Topics 

• Money Missing 

• Sales and Use Taxes – Aggressive Auditing and Assessing for NC Marine Businesses 

• Still a Good Deal – The Feel Good  $25.00 

• Proposed NC Bills Take On Property Tax Issue for Non-Resident Boat Owners

• Training and Business Help Seminars

• MRAA Sees Progress On Warranty Front

• Two Companies: One Boat

• NC Boaters Can Claim Fuel Tax Refund

Money Missing

Funding for operation of the Dismal Swamp Canal and critical dredging of the Atlantic Intracoastal Waterway (AIWW) is not included in the President's FY 2005 proposed budget. Although Congress originally authorized the AIWW to be created and maintained at a depth of 12 feet, “The Office of Management and Budget has made its own little "rule" that so-called "low-use" waterways not be maintained.  That is, waterways that carry less than 1 billion ton-miles of freight” according to Worth Hager, President of the National Waterway Conference. 

NC Congressman Mike McIntyre, Chairman of a new Congressional Waterways Caucus, released the following statement regarding the Administration’s FY 05 U.S. Army Corps of Engineers budget request: “This budget request ... should soundly be rejected by Congress! Our beaches and waterways are the driving force in thousands of local communities all across this nation”.  

There are number of ways to head this off, but they all involve action on your part – especially NC marine business owners. The AIWA website at www.atlintracoastal.org/Congress/NC1.htm has very helpful information, as well as the NMMA site at www.nmma.org/government/vocus/. And a call to Penny Leary-Smith, Director of the Dismal Swamp Canal Welcome Center at (252) 771-8333 will provide more information. If you can, attend a 9:30 am March 2nd meeting at the Hampton Inn in Elizabeth City. Representatives from the US Army Corps of Engineers will be Joel Scussel, Project Manager AIWW, and W. Meade Stith, Chief, Operations Support Section will be discussing the Dismal problems. See our Dredging Links.

Sales and Use Taxes – Aggressive Auditing and Assessing for NC Marine Businesses

Boat building and boat repair businesses have come under some aggressive auditing and assessment of back Sales and Use Taxes, plus penalties and interest. Unfortunately, the tax rates, exemptions, and exceptions concerning materials, supplies and services (purchased and sold), are not clearly defined for these business activities. 

At issue are the methods businesses use to bill the customer for repairs, services and tangible property sold. The seemingly simplest things, like separately stating installation costs or labor costs on a customer’s invoice for repairs and service, can be the difference between having the total sales amount fully taxable, and only being taxed on the value of the tangible personal property sold. 

Determining a Taxpayer’s liability for sales and use taxes is sometimes complicated, and being wrong can be ruinous. In certain situations business managers and owners can be personally liable for tax deficiencies and penalties and interest.  Consulting your qualified tax professional is the best way, along with keeping accurate books and records, to avoid expensive surprises.  More details. 

For more in-depth information, the location of state websites and where you can find seminar information, go to the Training & Certification link. We are aware of series of one-day seminars about NC Sales and Use Taxes in various NC locations including Wilmington, Charlotte, Greenville, Raleigh, RTP, Greensboro, Winston-Salem and Fayetteville during the end of April and beginning of May. These seminars will cover how to determine, account for, pay, and recognize the Sales and Use Tax. Click here.

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Still a Good Deal – The Feel Good  $25.00

Thanks to all of the businesses that responded to this request in January’s NC Marine TradeWinds. Since it remains a good deal, we will run this request again. This newsletter and the NCwaterways.com website are entirely produced and maintained by this state agency program – the SBTDC NC Marine Trades Services. The site refers users to over 3,500 NC marine businesses (each company can access their data to update), and has about 5,000 unique web visitors per month. This newsletter is sent to 2,000 NC businesses by email and 800 by fax. Our funding to maintain and manage this effort is limited. A $25.00 tax-deductible business donation check made out to the SBTDC (Small Business and Technology Development Center) and sent to P.O. Box 406, Beaufort, NC 28516 would go a long way. Thanks – Mike Bradley, program director. See program information.

Proposed NC Bills Take On Property Tax Issue for Non-Resident Boat Owners

The complex problem of NC property taxes levied on boats owned by non-resident boat owners, but which are in the care of NC businesses, is gaining attention and action by NC builders, repair businesses and brokers. NC House Bill # 1734 (or Senate Bill # 663) addresses inconsistencies in county property tax treatment as applied to non-resident boat owners using North Carolina businesses for repairs and service. It is felt by many NC business owners that existing tax practices discriminate against NC businesses and create an unfair competitive advantage for competing businesses of other coastal states. 

In short, the bill would allow NC businesses to renovate, repair, or sell boats for non-residents as follows: For repairs: The boat is owned by a nonresident individual or an entity that has no principal office in this State, the boat’s tax situs is normally outside of this State and it is in this State solely for repair or renovation. For a boat broker: the broker can possess a boat for sale without that boat incurring property tax debt as long as the boat is owned by a nonresident individual or an entity that has no principal office in this State, its tax situs is normally outside of this State, and the boat is in the possession of a person, other than the owner, who is engaged in business as a seller or broker of boats and with whom the owner has contracted to sell the boat. Call or e-mail Mike Bradley at (252) 728-2144 or mbradley@sbtdc.org for more information and see letter on issue from NC builder/boatyard owner.   

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Training and Business Help Seminars

We have revamped our website’s Training and Seminar section. Boat building, boat and engine repair, safety and regulatory, and a full range of business workshops, seminars and comprehensive training programs are becoming more and more available across the state. Keep your business to be up-to-date on tax codes, correct OSHA information and forms, the latest technology information, and business methods and management. Private companies and state agencies / community college have a lot to offer marine businesses. Visit our Training and Seminars section.

MRAA Sees Progress On Warranty Front

[from Soundings Trade Only Today – February 24, 2004] www.tradeonlytoday.com

The Marine Retailers Association of America says its recent call for a “bold” new bow-to-stern warranty policy has elicited support and inquiries from a number of leading boat manufacturers. A number of the manufacturers also have asked that MRAA encourage dealers to do more in the customer service area — a partnering initiative that was called for in the MRAA position paper. The position paper calls on manufacturers to provide support to train these technicians. See MRAA.

Two Companies: One Boat – Ask Your Tax and Legal Professionals

Several boat builders have structured their business as two separate and distinct corporations and/or LLCs.  One entity is the owner of the business’s tooling and productive assets, and the other is the actual entity that builds, markets, and sells the boats.  In brief: the tangible asset-rich company leases the tooling to the operating company or collect royalties based on the use of the tooling. The manufacturing entity is responsible for product liability issues, but the owner’s overall risk may be reduced if the legal entity that manufactures and sells the product does not own the production tooling.  

For financing purposes, it is also possible to borrow, and/or sell equity to investors, in either the entity that owns the tangible assets, or the entity that operates the going manufacturing operations, or both.  For financing purposes, the value of two separate entities may exceed the value of one combined company. Tax issues would depend on the type of business entity used. The only way to decide these issues is to do research and to consult you tax professional and business attorney. – For more information, NC business owners can contact SBTDC counselor, Jack Morrow (jmorrow@sbtdc.org) at (910) 962-3351.

NC Boaters Can Claim Fuel Tax Refund

Boaters can claim a refund for taxed fuel used in off-highway uses in 2003. They can pull down the 2003 forms from the following website address: www.dor.state.nc.us/downloads/motor.html (instructions for this form are found at www.dor.state.nc.us/downloads/Gas1201_2003_Instuctions.pdf. The phone number for the state’s tax office is 919-733-3409. Marinas: Pull off the form and mail it to your marina customers with your newsletter.

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