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Old 12-10-2017, 10:27 PM   #1
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Tax Implications For Cruising The Pacific Northwest

I'm looking at buying a boat and cruising the Pacific Northwest: Oregon, Washington, BC, or Alaska. I'm looking to find the most tax efficient way to do so. I am a resident of Texas. My original plan was to buy in Washington and cruise the san juan islands, with anacortes as a home base. I am now reconsidering those plans with the 8% sales/use tax implications. I'll be on the boat 5 months out of the year and will be storing on the hard the rest of the year I'll likely only be in Washington for 2-3 years max. A few questions:

1) What is the most tax efficient way to purchase a boat and cruise between San Juan Islands and BC? It is my understanding the boat could be non registered in Washington and visit for 180 days a year (60 day + extension) or for one full year and not come back for another two years.

2) Can you receive multiple 60 day+ extension permits from the Washington in consecutive years? Does the 60 days get reset when you cross into Canada?

3) It is my understanding if you are a non-resident in BC you would not pay any tax on your boat. Is that correct? Do they need any additional documentation to prove that? For overwintering it looks like you need to be in a yard in BC and receiving maintenance as well?

4)Do people base their boat in BC and then jump down to Washington for 60 days at a time? Is their an established pattern with other boaters to avoid the use tax?

5) Is the boating in Washington significantly better than cruising BC to substantiate the cost of the use tax?

6) I'm looking at doing a 4 year cruise starting in WA and slowly working up the inside channel to Alaska. It just seems crazy to pay an 8% use tax to a state that I will be based in for two years...am I looking at that right?

7) It looks like charter boats are exempt from the use tax. Do you have to run a profitable charter business to use this exemption? Anybody used this strategy with success?

To be clear I'm not looking to avoid paying tax I'm looking to minimize my tax burden with proper planning and structure. I'm looking forward to hearing any ideas how I can structure my planned cruise. Many Thanks!
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Old 12-10-2017, 10:47 PM   #2
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Welcome.


For a non-resident in Washington, if your vessel is in Washington waters for more than 180 days you must pay a "user fee" at the same rate as the sale tax. It is a one-time tax.


Canada has different rules for non-Canada boats, but we a few friends that moor their boat in and around Sidney.


Oregon I think it is just an annual fee which is less than Washington. But you will get busted by Washington if you register in Oregon, then moor it in Washington.


Alaska the fee is $24 for 3 years or $0 if you are a documented vessel. No tax.
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Old 12-10-2017, 11:07 PM   #3
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Another thing to consider. Where do you intend to take it after 2-3 years? Let's say you avoided Washington tax by keeping it elsewhere, eventually you may still face a use tax somewhere if you've never paid sales or use tax.
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Old 12-11-2017, 04:57 AM   #4
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Check to see whether any of the states/province involved exclude from consideration time in which the boat is in out of water storage. This exclusion of time is common for tax purposes for out of state boats on the east coast of the United States. if one of them does your problem is solved.
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Old 12-11-2017, 09:25 AM   #5
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Another thing to consider. Where do you intend to take it after 2-3 years? Let's say you avoided Washington tax by keeping it elsewhere, eventually you may still face a use tax somewhere if you've never paid sales or use tax.
I plan on selling the boat after the cruise, so it is my understanding that it would be the buyers responsibility to pay any sales tax where they register the boat. Right?
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Old 12-11-2017, 09:29 AM   #6
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Welcome.


For a non-resident in Washington, if your vessel is in Washington waters for more than 180 days you must pay a "user fee" at the same rate as the sale tax. It is a one-time tax.


Canada has different rules for non-Canada boats, but we a few friends that moor their boat in and around Sidney.


Oregon I think it is just an annual fee which is less than Washington. But you will get busted by Washington if you register in Oregon, then moor it in Washington.


Alaska the fee is $24 for 3 years or $0 if you are a documented vessel. No tax.
So does the 180 day reset upon leaving Washington State waters, on a calendar year basis, or is it cumulative for the lifetime of the boat?
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Old 12-11-2017, 10:02 AM   #7
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I plan on selling the boat after the cruise, so it is my understanding that it would be the buyers responsibility to pay any sales tax where they register the boat. Right?
You're playing a complex and dangerous game. I don't know what price boat you're talking about, but depending on the amount of money and how badly you want to avoid paying more than you have to, I'd do one of the following.

