017.
Question:
Is the sale of a personal watercraft, such as a “jet ski,” entitled to a maximum sales and use tax
under Code Section 12-36-2110 as a “boat”?
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Conclusion:
It is the Department’s opinion that the sale of a personal watercraft, such as a “jet ski,” is entitled
to a maximum sales and use tax under Code Section 12-36-2110 as a “boat.”
Discussion:
Code Section 12-36-2110(A) reads in part:
(1) The maximum tax imposed by this chapter is [five] 1 hundred
dollars for each sale made after June 30, 1984, or lease executed after
August 31, 1985, of each:

(d) boat;

(2) In the case of a lease, the total tax rate required by this section
applies on each payment until the total tax paid equals [five] hundred
dollars. Nothing in this section prohibits a taxpayer from paying the
total tax due at the time of execution of the lease, or with any payment
under the lease. To qualify for the tax limitation provided by this
section, a lease must be in writing and specifically state the term of,
and remain in force for, a period in excess of ninety continuous days.
It is an accepted practice in South Carolina to resort to the dictionary to determine the literal
meaning of words used in statutes. See Hay v. South Carolina Tax Commission, 273 S.C. 269,
255 S.E.2d 837 (1979); Fennell v. South Carolina Tax Commission, 233 S.C. 43, 103 S.E.2d 424
(1958); Etiwan Fertilizer Co. v. South Carolina Tax Commission, 217 S.C. 484, 60 S.E.2d 682
(1950).
The Second College Edition of The American Heritage Dictionary defines the word “boat” to
mean “a relatively small, usually open craft.”
Although not controlling, the definitions found in Title 50, “Fish, Game and Watercraft,”
Chapter 21, “Equipment and Operation of Watercraft,” provide further insight into whether a
personal watercraft should be considered a “boat.” Code Section 50-21-10 contains the
following relevant definitions:
(2) "Boat" means a vessel.

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Effective after June 30, 2017, the maximum sales and use tax imposed pursuant to this chapter on the sale, lease, or
registration of an item enumerated in item (1) is increased from three hundred dollars to five hundred dollars. Code
Section 12-36-2110(A)(4).

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***
(25) "Vessel" means every description of watercraft, other than a
seaplane regulated by the federal government, used or capable of
being used as a means of transportation on water.
Finally, Code Section 50-21-870(A)(1) defines the term “personal watercraft” as follows:
(a) “Personal watercraft” means a boat less than sixteen feet in
length which:
(i) has an outboard motor or an inboard motor which uses
an internal combustion engine powering a water jet pump
as its primary source of motive propulsion;
(ii) is designed with the concept that the operator and
passenger ride on the outside surfaces of the vessel as
opposed to riding inside the vessel;
(iii) has the probability that the operator and passenger,
in the normal course of use, may fall overboard.
(b) Personal watercraft includes, without limitation, a vessel
where the operator and passenger ride on the outside surfaces of
the vessel, even if the primary source of motive propulsion is a
propeller, and a vessel commonly known as a “jet ski.” (Emphasis
added.)
Based on the above, it is the Department’s opinion that the sale of a personal watercraft, such as
a “jet ski,” is entitled to a maximum sales and use tax under Code Section 12-36-2110 as a
“boat.”
Note: Based on the above discussion, a personal watercraft, such as a “jet ski,” is also considered
a boat under the casual excise tax provisions found in Code Sections 12-36-1710 through 12-361740.
SOUTH CAROLINA DEPARTMENT OF REVENUE

s/W. Hartley Powell
W. Hartley Powell, Director
May 2
, 2018
Columbia, South Carolina

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