Sales tax on documented vessel

[Bwester]

After reading through this thread I am totally confused as a newbie. I have a boat under contract will be arriving in San Diego in a few weeks after cruising in Mexico. If the survey goes well I would be buying the boat while it is physically in San Diego. I currently live in Boise Idaho and will keep a PO Box here and will return here with a physical residence at some time in the future. For now my plans are to keep the boat for no more than 2 months in San Diego while I go through some training and moving aboard. Then if confident head down to Mexico in the fall if it is open. After cruising Mexico we intend to bring the boat up to Anacortes Washington where it will hopefully stay. So now the 6%, 8 %, 10%+ question. WHERE DO I REGISTER THE BOAT AND PAY SALES TAX.

 

[Bryant]

Tax

After reading through this thread I am totally confused as a newbie. I have a boat under contract will be arriving in San Diego in a few weeks after cruising in Mexico. If the survey goes well I would be buying the boat while it is physically in San Diego. I currently live in Boise Idaho and will keep a PO Box here and will return here with a physical residence at some time in the future. For now my plans are to keep the boat for no more than 2 months in San Diego while I go through some training and moving aboard. Then if confident head down to Mexico in the fall if it is open. After cruising Mexico we intend to bring the boat up to Anacortes Washington where it will hopefully stay. So now the 6%, 8 %, 10%+ question. WHERE DO I REGISTER THE BOAT AND PAY SALES TAX.

Register and pay your taxes in Wa if that is where it will ultimately wind up. Document it and pick any home port you like. Make your home port Omaha if you want to start conversations.

 

[Newtrawlerowner]

Sales Tax

After reading through this thread I am totally confused as a newbie. I have a boat under contract will be arriving in San Diego in a few weeks after cruising in Mexico. If the survey goes well I would be buying the boat while it is physically in San Diego. I currently live in Boise Idaho and will keep a PO Box here and will return here with a physical residence at some time in the future. For now my plans are to keep the boat for no more than 2 months in San Diego while I go through some training and moving aboard. Then if confident head down to Mexico in the fall if it is open. After cruising Mexico we intend to bring the boat up to Anacortes Washington where it will hopefully stay. So now the 6%, 8 %, 10%+ question. WHERE DO I REGISTER THE BOAT AND PAY SALES TAX.

The answer is simple. If you keep the boat in any state that requires the owner to pay that state for leaving the boat there for a period of time you'll owe sales tax and in some state a use tax.

To get the answer for California go to
https://www.cdtfa.ca.gov/industry/vehicles-vessels-aircraft-guide.htm#Vessels


In my humble opinion if you plan on moving the boat to Mexico then to Washington, I wouldn't worry about paying a California tax and instead check into any tax that might be due in Washington.

Regardless of where you buy the boat, the state only wants something for you being able to have it in that state. Again some states call it "sales" tax some states call it "use" tax.


The one thing I would suggest is to document your boat with the USCG if you plan on taking it to Mexico. USCG documentation protects you from having your boat seized from another countries government.

 

[Takoradi]

I just researched exactly the same thing. I purchased my boat in Seattle and am berthing it in the CA Delta. It's documented so I don't have to register it with CA DMV. I did not pay tax in WA so I will have to pay sales tax at the sales tax rate where it's berthed which in my case is ~7.5%. It has to be paid within 12 months or within 1 month of the state agency notifying you. As Newtrawlerowner noted, that agency in CA is the CDTFA.CA.GOV. Then there is also a personal property tax which is just like the annual tax you pay on your dirt home. I'm in communication with my county's marine assessors office working to assess the boat value right now.


I attached a screen shot of the cdtfa site noting the payment timing at the bottom.


Hope that helps.


Tak aka Brad

 

[rjwilliams11741]

Sales Tax

Talk to a tax attorney in San Diego experienced in boat sales taxes. If you are taking the boat to Mexico and will be cruising there for more than a year you might be able to do an off-shore purchase in San Diego. You can then bring the boat back to San Diego for a prescribed number of days before you have to leave. Move the boat to a marina in Ensenada during your "training period" (Marina Coral is a great place and an hour or so bus ride from Tijuana). You will successfully avoid California Tax legally. If you are using a Broker in San Diego for the transaction they are quite knowledgeable about off-shore purchases and tax avoidance.

 

[hollywood8118]

Talk to a tax attorney in San Diego experienced in boat sales taxes. If you are taking the boat to Mexico and will be cruising there for more than a year you might be able to do an off-shore purchase in San Diego. You can then bring the boat back to San Diego for a prescribed number of days before you have to leave. Move the boat to a marina in Ensenada during your "training period" (Marina Coral is a great place and an hour or so bus ride from Tijuana). You will successfully avoid California Tax legally. If you are using a Broker in San Diego for the transaction they are quite knowledgeable about off-shore purchases and tax avoidance.

The above is all true and good advise.


When you move the boat to Washington you will owe use tax after 90 days. The difference in Sales and use tax is that the state can charge you on the value of the vessel vs the sales price you paid at purchase. I have tried unsuccessfully to fight values the state sets on vehicles in the past, even when it was the actual sales price on a truck not the price the seller said was paid ( wink wink). While Washington isn't as aggressive as California regarding their collection of annual personal property tax, they are very successful in finding boats in the state that tax has not been paid on.

I would probably just pay the tax in washington if your ABSOLUTELY SURE you will end up with the boat there. If not, do the offshore deal and bounce the boat between Mexico and California and save the tax. You might find the boat isn't your dream boat and skate on paying the ta if you trade up or sell.
HOLLYWOOD

 

[DDW]

I believe if you complete the sale and take possession in California, you will owe California sales tax, Period. If delivered offshore or in Mexico, you must keep the boat out of California for 180 of the first 360 days. Any tax paid in California will be credited against tax owed in Washington (after 60 days there, not 90...).