1. Register the boat and pay taxes in the location you intend to keep and use the boat most.

2. Get a documentation agent in the area and very familiar with all the issues and pay them for their advice and to register or document the boat for you.

In your initial post you stated, "It just seems crazy to pay an 8% use tax to a state that I will be based in for two years...am I looking at that right?". No, you're not, in my opinion. You buy a car, you pay sales tax. Doesn't matter how long you use it. You also are saying in that statement you intend to be based in Washington for two years. If that's true, you should register and pay taxes there. Or you need to change that intent to be based somewhere else. Not to pretend to be based elsewhere but to really be. If you want to be based in BC, then that's fine. Pay Canadian taxes.

Will you be impacted when you sell the boat? I can't say definitively, but then you probably intend to sell it in Washington and that means keep it in Washington for whatever time which comes back to registration and back to taxes.

My understanding is Oregon is less expensive so you could keep it in Oregon and never spend more than 60 days at a time in Washington without going to either Canada or back to Oregon, but that also means the trip up the coast regularly and perhaps a lot of inconvenience.

Don't overlook the convenience of lack of convenience in getting back and forth to the boat either in selecting where to keep it and availability of storage and service facilities. Alaska is the cheapest place to register and keep your boat, but is that where you want it?

You're dealing with many moving parts and advice we give here may be not knowing everything you have planned. It's the small variations that can lead to trouble and why I recommend using a professional.

We did purchase two boats in Washington. Both were registered in Florida with Florida sales tax paid and both were US documented. One we used in Washington, BC, Alaska and Oregon before shipping to the East Coast. We never were in the state of Washington for 60 days at a time. The other we used in Washington for less than 60 days and then headed south. We had to deal with California rules because it was in California for an extended time but knew the laws in advance and complied and got specific clearance from San Diego as it was there on January 1, proving it's primary home was to be FL and it was just passing through on it's way there.

Your apparent choices for the home of your boat are Oregon, BC, Washington, and Alaska. If not for taxes, you've indicated Washington would be your preference. Your decision is whether you'd change that to reduce taxes.
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Old 12-11-2017, 10:05 AM   #8
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Chinaboy

You may be overthinking this issue. First I'd suggest you find the boat that checks all the boxes. As part of your looking effort travel to Oregon, Washington and BC and look at listed boats. In each location talk to the brokers about tax issues and moorage options. If you are a tire kicker only you will not get details on how best to accomplish your task.

What is your budget? The bigger the potential purchase the better real world help, guidance and advice from the brokers. This is how I have successfully done it.

BTW, a very viable option is to store your vessel on the hard in Wrangell AK. Covered shed most likely. Great facility and wonderful people.
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Old 12-11-2017, 10:17 AM   #9
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How expensive of a boat are you looking at?
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Old 12-11-2017, 10:24 AM   #10
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Based on the information you gave I would suggest either keeping the boat in BC or keeping the boat in the Anacortes area. If you keep the boat in BC, you will need to register the boat in BC, paying all applicable taxes and registration fees. You then could use the boat in WA for up to 60 days/year. The clock, as I understand it, does not reset if you leave state waters. 60 days/year is a lot of time to cruise WA waters. The rest of the time you can spend cruising BC.
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Old 12-11-2017, 10:25 AM   #11
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So does the 180 day reset upon leaving Washington State waters, on a calendar year basis, or is it cumulative for the lifetime of the boat?
This part of the WA rules are unclear. I received conflicting and contradictory answers from official sources within WA DOR, and a friend of mine received written determinations from them that again contradicted the info I received. I finally concluded I couldn't figure out how to comply and that I needed to leave WA, so we spend our last year in BC and AK, and when we went south, I made sure I didn't enter WA. It was all very frustrating since I wanted to stay in WA, give my business to WA establishments, and buy goods in WA, all of which generate tax revenue for the state. Instead they got nothing.

Here's where the ambiguities some into play. This is from the perspective of a visiting boat. If you buy in WA and purchase the 1 year pass, it's different rules.

