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Old 04-12-2019, 10:34 PM   #1
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USCG Documentation vs. State Registration

After more than a year searching and researching, I think I'm finally close to making an offer an negotiating to purchase a 40 trawler -- one step closer to starting my Great Loop adventure ;-)

My three previous boats -- all trailerable 17' - 24.5' -- were all registered in whatever state I happened to reside in at the time (IN, WI, MO, or IL) -- not only because I lived in and file state income tax returns in that state, but also because I kept the boat on the trailer and used the boat primarily in that state (excluding "vacation" trips with the boat in tow to NC, MI, TN/KY, etc.).

Can anyone tell me the pros and cons of documenting my new 40' trawler through the US Coast Guard versus registering it in IL where I live or in WI or IN where I'm more likely to keep the boat and call "home port?" What's the advantage(s) and/or disadvantage(s) of having the boat federally USCG-documented versus state-registered?

WI, IL, and IN all have state sales/use tax rates within 1% - 1.5% of each other, so my question has little or nothing to do with trying to avoid sales/use tax. However, I DO have a state sales/use tax question: If I purchase the boat from an individual (through their yachtworld.com listing agent/broker) in GA as an out-of-state buyer, will I be expected to pay the 7% state/local sales tax there or not until I finally bring the boat back to either WI, IL, or IN (and then pay that state's 5.5%, or 6.5% or 7% sales/use tax, respectively)?

Thank you all in advance for sharing your knowledge and experience on this matter.
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Old 04-12-2019, 11:06 PM   #2
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If you are going to have a loan on the boat the mortgage company will most likely require you to document the boat. It gives them a stronger position if you donít make the payments. If you are planning on going out of the country with the boat documentation is probably better. As to the tax implications everyone will tell you something different. Our boat is documented but we still have to register it here in Michigan primarily because the state wants the sales tax and the registration fees.
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Old 04-13-2019, 05:49 AM   #3
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I can't be sure about those states but will say in general, my experience buying out of state no sales tax collected until the boat or vehicle returned to my home state (NY) and was regustered.
Above is exactly what happened w Documented boat bought in TX via private sale. I applied for Doc name & owner change and had to register in NY to get the reg decal but they do not issue NY Reg #s... they do collect sales tax.
I had to have a Bill of Sale and Title (signed over Fed Doc form)
Advantage... already mentioned- more secure, may be reqd for loan. No need to display state reg #s on hull
Disadvantage... takes time and more paperwork + more $, need to add Doc # placard if not already documented and in place... usually in Eng Rm.
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Old 04-13-2019, 09:57 AM   #4
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There is no sales tax on used boats in GA.
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Old 04-13-2019, 10:08 AM   #5
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Being documented brings the protection of being a US flagged vessel, and is inexpensive. You’re doing the loop, and will be in foreign waters...and may decide to head to the Bahamas during the southern part of the loop.

Get it documented.
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Old 04-13-2019, 11:11 AM   #6
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This most likely doesn’t apply to you but I bring it up so others check before they buy. California May be the only state in the union that does this but they do it. If you buy a California registered boat you will pay Sales Tax, even if you are an out of state buyer who is taking possession of the boat out of state. There are some strange exemptions and there are many transactions the state hasn’t pursued but the bigger the $’s the more aggressive the state is.
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Old 04-13-2019, 02:09 PM   #7
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It’s about $92.00 to document your boat. Money well spent. You must check with the tax laws of the state you are buying the boat in. Some want it, some don’t
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Old 04-14-2019, 05:12 PM   #8
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Thanks to all of you who responded. I have one additional question:
If I put the boat in a marina in WI or in IN (rather than in IL), will I pay WI (or IN) sales/use tax, or, because I am an IL resident, IL sales/use tax? The difference between the three states is only 1% +/- .5%...
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Old 04-14-2019, 05:30 PM   #9
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one additional thought: be careful whom you invite aboard if you document. My understanding is that if a guest happens to bring a federal illegal drug, like marijuana, and it is found during a Coast Guard search, your vessel can be confiscated but you still owe the bank. My boat is documented but I don't allow anything illegal aboard.
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Old 04-14-2019, 06:46 PM   #10
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Starting in January this year ALASKA requires state registration whether you are documented or not. Sales taxes weren’t the reason. The State thinks it will help track down owners of abandoned boats.

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Old 04-15-2019, 08:43 AM   #11
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Quote:
Originally Posted by Boilermaker75 View Post
If I put the boat in a marina in WI or in IN (rather than in IL), will I pay WI (or IN) sales/use tax, or, because I am an IL resident, IL sales/use tax?
Sales tax, and requirements to register, very rarely have anything to do with YOUR state of residence. They have to do with where the boat is bought/sold, and/or where the boat is kept.

I do not know the specific laws in WI or IN, but even if I did I would suggest that you should verify them for yourself. If they are similar to most of the states that I am familiar with then keeping the boat in (for example) WI would mean that you must register the boat in WI. And when you register it there, if you have not paid sales tax elsewhere, then you will have to pay sales (use) tax to WI.

Generally speaking, this sort of thing has nothing to do with whether or not you document the boat with the CG. There are exceptions, but most states will require you to register your boat with them if you keep it there, regardless of CG documentation. If it is documented, however, you will NOT display state registration numbers on the boat.
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Old 04-15-2019, 09:50 AM   #12
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They will each independently wantvtheir sales tax- register where it will live. I bought my boat in WI - registered and paid the sales taxes in Illinois as I knew I would bring her down here the next season. For these states- (others may be different) you have to register even if you are documented. Itís not big of a deal money wise either
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Old 04-15-2019, 10:12 AM   #13
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Once again, a hearty and grateful THANK YOU to all who replied and shared their knowledge, experience, and advice with me on this matter -- I greatly appreciate you all.
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Old 04-15-2019, 12:08 PM   #14
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Being documented serves two purposes:

1) The USCG titles the vessel. The requirement for documentation for a vessel with a boat loan, largely applies to boats registered in states which do not issue titles for boats (not all states issue titles).

2) Travelling internationally.

NOTE: Canada, Bahamas may not require a US vessel be documented, but most other countries do.

If you don't plan on international travel, and are NOT required to title the vessel, there is little need to document it.

Registration requirements are by state and has nothing to do with the state you reside in. Each state varies. Unlike an Auotmobile, you may find you will need to register in multiple states if you remain in that state beyond the time limit. Some states limit time by the year, others by the amount of time spent in a single visit.

Taxes is another discussion completely and has to do with the state the vessel is registered in.
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Old 04-15-2019, 12:22 PM   #15
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Originally Posted by Dawdler View Post
one additional thought: be careful whom you invite aboard if you document. My understanding is that if a guest happens to bring a federal illegal drug, like marijuana, and it is found during a Coast Guard search, your vessel can be confiscated but you still owe the bank. My boat is documented but I don't allow anything illegal aboard.
Extremely unlikely to happen in the US for personal use amount. Plus, there is an innocent owner defense to all drug related seizures (retired DEA agent). And, being federally documented or not, has no operational difference as far as drug violations go.

In another country besides the US? It depends.
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Old 04-15-2019, 04:03 PM   #16
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tons of information online

if you have a lender they will likely require it be documented

read and understand each state's laws where the transaction will take place, where it will be stored, and where it will spend any time, even passing through. there is not only sales tax, but use tax, and property tax considerations, depending on the state.

you will have to follow each state's guidelines even if its documented. you may have to get a decal/register in multiple states.

be very careful
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