CA Property Tax

[MichaelB1969]

I am purchasing a boat in WA in early to mid-December of 2016. I plan on bringing the boat to CA where it will be berthed. I assume I will pay CA tax in this case.

My question is, does it matter if I actually bring the boat to CA in December vs. January 2nd from a property tax perspective?

I believe the CA law is that you owe property tax for a given year on property you possess on January 1st of that same year.

But is it property I brought into CA on or before January 1st, registered in CA on or before January 1st, or property I "own" on or before January 1st?

Trying to determine if it is simply a matter of waiting to bring the boat, or register the boat in CA after January 1st that enables me to legally avoid paying property tax until the 2017 tax year, or not.

Thanks,
Mike

 

[menzies]

I think you mean their use tax?

https://www.dmv.ca.gov/portal/dmv/detail/boatsinfo/boatreg

 

[Bay Pelican]

Perhaps one of the Californians on the list can clear this up. I seem to recall there were both a use tax and a personal property tax which had to be paid. The property tax was "assessed" if the boat was in California waters on a certain date each year.

But then I have been retired for years and I try and forget such things.

 

[BHBCO]

Got this off the back of my tax bill, hope it helps. "Assessment Date: Annually , the assessor assesses all taxable property in the county, except State assessed property to the person owning, claiming, possessing or controlling it on the January 1 lien date Tax Lien Date: All tax liens attach annually as of the lien date, January 1, preceding the fiscal year for which the taxes are levied. (sections 2192 and 2901)
Fiscal year: This tax bill Is levied for the fiscal year, July 1 to June 30, based on ownership on January 1."

 

[DavidM]

As others have noted, January 1 is the date that property tax liability is established each year. So theoretically if you move your boat to California on January 2, you will not be liable for the tax that year.

Use tax (analogous to sales tax) is another story. If the boat has been out of California (like Ensenada, Mexico or another state) for at least 12 months since purchase, then use tax is not assessed.

David

 

[CraigC]

As others have noted, January 1 is the date that property tax liability is established each year. So theoretically if you move your boat to California on January 2, you will not be liable for the tax that year.
David

For Real Property, the state of CA issues a "supplemental" tax bill which is prorated back to the original date of purchase, at the end of the first tax billing period (6 months). They are good at collecting their taxes, when they have a right to collect it. I am not sure if that practice applies to personal property, though.

Sales/Use tax (same thing essentially) is gen (7.5%) + local/district tax. IRS Sched A itemized deductions allows you to deduct the general portion, I believe, IF you use Sched A. This is the last year I am itemizing, so it helps me to purchase and pay the sales tax this year.

 

[MYTraveler]

The California use and property tax laws are too complex for any unqualified statement (about whether a tax is due) to be universally true. For example, the idea that only January 1 matters. For starters, the assessors don't "walk the docs" on January 1 (more like January 10), and don't rely exclusively on seeing your boat there. California has a concept known as "situs", the idea being that if California is your boat's natural "home", it is subject to property tax, even if it isn't physically present at all during the year. It would be a rare circumstance, but if the boat has a slip in California, is owned by a California resident, and if it habitually spends more time in that slip than anywhere else, its home, for tax purposes, can be considered to be California, in which case it will be subject to tax. And the assessors have gotten pretty good and figuring out which boats, beyond those that they physically see on January 10, might have California as their situs. For example, they look at slip rent rolls and pick up most of the guys who take their boats to Mexico for January.

Sales tax (use tax) is an entirely separate tax for which the rules are also complicated but at least there are some bright lines. If the boat is not present in California for the first year of ownership, including at the time of sale, you are almost certainly exempt from the tax.

Bottom line, if the tax amounts are significant, it is worth speaking to an expert.

