While the proposed rules provide a business use exemption for all vehicles, they employ a different standard for business use for passenger vehicles than they do for boats and aircraft. To be exempt from the luxury tax, automobiles must be utilized by the purchaser exclusively in the active conduct of the trade or business of transporting property or persons for compensation or hire, unless other use is de minimis. For boats, the exemption is a bit more liberal. In particular, the tax does not apply to boats used exclusively for commercial fishing, transportation for compensation or hire, or for use in any other trade or business, unless the boat is used predominantly for an activity generally considered entertainment, amusement or recreation. There is an exception for entertainment boats for hire, i.e., cruise ships, sightseeing boats, etc.
Aircraft enjoy the most liberal business use exemption.
This means that if an aircraft is regularly flown between New York and Florida for pleasure, and to and from Europe for business, the aircraft could conceivably meet the test for exemption. Unlike the test for airplanes, the test for automobiles and boats is extremely subjective and, therefore, far more difficult to meet. The regulations present an example of an individual who owns a luxury taxi cab for use in his business of providing taxi services to the public. In addition, he often uses the cab to pick up family members and to go shopping. These other uses are not considered de minimis non-business uses, and the taxi will not qualify for exemption.