- When you first enter WA, the 60 day clock starts to tick. On your one year anniversary, the clock resets.

- There seems to be consistent interpretation that the 60 days are like a bank account. You use days when you are in WA, but not when you are outside of WA. So if you leave to BC for a week, you are not consuming days when out of the state. With this, you can come and go over the course of a year, year after year, provided you don't spend more than 60 days in WA over any year.

- Then you can purchase 60 day extensions, but this is where things get confused. If you read the actual laws, I think it's pretty clear that the 60 day extensions are essentially a replenishment of the bank account, giving you another 60 days in WA, distributed however you want. However that's not how it is implemented. In implementation, your 60 day extension permit has a start and a stop date, and they are 60 days apart. That makes is 60 consecutive calendar days, whether you are actually in WA or not. It's also unclear when you need to purchase the extension permit by. Some language says it must be purchased within 60 days of entering WA. Well, is that within 60 days of your first entry when you got your initial 60 days? Or is it before you have consumed your first 60 days? It makes a big difference. I have received official answers that say both, so who knows which is correct.

- Similar confusion reigns with the second extension permit. When it must be purchased totally depends on the interpretation of how the first extension permit days are used. Are they flex days consumed only when you are actually in WA, or are the calendar days that tick off whether you are in the state or not?

- Then, there is another way to keep the boat in WA while it is in the exclusive care of a marine service company for repairs. The exclusive part is important. You can not make use of the boat during that time, so you can't be living on the boat, or taking it out on weekends. If you do make use of the boat, you need to count those days from your initial 60. If you do this for more than 60 days, you need to file a repair affidavit to that effect, and refile every 60 days.

- There is confusion within DOR about intermittent personal use of the boat while in the hands of a repair organization. I counted all personal use towards my initial 60 days, and kept careful track of everything. But one of the DOR people told me that wasn't allowed, told me that after every stint of personal use I needed to re-file the affidavits, and told me that I needed to file a separate affidavit for every org that works on the boat rather than just the coordinating firm. I challenged her on all of it pointing to the WA laws, and asking for anything written that supported her assertion. I never heard back.

- It is totally unclear whether the extension permit days stop counting if you are under a repair affidavit. I again have received contradictory official answers, so stopped asking.

- In my final year in the PNW, I decided that buying two of the 60 day extension permits was a good insurance policy against different interpretation of the work affidavits and their relationship to the initial 60 visitor days allowed. But remember, it's not clear whether you need to buy the permit within 60 days of first entry into the state, or before your 60 days are expired. I counted the days from first entry and realized that depending on the interpretation, I needed to buy the permits TOMORROW, and I was in Boston. And you can only buy them in person, in WA. Now note the irony in that. If you need the permit, you by definition are from out of state. But the only way to buy the permit is to present yourself in person within the state. WTF, right? So 2 hrs later I was on a plane to Seattle to buy my fuc#ing permits. Then, after I bought them, I realized that, once again depending on how you interpret the use of the permits, I had either bought a great insurance policy, or had ensured that I needed to leave the state in late January and couldn't come back until the following October.

So in January I left, moved the boat to BC and haven't returned to WA since. I lost access to WA waters, businesses, and services. WA lost all the tax revenue associated with my activities in the state. Both of us lost out as a result of their confused state of affairs. And instead BC won out. Now I love BC and have lots of good friends in CA, but given the choice I'd rather keep my business in the US and support my home country.
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Old 12-11-2017, 10:26 AM   #12
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2. Get a documentation agent in the area and very familiar with all the issues and pay them for their advice and to register or document the boat for you.
Absolutely agreed. I'm trying to learn as much as I can before developing a strategy but I agree a seasoned tax professional will be needed. Right now I'm trying to craft the scope of the mission for the cruise with tax implications incorporated into the costs projections.

