Originally published on Forbes.com.
Frederick Brodsky posted a comment on an article about local law problems that boaters encounter that reflects some frustration with Massachusetts:
Any boating survival guide should include a warning to avoid docking in Massachusetts for any length of time as this state is very aggressive in assessing a Use Tax of up to 6% for the privilege of using Massachusetts waters. Nine days after docking in Massachusetts, my 59′ Symbol was assessed $40,000, in spite of entering Mass waters more than 6 months following the purchase.
More of the story of the trouble that Frederick and his wife Dora had with the Commonwealth is covered in a recent decision of the Massachusetts Appellate Tax Board (downloads as a word document).
Use Tax
Use tax is something of a back up to sales tax. If you buy something and don’t pay sales tax on it, you can get tagged for use tax when you bring it to some states for storage or use. The Brodskys have their primary residence in Dallas, but they have a summer home in Fairhaven, Massachusetts, which is on the south shore of Massachusetts next to Buzzard’s Bay. In principle, if the Brodsky’s furnished that home with furniture that they schlepped from New Hampshire, they would be liable to Massachusetts for use tax on that furniture. Just between you and me, there is a good chance that the Department of Revenue would never pick up on that.
The Odyssey
Mass DOR would not have noticed their 59-foot yacht with the, in my mind, unlucky name of Odyssey had it not been for a slip-up by Mrs. Brodsky. Odyssey being a big boat came with a little boat (10 feet) called “Tender”. The Brodskys were in the process of selling Odyssey at the end of 2010 only about two years after they purchased it.
On a side note, the Brodsky’s did not unload Odyssey because they lost their love of boating. You can read all about that in a blog that Mrs. Brodsky ran on their journeys with their dogs on the 70 foot Jambo, that they took possession of in 2012. You know that saying about yacht prices and how if you have to ask you can’t afford it. Regardless, the blog contains a lot of practical advice from Mr. Brodsky on what is involved in buying a new yacht. It is more than enough to discourage me. If my metaphorical ship ever comes in, none of it will go towards the purchase of a literal ship.
At any rate, the buyer of Odyssey was concerned that Tender was not registered, so Mrs. Brodsky went to register it, which is what led to the problems.
The evidence indicated that Mrs. Brodsky registered Tender at the Customer Service Bureau office of the Massachusetts Department of Revenue (“Department”) on September 22, 2011, paying a Massachusetts use tax of $86.50 on the purchase price of Tender, plus $54.09 in penalties. According to the Assessment Narrative prepared by the Department’s auditor, when Mrs. Brodsky submitted her paperwork for Tender, the examiner on duty also noticed documentation related to Odyssey, for which no use tax had been paid. The Assessment Narrative, which was among the stipulated documents entered into the record, noted that when questioned about Odyssey, Mrs. Brodsky refused to answer and “covered the documents” relating to Odyssey. The examiner subsequently referred the matter to the Department’s Boat Unit for audit.
So Mass DOR has a Boat Unit. Who Knew?
Odyssey’s Odyssey To Massachusetts
In order to determine whether there was use tax due on Odyssey, it was necessary to go back to how it was acquired and how it made its way to Massachusetts. Mr. Brodsky acquired Odyssey from a California vendor for $815,000 in November 2008, but took delivery in international waters, so there was no California sales tax.
Mr. Brodsky sailed Odyssey to Mexico and then had it shipped to Florida, where it arrived in December 2008. Mr. Brodsky testified that he had secured mooring in Dania Beach, Florida and had no intent of bringing the yacht to Massachusetts. It was a piece of cake to drive or fly from Massachusetts to Florida anytime they wanted to use the boat. Then commenced another tale of woe, that will convince you to think twice before buying a yacht and then not buy it.
With Odyssey safely moored in Florida, Mr. Brodsky hired boat mechanics to look into the problems that had surfaced en route to Mexico. Subsequent inspections revealed additional problems, including issues with the boat’s hydraulics, air conditioning, and automatic identification system. Invoices for the work performed on Odyssey during this time were introduced into evidence.
In February of 2009, the Brodskys departed on Odyssey for a cruise of the Bahamas. This tour lasted approximately three weeks, after which they arrived back in Florida. During this cruise, they once again experienced problems with Odyssey’s systems, including leaks as well as problems with the electronics, hydraulics, and stabilizer. Again, Mr. Brodsky hired mechanics to conduct the necessary repairs on Odyssey.
So according to his testimony, Mr. Brodsky decided to bring the boat to Fairhaven so he would be able to supervise the repairs. Odyssey arrived in Fairhaven on May 9, 2009 which worked out to six months and four days after taking delivery in international waters on November 5, 2008.
Why Six Months Is Important
Property is presumed to have been purchased for use in Massachusetts if it was brought into the Commonwealth within six months of its purchase. Thanks to the four days, the statutory presumption did not apply, but that did not settle the issue. They need to look at the surrounding circumstances, which didn’t really look that good for Mr. Brodsky.
When he purchased Odyssey the insurance paperwork indicated that he would be docking it in New Bedford (The famous whaling port just across Buzzard’s Bay where the fellow who you were to call Ishmael shipped out with Captain Ahab). Documentation with the Coast Guard and Homeland Security indicated Fairhaven was the home port. Probably worst was that Fairhaven was emblazoned on the stern of the yacht. And of course there was no use tax paid to Florida, which Mr. Brodsky had testified was the yacht’s intended home.
The Board did not find Mr. Brodsky’s testimony with respect to his intentions for Odyssey to be credible, as it was inconsistent and contradicted by contemporaneous documents entered into the record. 4 Specifically, the Board rejected Mr. Brodsky’s assertion that unexpected events — namely, the mechanical issues that arose following his purchase of Odyssey and his need to personally oversee the repairs — caused him to bring Odyssey to Massachusetts in 2009, contrary to his original plans.
The Other Way Around This
I had a hard time deciding who to root for when I was reading this case. I ended up leaning toward Mr. Brodsky, since his spouse makes them part of the siblinghood of bloggers. One solution that they either did not consider or rejected for other economic reasons was to berth in Rhode Island, which has a tax free boating policy. They don’t call it the Ocean State for nothing. John Kerry while representing Massachusetts in the Senate kept his yacht docked in Newport.
Odyssey?
Something tells me Mr. Brodsky did not take Greek in high school like I did. For whatever reason “odyssey” has come to mean a grand adventure, but if you read the story of Odysseus, the nautical portion is altogether a tale of woe.
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