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Charters

Bare boat charter

A bare boat charter is renting or leasing a vessel to a customer, who then has total control of the vessel. The boat owner or the charter business cannot provide a captain or crew or be present on the vessel during the charter.

Vessel owners can place some general restrictions on vessel operation, such as requiring the lessee to hire a licensed skipper, limiting the number of passengers on board, and limiting where the vessel can be operated. To avoid tax liability for intervening use, the boat owner cannot be on board as a skipper, crew member, or guest.

Reference: WAC 458-20-211

Tax on boats purchased for bare boat charter

Vessels purchased solely for bare boat charters are purchases for resale and are exempt from sales tax. Sellers must retain a reseller permit in their records documenting the exempt sale.

The purchaser will be subject to use tax (based on the total value of the boat) if they engage in intervening use of the boat. If the boat owner is on board as a skipper, crew member, or guest, it is considered intervening use. Charter boat owners or charter businesses are not treated as vessel dealers. Intervening use of a charter boat is taxed on the full value, not the rental value.

Intervening use doesn't include activities in support of a bare boat charter business such as maintenance, fueling or delivery activities. Such activities won’t trigger use tax liability. This is consistent with "dealer use."

Purchaser requirements

Purchasers of documented vessels for bare boat charter are generally required to complete and file a Commercial Vessel Tax Personal Property Listing Application with the Department of Revenue. This requires that the business that owns the vessel is registered with the Department of Revenue. Apply for a business license online.

Bare boat charter tax reporting

The following scenarios represent the two most common business methods and how the activities are reported.

1. Company A leases boats from the boat owners and sub-leases them to the public.

Company A collects sales tax on bare boat charter fees and reports their gross receipts under the retailing B&O tax classification. The vessel owners report wholesaling B&O tax on gross income from the lease to Company A.

In this scenario, the owner may lease back the vessel from Company A and pay sales tax on the fair market rental rate.

2. Company B is an agent (but not lessee) for the vessel owner and provides charter management services.

Company B collects sales tax on the bare boat charter fees and reports its commission earned under the service and other activities B&O tax classification. The charter fees are reported as follows:

  • Owners using a charter agent that charters in the name of the boat owner must report under retailing B&O tax and retail sales tax. If the charter agent remits the sales tax to the Department, the owner may take a deduction from retail sales tax. On the deduction detail pages, identify the deduction as “sales tax reported by agent.” See WAC 458-20-159.
  • Owners using a charter agent that charters in the name of the charter agent report under wholesaling B&O tax. In this situation the boat owner must obtain a reseller permit from the charter agent. See WAC 458-20-102.


The owner reports their gross receipts, without any deduction for amounts paid to or withheld by Company B as compensation for their services. Here it is assumed that Company B will remit the sales tax collected directly to the Department of Revenue with its excise tax returns.

When Company B acts as an agent for a vessel owner, the owner cannot use the vessel without incurring a use tax liability on the fair rental value base on the full value of the vessel. The only way that a boat owner can use the boat for personal pleasure and not owe sales or use tax based on the value of the boat is, before any pleasure use by owner has occurred, to lease the boat to a third party on a long term lease, then lease back the boat for shorter periods of time. In this case the owner pays sales tax based on fair rental value for the period of personal use. See WAC 458-20-211.

Additionally, the owner may not allow employees of the owner to use the vessel for their pleasure at no charge, or for a charge below fair market value. This will be considered intervening use by the owner.

References: WAC 458-20-159, WAC 458-20-178 and WAC 458-20-211 and Taxability of the Charter Boat Industry Special Notice

Skippered charters

A skippered charter is the rental of a vessel with a captain and/or crew. The purchase of a vessel for skippered charters is subject to sales tax. A reseller permit cannot be used to purchase vessels for skippered charters. (See reseller permit section)

Charter boat repairs

Parts and labor for the repair and maintenance of charter vessels are taxed in the same manner as the vessel to which they are affiliated. If a vessel is operated for bare boat charter, the vessel was tax exempt at time of purchase. Therefore, repair/maintenance charges will also be considered to be purchased for resale, and exempt from sales tax.

Charter examples

Example 1: John Doe purchased a vessel which will be rented to others as a bare boat rental. The rentals will be arranged through an agent at a marina.

This is not a qualifying leaseback situation. If the boat owner will occasionally use the boat for personal pleasure, a reseller permit can’t be used to purchase the boat. Just because an agent is used to arrange charters, does not make this a qualifying leaseback situation.

Example 2: Jane Smith purchases a vessel to create a bare boat charter business and immediately signs an exclusive lease agreement with WWW Charter Company. WWW Charter sub-leases the vessel to members of the public. Ms. Smith occasionally rents the vessel from WWW for the same rate and terms as anyone else.

This is a leaseback situation in which case the vessel may be purchased with a reseller permit.

Timeshare transactions are treated the same way.

For more information, please see our Special Notice: Taxability of the Charter Boat Industry.

ETA 3046: Tax Liability of Charter Boat Owners and Charter Agencies - Reporting Instructions (pdf)

Fishing charters guide