In your initial post you stated, "It just seems crazy to pay an 8% use tax to a state that I will be based in for two years...am I looking at that right?". No, you're not, in my opinion. You buy a car, you pay sales tax. Doesn't matter how long you use it. You also are saying in that statement you intend to be based in Washington for two years. If that's true, you should register and pay taxes there. Or you need to change that intent to be based somewhere else. Not to pretend to be based elsewhere but to really be. If you want to be based in BC, then that's fine. Pay Canadian taxes.
Yes, I agree. As I mentioned I'm not looking to avoid taxes I'm looking at minimizing them. But part of that equation is trying to decide the value of different cruising locales in the area and their associated tax cost.


Don't overlook the convenience of lack of convenience in getting back and forth to the boat either in selecting where to keep it and availability of storage and service facilities. Alaska is the cheapest place to register and keep your boat, but is that where you want it?
Excellent Point

You're dealing with many moving parts and advice we give here may be not knowing everything you have planned. It's the small variations that can lead to trouble and why I recommend using a professional. agreed

We did purchase two boats in Washington. Both were registered in Florida with Florida sales tax paid and both were US documented. One we used in Washington, BC, Alaska and Oregon before shipping to the East Coast. We never were in the state of Washington for 60 days at a time.



Your apparent choices for the home of your boat are Oregon, BC, Washington, and Alaska. If not for taxes, you've indicated Washington would be your preference. Your decision is whether you'd change that to reduce taxes.
Correct, Spot On.

With that framing is the cruising in Seattle/ San Juan Islands materially better than being based on the Canada side and doing Vancouver island with shorter trips into the San Juan Islands?
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Old 12-11-2017, 10:30 AM   #13
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Based on the information you gave I would suggest either keeping the boat in BC or keeping the boat in the Anacortes area. If you keep the boat in BC, you will need to register the boat in BC, paying all applicable taxes and registration fees. You then could use the boat in WA for up to 60 days/year. The clock, as I understand it, does not reset if you leave state waters. 60 days/year is a lot of time to cruise WA waters. The rest of the time you can spend cruising BC.
If the boat is Documented or registered somewhere other than WA, then it would be a visiting boat in BC. This is what we were as a Documented, non-Washington vessel. As such you don't need to pay anything in BC, and can stay for up to a year. There is a special form that you need to fill out of you plan to leave the boat while you come and go. We had our boat in BC for about 4 months this way. Once you leave the country, the 1 year clock resets on re-entry.

Now you know why boats visiting the PNW all stay in BC and not WA. Washington is just shooting themselves in the foot, if not the knee caps, if not the nuts. Just a brilliant policy.
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Old 12-11-2017, 10:33 AM   #14
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Domestic nonresidents are exempt from vessel registration requirements for the first 60 days of use within 12 continuous months. RCW 88.02.570(5).

Domestic nonresident individuals can extend their registration exempt stay if, before the 61st day of use here, they purchase a nonresident vessel (cruise) permit from the Department of Licensing (DOL).

To further extend the registration exempt period, a domestic nonresident individual must purchase a nonresident vessel permit from DOL before the first nonresident vessel permit expires. Exempt stays may not exceed 6 months during any continuous 12-month period.


It looks as though the law reads that you can be in Washington for 6 months or less on in any 12 month period under a cruising permit and be exempt from the use tax.

If thats the case I would be interested in hearing if anybody has any experience with recieving multiple extended permits in consecutive years and the implications for bouncing back and forth between Canada and Washington.
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Old 12-11-2017, 10:42 AM   #15
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If the boat is Documented or registered somewhere other than WA, then it would be a visiting boat in BC. This is what we were as a Documented, non-Washington vessel. As such you don't need to pay anything in BC, and can stay for up to a year. There is a special form that you need to fill out of you plan to leave the boat while you come and go. We had our boat in BC for about 4 months this way. Once you leave the country, the 1 year clock resets on re-entry.

Now you know why boats visiting the PNW all stay in BC and not WA. Washington is just shooting themselves in the foot, if not the knee caps, if not the nuts. Just a brilliant policy.
This is what I was looking for. So a documented US vessel other than WA, could have a "transient" home base of BC jump down to WA for 60 days (180 with cruising permit) and the one year clock would reset in BC upon clearing out of BC?

How onerous is the process clearing out of BC and into US in the San Juan Islands?
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Old 12-11-2017, 10:56 AM   #16
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Domestic nonresidents are exempt from vessel registration requirements for the first 60 days of use within 12 continuous months. RCW 88.02.570(5).

