We've seen this limitation used over and over, especially in major cases like El Faro. Horrible law, but has been challenged often to no success, so now most won't even challenge it.
Montana LLC
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We've seen this limitation used over and over, especially in major cases like El Faro. Horrible law, but has been challenged often to no success, so now most won't even challenge it.
ksanders
Moderator Emeritus
I must be missing something, because it’s not making any sense.
If I am a legal resident of lets say Alaska. I buy a boat in Washington (which I did).
I leave the state of Washington and start my cruising lifestyle.
No state requires me to register my boat in their state as a passing through visitor. Of course if i decide to stick around then I would have to register the boat in that state, and some states (washington is one of them) that I would then have to pay sales tax.
Am I missing something???
Yes, the way most state laws are written, they require registration of all boats, but they grant you an exemption for 60 or 90 days if your boat is legally registered in another state.
Now, many say they've not had this enforced ever but then there are some states that have been aggressive in enforcing it. It's an easy action if a state is serious as they just stop any boat without a registration sticker or numbers.
The registration is normally a rather minor amount compared to sales tax and/or property tax so not a major collection item. Then there are states like California that don't require registration of a documented vessel. They are very much in the minority.
ksanders
Moderator Emeritus
Thanks for the clairification. Since Alaska has no registration for documented vessles, I’m compliant and can travel as long as I keep traveling and do not stay anywhere too long.
psneeld
Guru
Not really Kevin... I think both BandB and I have caught that the wording (I will only say Fl as that I did look up) says you have a grace period "only if registered in another state".
Though you might be compliant in your home state..... thats noit what the Fl law says literally. Whether the "literal" part is enforced is still a question in my mind.
Woodland Hills
Guru
What does maritime law have to do with state taxes? And why would a specialist in maritime law know anything about the tax codes of the different jurisdictions?
No wonder you got bad advice, it was not his area of expertise...... we got the opposite advice from a tax accountant, a tax attorney and the state Department of revenue in the state where the llc was formed as well as the state where the sale took place.
Hobo was an Alaskian boat. Since she was documented, she didn’t need to be state registered as Kevin mentioned plus when we bought her, no sales tax was paid. We traveled the west coast and no one asked about state registration and we did give our vessel doc information several times when staying in marinas. We ended up in Florida and registered her there for the first state registration since we owned her. We were told we owed no sales tax, just the registration fee, since we had satisfied the taxing jurisdiction where Hobo came from. Hard to argue with the no sales tax coming from the tax people.
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psneeld
Guru
Thanks Larry,
My point was only about registration in FL and other states if they word their registration reciprocity the same. Sales tax often has a couple layers of "but ifs" thus hard to condense all the possible suggestions.
Heading south in a month, hope NC and SC are passable soon.
My point was only about registration in FL and other states if they word their registration reciprocity the same. Sales tax often has a couple layers of "but ifs" thus hard to condense all the possible suggestions.
Heading south in a month, hope NC and SC are passable soon.
twistedtree
Guru
This is exactly what I was trying to ask earlier. When a visit state grants you an exemption provided you are "registered in another state", does that mean:
1) You have a registration certificate from another state, or
2) You are in compliance with the registration requirements of another state.
Those are two different things. Kevin and I are in the same situation because neither of our residency states register documented boats. So we are in compliance with the registration requirements of our home state, but we do not carry registration certificates because the state doesn't issue them.
I would think by now there would be case low on this, but who knows.
Fletcher500
Guru
Our last two boats were new. We paid the Sales Tax both times. I could have used the temporary foreign port route prior to bringing the boat in to it’s home port, but didn’t. Not judging others who have, but personally I didn’t want to do it for various reasons.
McGillicuddy
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It’s what the Supreme Court calls ‘Settled Law’.
It’s origins date back to English seafaring law where going to sea in ships was considered a risky or even foolhardy venture. Therefore the coverages were limited to only the value of things and no more. Seafarers were supposed to be aware of the risks they were taking by venturing from the safety of the firmament. Only if an Owner (who rarely ventured to sea in his own vessels) deliberately put the ship in peril by his willful negligence would the limitations be breached.
Nowadays, in general, people rarely take responsibility for their own foolhardy ventures and there is always someone else to blame/sue.
