What Marina Taxes Apply to Your Business?
Explore the tax framework for marinas, examining how distinct rules apply to property assets, revenue streams, and operational expenditures.
A marina combines real estate management, retail, and various services, creating a broad spectrum of tax obligations. Marina owners must understand rules for property, sales, and income taxes, which can vary significantly by location.
Property Tax on Marina Real Estate
Local property taxes are a recurring expense for marinas, calculated on the assessed value of its physical assets. This ad valorem tax is levied by local governments and includes land, buildings, and specialized marine infrastructure like docks, pilings, and seawalls. The valuation also accounts for any submerged land leases or riparian rights that grant the marina control over adjacent water, as these rights are integral to its operation.
The valuation process for a marina is distinct. While assessors use three methods, the income approach is the most relevant because it values the property based on its ability to generate revenue. The sales comparison approach is hindered by infrequent marina sales, and the cost approach may not accurately reflect the market value of an operating business.
Using the income approach, an assessor analyzes income streams like slip rentals and fuel sales, then subtracts operating expenses to find the net operating income. This figure is converted into a property value using a capitalization rate. The rate reflects the expected rate of return for a property of its type and risk profile.
Sales and Use Tax on Marina Operations
A marina’s daily operations generate sales and use tax obligations. These taxes apply to the goods and services a marina offers, requiring operators to track and remit them based on specific revenue streams.
The taxation of boat slip and mooring rentals depends on their classification. A long-term, exclusive lease of a specific slip may be a non-taxable real estate rental. A shorter-term, non-exclusive right to use any available slip is more likely a taxable license.
Fuel sales from the marina’s dock are subject to state and local sales tax on the retail price. This is a separate tax from the per-gallon excise taxes also levied on motor fuels. The marina is responsible for collecting this sales tax from the customer at the time of purchase and remitting it to the appropriate tax agency.
Other marina operations also have sales tax implications:
- Sales from a chandlery or ship’s store are subject to tax.
- For boat repair and maintenance, sales tax is due on parts and materials, while the labor portion may be exempt.
- Revenue from renting out marina-owned boats is taxable.
- Fees for chartered excursions are also taxable transactions.
Marina operators also have use tax obligations. This tax applies to items purchased for business use without paying sales tax, often from out-of-state vendors. The marina must self-assess the use tax on items like maintenance equipment and remit it directly to the state.
Federal and State Income Tax Considerations
Marinas are subject to federal and state income taxes on their net profits. Several specific deductions and accounting rules are relevant to their operations, with depreciation being a primary focus due to the investment in specialized, long-lived assets.
Depreciation is a non-cash deduction that allows a business to recover asset costs over time. Under the Modified Accelerated Cost Recovery System (MACRS), assets are assigned specific class lives. Land improvements like seawalls and docks are 15-year property, while assets like vessels are 10-year property. Floating docks may qualify for a more accelerated schedule.
Marinas incur unique deductible operating expenses, such as periodic dredging to maintain channel depth. While the cost of initial dredging is capitalized as part of the land cost, subsequent maintenance dredging is often treated as a deductible business expense.
Other deductible expenses include costs for environmental compliance, such as fees for water quality monitoring. A routine repair that keeps an asset in its normal operating condition is expensed immediately, while a major overhaul that extends the asset’s life must be capitalized.
Other Relevant Taxes and Fees
In addition to property, sales, and income taxes, marinas are subject to other specific levies and fees. These charges are tied to operating a waterfront or fuel-based business. They are imposed by various levels of government.
A prominent example is the collection of fuel excise taxes. Separate from sales tax, federal and state governments impose a per-gallon excise tax on fuel. The federal excise tax is 18.4 cents per gallon for gasoline and 24.4 cents for diesel. Operators include these taxes in the pump price, collect them from customers, and remit them to the government, often through their fuel distributor.
Marinas may also face environmental taxes or fees from state or local authorities. These can include charges such as stormwater utility fees or special assessments for shoreline protection and beach replenishment.
Some jurisdictions levy a business personal property tax, distinct from real estate tax, on movable assets used in the business. For a marina, this could include vehicles, tools, and rental boats. The marina must file an annual declaration of its personal property, which is then assessed for tax purposes.