 

[BandB]

There are so many intricacies to the laws. One reason whether the boat was purchased in BC or WA makes a big difference is as follows. California will give you credit for sales tax paid to another state. So, one could purchase a boat in WA, pay the sales tax at time of purchase, then just owe CA the difference. Now, that only works when the rate in the first state is less than the second. When we purchased in WA, we made sure we paid FL sales tax and not WA as FL limits sales tax on a boat to $18,000. Also, CA has a 90 day rule but it applies only if you can prove you purchased the boat for use in another state and used it more than 90 days, not that you stored it there to avoid the tax. If you live in CA, it's highly unlikely you'd ever convince them of that.

Property tax, on the other hand, has no such provisions. There are circumstances in which people have been found to owe property taxes in two different states as one had an "as of date" law and the other based it on residence and primary use.

Now, taxes paid in BC on a purchase are not, to my knowledge credited in WA or CA.

All this just points out the need for someone who deals daily in WA with boats from BC and people residing in or headed to CA. They can advise correctly in minutes what you can spend days researching and asking others only to get incorrect answers.

 

[Oldersalt]

"Mud" Tax in California

In addition to the annual personal property tax on your boat, in some counties you may also be assessed for the portion of the marina property that is underneath your boat. Hence the local term "mud tax." I don't know if all counties do it, or if there is a difference based on the ownership of the marina (i.e. some marinas are owned by city or county agencies). It's usually not much, but don't be surprised when you get a second personal property tax bill!

Oldersalt

"Everything on your boat is broken. You just don't know it yet."

 

[MichaelB1969]

After some self directed research, seems like I can likely deduct CA property tax on my federal return. For state use tax, looks like you can only deduct income or sales/use taxes on your federal return, but not both. Good reason to buy a big retirement boat.

I'm going to consult a marine tax specialist on all of this. But this was my initial finding.

Sales Tax Deduction: How To Use It | Bankrate.com

 

[MYTraveler]

After some self directed research, seems like I can likely deduct CA property tax on my federal return. For state use tax, looks like you can only deduct income or sales/use taxes on your federal return, but not both. Good reason to buy a big retirement boat.

I'm going to consult a marine tax specialist on all of this. But this was my initial finding.

Sales Tax Deduction: How To Use It | Bankrate.com

I think your conclusion is correct. Moreover, the question of being able to deduct both sales (use) tax and state income tax is not a marine (or even California) tax question -- it is federal law applicable to all state income and sales (use) taxes. If anyone has found a legit way to deduct both state income tax and sales tax, I would love to hear it. I understand for example, that a cash basis taxpayer cannot load all two years of state income tax into one year, deduct that year, then deduct sales tax the next year.

 

[MichaelB1969]

...the question of being able to deduct both sales (use) tax and state income tax is not a marine (or even California) tax question -- it is federal law applicable to all state income and sales (use) taxes.

Agreed, my reason for contacting a marine guy is more for the overall sale, which is fairly complicated (buying from seller in Canada, delivery in WA, use in CA).

Best,
Mike

 

[rjwilliams11741]

I would suggest that you contact a attorney who knows California Sales / Use Tax law as it relates to boats. Based on what I know from dealing with a boat purchase many years ago I would suggest doing an offshore sale and then getting the boat out of Washington before sales tax becomes due, take it to Oregon where there is no sales tax and leave it there for a year(?) before you bring it to California (used to be 91 days). There is no way around property tax in California if your vessel is docked there but there are legal ways to not have to pay sales / use tax. If you are talking about a $300,000 boat the sales tax could be $20,000 to $30,000 depending on the county you dock you vessel in, easily worth the $2000 or so you would pay a tax attorney to get you exempted from the sales tax.

 

[Larry H]

The state of Washington has a provision to allow an out of state buyer to purchase a vessel and keep and use it in Washington without paying Washington sales tax. I think the period is up to 180 days, but a buyer should find out from a boat broker. This may be the section of the tax law that applies. RCW 82.12.700: Exemptions—Vessels sold to nonresidents.

Disclaimer: I am not absolutely sure about the details of this. Contact a broker or the Washington Dept of Revenue.