I agree that if ever there was a case for busting the Limitation of Liability it would be El Faro. Even though the owners filed for limitation, the case will never be heard as Underwriters settled fairly quickly with families. From what I have heard, the settlements already exceeded the limitations anyway and that was before payment of the hull loss and other liabilities.
Fletcher500
Guru
OP, it appears you received an to your answer initial question, and we are on major thread drift now, so I will chime in once more to add to that drift. Agree, the El Faro sinking was a very good case as to why it should be re examined. R Slades, "In to the Raging Sea" (Sinking of the El Faro) covers this topic at the end of the book.
My understanding was that they very quickly offered settlements that exceeded the limitations but were still extremely small compared to what you'd expect in any death situation not covered by this law. However, they made it clear that the families would be very wise to accept the settlement offered as otherwise they would invoke the maritime law and they would get less, not more. It was a basic warning of "don't hold out for more because we'll refuse and you'll end up getting less due to the maritime limit. We're giving you more than we're legally required to.
Whether anyone could have sued and gotten more through a claim of gross negligence we'll never know because families in those situations can't afford the time they'd have to wait or the legal costs involved.
By comparison, air accidents often pay far more.
However, there are other situations even more limited than the maritime limitations and that is deaths in the workplace. Most of those are covered by worker's compensation laws and those limitations are typically in the range of $150,000 (vary by state). Same situation of proving gross negligence required to get more. Many people think worker's compensation laws were written to protect employees and it's the exact opposite. They were written to protect the employer by limiting their liability.
psneeld
Guru
I have no idea which concept a state pushes.
But my guess is ....because of the wording is not leaning towards "meeting the requirement (of zero)" ...though perfectly legal....
Otherwise it would be worded as such because other states don't have registration requirements.
Thank you everyone for your comments including the one that attempted to address my question. I was asking if anyone had personal experience especially as it might relate to ACTUAL ATTEMPTED ADVERSE ACTION by some state other than, in my case MT (or other no sales tax states like Delaware). It appears that no one actually knows of any.
In the RV full timing world, where MT LLCs are quite common, similar discussions go off track as people expound on tax avoidance vs evasion and other such nonsense. But in my 20+ years in that world and in RV forums, there has been one documented case of a state actually going after a LLC transaction which that state thought deprived it of its right to extract sales tax. And that case was against a western state dealer who touted "no sales" tax to its customers and steered them to a MT LLC. That dealer was licensed in the western state and started to feel the weight of the state on it and caved rather than fight to retain its business license. Their issue was not even decided on the merits but rather on the "rule of tonnage". The purchasers - no problem.
It is not illegal to form a corporation to own your assets. Done every day of the week. It's not illegal to have the corporation domiciled in a 'foreign' state or even country (go check the corporate registry of Delaware to see how many of your "home state" companies are actually Delaware corporations. So for an individual to exercise his or her right to legally form a corp in a non sales tax state like MT or DE is well within their rights and to have that corporation then buy an asset without sales tax is perfectly legal. On a documented vessel that travels through any other state's waters complying with the state's rules on how long the vessel can be continuously in their waters (and that applies to all vessels even to those of your on which sales tax was paid), it's a no harm, no foul situation.
The only state then that might feel that they should get paid sales tax would be my home state of SD (3%). SD will never ever see my boat and even if their 'domicile police' did, they wouldn't see SD painted on the transom and would have zero idea who the owner is or where they claim residency.
I am unaware of any first hand (not I heard or I think) "owner" issues on the RV side and was just wondering here if that was the same experience on the boating side and am happy, via responses received here, that no one is aware of any legitimate issues. Again, I thank you.
In the RV full timing world, where MT LLCs are quite common, similar discussions go off track as people expound on tax avoidance vs evasion and other such nonsense. But in my 20+ years in that world and in RV forums, there has been one documented case of a state actually going after a LLC transaction which that state thought deprived it of its right to extract sales tax. And that case was against a western state dealer who touted "no sales" tax to its customers and steered them to a MT LLC. That dealer was licensed in the western state and started to feel the weight of the state on it and caved rather than fight to retain its business license. Their issue was not even decided on the merits but rather on the "rule of tonnage". The purchasers - no problem.