Domestic nonresident individuals can extend their registration exempt stay if, before the 61st day of use here, they purchase a nonresident vessel (cruise) permit from the Department of Licensing (DOL).

To further extend the registration exempt period, a domestic nonresident individual must purchase a nonresident vessel permit from DOL before the first nonresident vessel permit expires. Exempt stays may not exceed 6 months during any continuous 12-month period.


It looks as though the law reads that you can be in Washington for 6 months or less on in any 12 month period under a cruising permit and be exempt from the use tax.

If that's the case I would be interested in hearing if anybody has any experience with receiving multiple extended permits in consecutive years and the implications for bouncing back and forth between Canada and Washington.
See my earlier post about confusion/contradiction over how the extension permits apply, and whether they are days of use in WA as the law you quoted says, or calendar days as implemented by the state. It makes a big difference.

And also confusion over when you need to buy the extension permits.

You had separately asked whether I used someone to help navigate this. I didn't. I just read all the laws and all the material that the state publishes. I though I understood it well, but when the DOR people started telling me differently, that's when I got spooked. They get to interpret it any way they want short of me taking them to court.

Many people suggest I speak to an attorney to get help. My feeling was that if I needed an attorney to visit a state in my own country, there is something fundamentally wrong with that state.

I should also say that I accept that all states have one or more ways to collect revenue, and I'm OK with that. All (or most) have rules about how long you can visit before you get treated as a new resident and need to pay up. That's fine, and I'm happy to comply. They just need to tell me what the rules are so I can decide how long to stay. My beef with WA is the lack of clarity and the blatant contradictions among and between their own staff, the administration of the rules, and the language in the laws themselves.

My recommendation would be to only use the 60 days per year (360 days from your first entry), and otherwise keep the boat in BC, or AK. Then it's clear how things work. But be careful when you actually buy. I think you are exempt if you are a non resident and you remove the boat within some period of time. Then I think you are just like any other visitor next time you re-enter. But check carefully.

Also, if you do an off-shore delivery, in WA that means going completely out of the straight and 3 miles off once out in open ocean. In the straight, WA claims everything up to the international boarder, so everywhere is either WA or Canada. I know someone who was caught by this, went to court over it, and lost. It was a very expensive surprise.
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Old 12-11-2017, 10:58 AM   #17
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There's a perfectly legal Washington state 1-year permit for $500 that the selling broker must get for you if you choose to do it. If you don't mind the $500, it is much cheaper than paying tax, at least for many decent size boats depending on your price range. Washington state waters include the San Juan islands so if you're a newcomer, i'd suggest you'd really want to spend some time in the San Juans.
One option might be to do the legal 1-year in Washington, then move over to BC for an additional year, then spend some time in Alaska and you'd get most of what you want.
As for Oregon: i'm fairly certain they do not have a boat tax so that's good... but the challenging issue is that from Anacortes to Astoria, OR is about 280 nmi and much of that is open Pacific blue water. some of the experienced captains make this trek regularly but for some it can be a bumpy journey.
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Old 12-11-2017, 11:03 AM   #18
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I'm a Utah resident. I bought a US documented vessel in May 2016, in Anacortes. The boat was previously owned by a California resident. My broker did not know for sure how the WA rules work, or chose not to profess to know. I left WA to cruise BC and SE Alaska shortly after the purchase (you have 45 days), and returned to WA late in the fall. I had to figure this out for the 2016/2017 winter in WA.

WA laws on this are not easy to read and understand. My sis is an attorney in WA (but not a tax attorney), and helped me sort through it. We did a good bit of Googling and reading of WA statues. Here's what I think I understand:

1. If your boat is on the hard in WA over the winter, that time does not count as being "in WA waters". If you're on the hard in WA for the winter, and gone from WA most of the summer, no requirement to register with WA, thus no WA sales/use tax. Assuming the boat in question is federally documented, it sounds like the OP's plan might fall into this category.

I chose to store for the winter in the water in WA, so the next option applied for me.