 

[BandB]

The state of Washington has a provision to allow an out of state buyer to purchase a vessel and keep and use it in Washington without paying Washington sales tax. I think the period is up to 180 days, but a buyer should find out from a boat broker. This may be the section of the tax law that applies. RCW 82.12.700: Exemptions—Vessels sold to nonresidents.

Disclaimer: I am not absolutely sure about the details of this. Contact a broker or the Washington Dept of Revenue.

They must purchase a permit within 14 days of purchase and pay $500 or $800 depending on size.

 

[BandB]

I am purchasing a boat in WA in early to mid-December of 2016. I plan on bringing the boat to CA where it will be berthed. I assume I will pay CA tax in this case.

In another thread you were talking about purchasing it in BC, I thought. Which is it?

 

[markpierce]

There can be significant differences in tax rates among counties. For instance, my boat is berthed across the strait in a different county than my home, saving nearly 40 percent annually in the boat's property taxes.

 

[MVDarlin]

Big issue is sales tax. Take delivery in Portland. Keep it there a year. If you return to WA without proof of sales tax payment somewhere and stsy over 60 days they will assess tax at boat's current value.

 

[Paul Swanson]

You can purchase a boat in Washington and get a 180 day cruising permit for Washington without paying Washington sales tax. The permit can be renewed for an additional 180 days. When the boat is brought into California you will owe no use tax (sales tax) if the boat was out of state for one year or longer. You can stay in Oregon for as long as you want. They have no sales tax. In California you must pay yearly property taxes, assessed by the county of residence, of about 0.5% of the assessed value. Hope this helps.

Paul

 

[SteveD]

The go-to guy for advice

If you want really reliable advice on boat tax matters, I highly recommend Cris Wenthur ( Wenthur Law Group, LLP ). He saved me lots of money!

 

[yachtbrokerguy]

The original poster does not mention where the boat was built. If it was built outside of North America, maybe Taiwan or China, then US import duty of 1.5% of current value may be due also. If it US built than an Entry needs to be made to US Customs as "US built return goods." There is no duty on Canadian built boats but the boat will still need to be entered with US Customs.
If US import duty was paid previously in the US, as it would if the original owner was in the US, then the boat was sold to a Canadian, that status of "Duty Paid" changes with where the last sale took place, in the US or Canada.
As others have suggested you need to get professional advice.

 

[Lepke]

Years ago I lived and commercial fished out of California. At the time, a boat bought outside of California and used for a period outside the state was exempt on sales tax. Documented vessels were exempt for personal property tax. I doubt with Jerry and his buddies running the state that's still true.
If it were me, I'd buy a boat that is documented and dock it in Oregon (no sales tax state) and later after whatever required period, move it to California. But if it was really me, I'd leave California, the once great state.
You'd probably have to sign a statement on the boats use. California doesn't have inspectors checking docks and boats out of state.

 

[MYTraveler]

California doesn't have inspectors checking docks and boats out of state.

Actually, in California, property tax is not collected by the state (so technically you are correct), but is instead collected by the respective county's Tax Collector. Los Angeles, Orange and San Diego Counties each "walk the docs" in early January in an effort to find "out of state" boats that should be paying property tax.

 

[Nomad Willy]

Even telephone poles have to pay tax in California.

 

[Donsan]

Even telephone poles have to pay tax in California.

Taxing trees is next on the agenda.

 

[CPseudonym]

Taxing trees is next on the agenda.

Not yet but if they ever evolve to fart they'll tax them into extinction

 

[Scary]

Having been down this road

Staying in Oregon one year will exempt you from California use tax if you can establish that the boat was purchased for use in Oregon. Simply leaving it there is not enough. You'll be asked to produce cruising logs, fuel bills, maintenance receipts and berthing bills. In other words you will actually have to use the boat and prove it to be exempt from California use tax. Unsecured property tax is collected by local counties and that rate varies.Usually around 1% of the value established by the county. You get to say what you paid for the boat, but they check on boats similar sold in Ca. Painting Oregon on the transom doesn't cut it. Also if you pay to have physical work done on your boat in Washington it buys you another 6 months with out paying Washington use tax.