It is not illegal to form a corporation to own your assets. Done every day of the week. It's not illegal to have the corporation domiciled in a 'foreign' state or even country (go check the corporate registry of Delaware to see how many of your "home state" companies are actually Delaware corporations. So for an individual to exercise his or her right to legally form a corp in a non sales tax state like MT or DE is well within their rights and to have that corporation then buy an asset without sales tax is perfectly legal. On a documented vessel that travels through any other state's waters complying with the state's rules on how long the vessel can be continuously in their waters (and that applies to all vessels even to those of your on which sales tax was paid), it's a no harm, no foul situation.
The only state then that might feel that they should get paid sales tax would be my home state of SD (3%). SD will never ever see my boat and even if their 'domicile police' did, they wouldn't see SD painted on the transom and would have zero idea who the owner is or where they claim residency.
I am unaware of any first hand (not I heard or I think) "owner" issues on the RV side and was just wondering here if that was the same experience on the boating side and am happy, via responses received here, that no one is aware of any legitimate issues. Again, I thank you.
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psneeld
Guru
The answer is yes.... I read a case in NJ where a NJ resident was taxed and fined in tax court for having a Delaware LLC with the boat purchased by it after he passed the boat through NJ waters. The court said even for 1 minute in NJ waters was good enough to show the sham....and said registration regs have nothing to do with tax regs.
That's the rub with tax laws, you may be good till one little "I gotcha"....his mistake was allowing the boat into NJ waters and at that point the tax court had jurisdiction and proved the LLC was just a shell for the boat to keep from paying use tax and therefore he owed the tax and penalty.
That's the rub with tax laws, you may be good till one little "I gotcha"....his mistake was allowing the boat into NJ waters and at that point the tax court had jurisdiction and proved the LLC was just a shell for the boat to keep from paying use tax and therefore he owed the tax and penalty.
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tiltrider1
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It doesn’t matter where your LLC is domiciled if you buy a boat in California you will pay sales tax. California will give you credit for any sales tax paid to your state of residence. California doesn’t care if you are buying the boat to take out of state. This why many boats are taken off shore to sign the paper work.
I have not heard of any other state being this aggressive but this would Trip up a Montana LLC for many.
I have not heard of any other state being this aggressive but this would Trip up a Montana LLC for many.
Michigan has been aggressive against quite a few boaters. I've known Florida to follow up on boats purchased in FL that claimed exemption from sales tax. I've also known GA to be aggressive in one case.
Here's what you must sign if you buy a boat in FL and don't pay sales tax on it, it's an affadavit for exemption:
http://floridarevenue.com/Forms_library/current/gt500003.pdf
Note that the above statement is kept by the dealer who files and claims the exemption. The trouble develops when a dealer receives a sales tax audit and the auditors either decide it looks excessive and follow up on many or they just do some random follow up.
This is really no different than sales tax exemptions for non-profits or for resale. The responsibility for maintaining properly filed exemptions is with the seller. However, once a seller is determined not to be in compliance then all purchasers are subject to further questioning. I know one instance in NC years ago where an exotic car dealership was encouraging businessmen and ladies to give them resell certificates from their businesses to avoid sales tax. Now it was clear they were not buying the autos for resell. A candy store doesn't generally sell Porsche's as an example.
I always recommend using a professional documentation company familiar with the states in question and having served thousands of boaters. They can assist you in legal and legitimate options for minimizing taxes. They will not assist in anything illegal. Sometimes they will provide multiple options for you to make a fully informed decision.
RV's with proper license plates are unlikely to have issues. Boat's with proper registration stickers are also unlikely. Both are actually subject to registration requirements by future states at some point. Boats are more likely to be checked as they are more likely to sit and overstay that time.
I have heard of one case only on an RV and that was in Mississippi. It was a very expensive RV and sat parked in a drive on a farm in the Delta of Mississippi. It had a Tennessee license plate. Well, Mississippi is very suspicious of Tennessee license plates because the cost of a license plate in Mississippi is extremely high. Now, this only became a huge issue because the owner was a Mississippi resident. The owner also angered the local sheriff over another issue. For a MS resident to register a vehicle kept in MS elsewhere is a Felony. They reached a settlement and agreed not to file criminal charges, but it was not cheap.