2. If you are in the water in WA over the winter, you may have up to three consecutive 60-day periods per year (I forget whether it's per calendar year or per 365 days) during which you are exempt from registering and sales/use tax. You obtain WA "non-resident vessel permits" (one for each 60 day period) from the WA Department of Licensing. First is free, next two cost a total of about $75. If you exceed the 180 days in WA waters, WA law says you are required to register with the state of WA, and thus owe the tax.

The marina where I stayed required a written statement from me as to why I did not have to show WA registration, in case a WA officer came by to inspect vessels at their docks.

So far this approach is working for me.

3. Some keep their boat in BC over the winter, return to WA in the spring to get ready to go cruising in BC and SE Alaska, come back to unload at the end of the summer, and then go back up into BC for the winter. No WA sales/use tax (though I'm not sure whether you may stay in the water in BC w/o tax).

4. If you stay in WA waters long enough to have to register with WA, and have already paid sales tax in another state, the sales tax you have already paid is deducted from what WA considers you owe them.

That's as much as I think I know.

There is some WA wrinkle (maybe what Hamrow just described?) which I don't fully recall on how the purchase happens that makes for rules different from those I described. Has something to do with leaving and not coming back within two years, IIRC. I would not want to get set up that way.
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Old 12-11-2017, 11:07 AM   #19
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How onerous is the process clearing out of BC and into US in the San Juan Islands?
Not at all, I sent you a PM.
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Old 12-11-2017, 11:53 AM   #20
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I'm a Utah resident. I bought a US documented vessel in May 2016, in Anacortes. The boat was previously owned by a California resident. My broker did not know for sure how the WA rules work, or chose not to profess to know. I left WA to cruise BC and SE Alaska shortly after the purchase (you have 45 days), and returned to WA late in the fall. I had to figure this out for the 2016/2017 winter in WA.

WA laws on this are not easy to read and understand. My sis is an attorney in WA (but not a tax attorney), and helped me sort through it. We did a good bit of Googling and reading of WA statues. Here's what I think I understand:

1. If your boat is on the hard in WA over the winter, that time does not count as being "in WA waters". If you're on the hard in WA for the winter, and gone from WA most of the summer, no requirement to register with WA, thus no WA sales/use tax. Assuming the boat in question is federally documented, it sounds like the OP's plan might fall into this category.

I chose to store for the winter in the water in WA, so the next option applied for me.
A friend of mine interpreted the law the same as you and your sister. But WA said differently. They consider the vessel to be in WA and subject to the taxes etc whether on the hard or not. So another example of ambiguity that can have costly repercussions.

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2. If you are in the water in WA over the winter, you may have up to three consecutive 60-day periods per year (I forget whether it's per calendar year or per 365 days) during which you are exempt from registering and sales/use tax. You obtain WA "non-resident vessel permits" (one for each 60 day period) from the WA Department of Licensing. First is free, next two cost a total of about $75. If you exceed the 180 days in WA waters, WA law says you are required to register with the state of WA, and thus owe the tax.
This is true, but really is not specific to winter storage. If you want a consecutive 180 days, and then will be gone until your 1 year anniversary, this approach can work fine. The way the state implements it is as consecutive calendar days, even though that contradicts what the law says.

Quote:
Originally Posted by RCook View Post
The marina where I stayed required a written statement from me as to why I did not have to show WA registration, in case a WA officer came by to inspect vessels at their docks.

So far this approach is working for me.

3. Some keep their boat in BC over the winter, return to WA in the spring to get ready to go cruising in BC and SE Alaska, come back to unload at the end of the summer, and then go back up into BC for the winter. No WA sales/use tax (though I'm not sure whether you may stay in the water in BC w/o tax).
This works well as long as you total number of days in WA remains under 60, counting from 360 days from first entry.

Quote:
Originally Posted by RCook View Post
4. If you stay in WA waters long enough to have to register with WA, and have already paid sales tax in another state, the sales tax you have already paid is deducted from what WA considers you owe them.

That's as much as I think I know.

There is some WA wrinkle (maybe what Hamrow just described?) which I don't fully recall on how the purchase happens that makes for rules different from those I described. Has something to do with leaving and not coming back within two years, IIRC. I would not want to get set up that way.
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