Here's what you must sign if you buy a boat in FL and don't pay sales tax on it, it's an affadavit for exemption:
http://floridarevenue.com/Forms_library/current/gt500003.pdf
Note that the above statement is kept by the dealer who files and claims the exemption. The trouble develops when a dealer receives a sales tax audit and the auditors either decide it looks excessive and follow up on many or they just do some random follow up.
This is really no different than sales tax exemptions for non-profits or for resale. The responsibility for maintaining properly filed exemptions is with the seller. However, once a seller is determined not to be in compliance then all purchasers are subject to further questioning. I know one instance in NC years ago where an exotic car dealership was encouraging businessmen and ladies to give them resell certificates from their businesses to avoid sales tax. Now it was clear they were not buying the autos for resell. A candy store doesn't generally sell Porsche's as an example.
I always recommend using a professional documentation company familiar with the states in question and having served thousands of boaters. They can assist you in legal and legitimate options for minimizing taxes. They will not assist in anything illegal. Sometimes they will provide multiple options for you to make a fully informed decision.
RV's with proper license plates are unlikely to have issues. Boat's with proper registration stickers are also unlikely. Both are actually subject to registration requirements by future states at some point. Boats are more likely to be checked as they are more likely to sit and overstay that time.
I have heard of one case only on an RV and that was in Mississippi. It was a very expensive RV and sat parked in a drive on a farm in the Delta of Mississippi. It had a Tennessee license plate. Well, Mississippi is very suspicious of Tennessee license plates because the cost of a license plate in Mississippi is extremely high. Now, this only became a huge issue because the owner was a Mississippi resident. The owner also angered the local sheriff over another issue. For a MS resident to register a vehicle kept in MS elsewhere is a Felony. They reached a settlement and agreed not to file criminal charges, but it was not cheap.
twistedtree
Guru
WA is very aggressive about collection, and wants to know the ownership of an LLC before you qualify for the exception. If a WA resident is an owner in the non-WA LLC, and the boat is brought into WA, it is immediately liable for use tax. It specifically designed to plug this exact loop hole of residents who are other wise liable for tax, trying to masquerade the boat as a non resident visiting boat.
nwboater
Senior Member
When I bought my previous trawler, we put it in an LLC formed to do charters. No sales tax at the time but we did have to collect and remit sales tax on the charter income. When we closed the business and registered the boat with the state, we had to pay state sales tax on the "value" of the vessel at that time. Because it was then 8 years older, I gave a depreciated value and paid sales tax on that amount (about half of what I paid when purchased.). One way or another, the state gets their share...same with the feds when you go to sell the boat -- Depreciation Recapture can be a big stumbling block if your boat still has good value.
One issue is getting a lawyer that really understands LLCs. I'd bet you got the wrong attorney. LLCs, Corps, and trusts (even better) are great entities to have to hold your toys.
Russell,
I could argue that you got bad advice. MANY companies have vehicles and they may have a separate entity to hold them... absolutely nothing illegal about that, just good business. The state can't "catch up with you" as there's no issue.
LLCs buying toys in them happens all the time, and perfectly legal. And one can buy the LLC and there's absolutely no tax due. However, there are aggressive tax people that will try to chase you. That happens all the time. So, keep a good lawyer that knows this stuff in your back pocket to sue these bastards and get them fired. I have.
Now, a better solution is a trust, but a whole different thread......
ctjstr
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as an example. our last boat was purchased here in WA, with a high sales tax. My son was a montana resident, so it was "registered" in Montana. Because of their rules, we were not required to have an actual Montana registration, so all we had was our documentation. It was located here in WAshington. We were allowed to keep it here for a year as I recall, after which time we were required to actually register it here, or move it out of state. We saved a little, by decreasing its value when re-registering here in washington, but not a bunch.
toni
toni
psneeld
Guru
Nope, I always research opinions much further and saw how many lawsuits individual "owners" of LLCs were in and how liability suits have become.
LLCs may provide other great things, but liability protection for actions done by the owner doesnt seem to be one.
The real trick is the thin line lawsuits are drawing in negligence and gross negligence these days.
Heres another opinion....
https://www.legalzoom.com/articles/...-protect-your-personal-assets-as-an-llc-owner
1. Obtain LLC Insurance
If someone files a lawsuit accusing you of wrongdoing—whether it’s negligently maintaining your building, wrecking the company van or defrauding a customer—your*LLC*won’t protect you from personal liability. And the judgment in a personal injury lawsuit can be financially devastating.
For this reason, it is important to have a good liability insurance policy that will cover both you and your business if you get sued.
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BrianSmith
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Just pay the tax that's owed, dang it. In whatever state your situation dictates (i.e., where you live, where you buy the boat, where you're going to register the boat, whatever.) A friend of mine always registered his boats in Montana, but they never spent a minute outside of FL. He got away with it, but it sure as heck wasn't legal. How is that fair to every other Floridian who DOES pay their legal share of taxes? It isn't. And he bought expensive boats - the last one was over $400,000 - so you can imagine the atual amount of tax he was evading. (To make matters worse, he was the kind who loved to complain about welfare cheaters, and government "entitlement" programs, etc. But I don't want to take this off into a political direction.)
Woodland Hills
Guru
If an LLC legally lowers tax liability then it is not evasion. There is no requirement to pay one cent more tax then one owes legally, so why condemn those who follow the law when structuring their boat ownership?
Capt Montana
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Montana home port
We documented our boat, 48 Tolly, and listed Absarokee Mt as our home port. We are Montana residents and in the ten years we spent as livaboards we only had issues when we moved the boat to Olympia Wa. We kept the boat there for about 120 days because I got another job in St Louis and we moved the boat back to the Mississippi. Washington State came after us because they said we were in the state more than 90 days and we owed full sales tax. During the Wa stay we had deck delamination work done on the hard in a shop for over thirty days so I said the law did not count those days as we were from out of state and WA laws allow boats to come in for work and not count toward the 90 days, hey grudgingly accepted that but then wanted the sales tax on the work that was done, also exempted by the same law if you were from a state that did not have a sales tax. (we were turned in by the bookeeper of the shop). No lawyers were involved, the laws are on the internet and WA was just being aggressive in collecting a tax. We would have paid the sales tax if we stayed in the Northwest.
As livaboards on the loop and on the Mississippi we never had an issue, were boarded several times by CG and locals and if the question came up, how do you boat in Montana, my answer was that Lewis and Clark boated in Montana all the way up the Missouri.
We sold the big boat, have a 29 Bayliner explorer with a single diesel and plan to go from Ft Benton Mt to St Louis on the Missouri. FAR WEST is a Montana registered boat, still no sales tax.
We documented our boat, 48 Tolly, and listed Absarokee Mt as our home port. We are Montana residents and in the ten years we spent as livaboards we only had issues when we moved the boat to Olympia Wa. We kept the boat there for about 120 days because I got another job in St Louis and we moved the boat back to the Mississippi. Washington State came after us because they said we were in the state more than 90 days and we owed full sales tax. During the Wa stay we had deck delamination work done on the hard in a shop for over thirty days so I said the law did not count those days as we were from out of state and WA laws allow boats to come in for work and not count toward the 90 days, hey grudgingly accepted that but then wanted the sales tax on the work that was done, also exempted by the same law if you were from a state that did not have a sales tax. (we were turned in by the bookeeper of the shop). No lawyers were involved, the laws are on the internet and WA was just being aggressive in collecting a tax. We would have paid the sales tax if we stayed in the Northwest.
As livaboards on the loop and on the Mississippi we never had an issue, were boarded several times by CG and locals and if the question came up, how do you boat in Montana, my answer was that Lewis and Clark boated in Montana all the way up the Missouri.
We sold the big boat, have a 29 Bayliner explorer with a single diesel and plan to go from Ft Benton Mt to St Louis on the Missouri. FAR WEST is a Montana registered boat, still no sales tax.
Not condemning those who stay both within the writing and spirit of the law. Mildly condemning those who are within the writing but not the spirit. Condemning all who violate the law or suggest plans that do and many mentioned here are clear violations. Just because one doesn't get caught, doesn't make it right.
I've saved very large amounts of state income tax by moving to Florida. I'm a legitimate Florida resident in every aspect. However, I know someone who took the steps to become a FL resident but still lives 75% of the time in California, in his former house for which ownership was transferred to his brother. I'm not going to turn him in but when California catches him I will applaud.
If he got the brother to pay for the house, he's like my brother.