What I would do: complete the deal and take possession offshore or in Mexico. Don't pay tax to anyone until you arrive and know you are going to stay there.

 

[rjwilliams11741]

I believe if you complete the sale and take possession in California, you will owe California sales tax, Period. If delivered offshore or in Mexico, you must keep the boat out of California for 180 of the first 360 days. Any tax paid in California will be credited against tax owed in Washington (after 60 days there, not 90...).

What I would do: complete the deal and take possession offshore or in Mexico. Don't pay tax to anyone until you arrive and know you are going to stay there.

Having spent 12 years cruising in Mexico, do not take possession in Mexico or you will probably end up paying a 16% VAT. On top of that, it is illegal to sell a non-Mexican vessel, although there are ways around that issue. We purchased off-shore, brought the boat back to San Diego for prepping and then took it to Mexico and berthed it at the "181 day" (91 days back then) yacht club (Marina Coral). We were then able to bring the boat back to San Francisco for a year in order to get it ready for the Mexican adventure. If you are going to pursue the legal tax avoidance I would seriously recommend an attorney. I saw the hassles that friends who tried to do it themselves went through in dealing with the California tax authorities. With the attorney every thing went smoothly and we got a letter from California stating that no tax was owed.

 

[twistedtree]

When you move the boat to Washington you will owe use tax after 90 days.

I'm 90% sure that if you are a WA resident, Use Tax is triggered as soon as you bring the boat into WA. If you are a non-resident, then you have a grace period because it's presumed you are just visiting on a temporary basis.


Also, it's worth clarifying the difference between Sales Tax and Use Tax. Sales tax is on a transaction that occurs in a state. If the transaction doesn't occur in the state, then they can't levy Sales Tax.


Use Tax, on the other hand, is a clever way of still collecting tax on out of state purchases where they were subject to someone else's Sales Tax. It varies by state, but if you bring a boat into the state and plan to keep it there, they will charge a Use Tax for that privilege. Most will credit you for Sales or Use taxes paid elsewhere, but check to be sure.



In the PO's case, since he doesn't plan to keep the boat in CA, the actual sale transaction should be conducted off shore where it is no subject to CA state sales tax. There are forms that you fill out and either keep or file (I don't recall which) to document it all. When you then re-enter CA, you are a visitor just like if you came in from OR or MX.


Then go down to Mexico as you plan, enjoy your self, then make your way back to WA where you plan to keep the boat. When you bring the boat into WA, and since you are a WA resident, Use Tax will trigger right away. You will need to pay, register in WA, and you will also become subject to their annual excised tax on the value of the boat.


Speaking of Mexico, singe the boat is in Mexico currently, it will have a TIP (temporary import permit). You will need to get that cancelled before you can apply for a new TIP in your name. So be sure to get the TIP from the previous owner. Cancelling and reissue can take time, so plan accordingly.

 

[twistedtree]

Having spent 12 years cruising in Mexico, do not take possession in Mexico or you will probably end up paying a 16% VAT. On top of that, it is illegal to sell a non-Mexican vessel, although there are ways around that issue. We purchased off-shore, brought the boat back to San Diego for prepping and then took it to Mexico and berthed it at the "181 day" (91 days back then) yacht club (Marina Coral). We were then able to bring the boat back to San Francisco for a year in order to get it ready for the Mexican adventure. If you are going to pursue the legal tax avoidance I would seriously recommend an attorney. I saw the hassles that friends who tried to do it themselves went through in dealing with the California tax authorities. With the attorney every thing went smoothly and we got a letter from California stating that no tax was owed.

Good advice. The boat's TIP (temporary import permit) for Mexico prohibits selling the boat while in Mexico.

 

[Comodave]

I agree that you should get an attorney if the boat value is significant. If it isn’t a very expensive boat then the tax would be small so go ahead and roll the dice...

 

[twistedtree]

I think in this particular case, much of the question is which state you want to pay. If you transact the sale in CA you will be subject to CA sales tax which let's say is 7%. Then when you bring the boat into WA you will be subject to WA Use Tax of say 10%, but you will get credited for the 7% already paid to CA. So in the end you would pay 7% to CA and 3% to WA.


On the other hand, if you transact the deal off-shore and pay no CA sales tax, then when you get to WA you will owe the full 10%, and it will all go to WA.


Your choice, but if I were a WA resident I think I'd rather see the money go to my home state rather than to CA.

 

[rjwilliams11741]

Cancelations of TIP

I'm 90% sure that if you are a WA resident, Use Tax is triggered as soon as you bring the boat into WA. If you are a non-resident, then you have a grace period because it's presumed you are just visiting on a temporary basis.


Also, it's worth clarifying the difference between Sales Tax and Use Tax. Sales tax is on a transaction that occurs in a state. If the transaction doesn't occur in the state, then they can't levy Sales Tax.


Use Tax, on the other hand, is a clever way of still collecting tax on out of state purchases where they were subject to someone else's Sales Tax. It varies by state, but if you bring a boat into the state and plan to keep it there, they will charge a Use Tax for that privilege. Most will credit you for Sales or Use taxes paid elsewhere, but check to be sure.



In the PO's case, since he doesn't plan to keep the boat in CA, the actual sale transaction should be conducted off shore where it is no subject to CA state sales tax. There are forms that you fill out and either keep or file (I don't recall which) to document it all. When you then re-enter CA, you are a visitor just like if you came in from OR or MX.


Then go down to Mexico as you plan, enjoy your self, then make your way back to WA where you plan to keep the boat. When you bring the boat into WA, and since you are a WA resident, Use Tax will trigger right away. You will need to pay, register in WA, and you will also become subject to their annual excised tax on the value of the boat.


Speaking of Mexico, singe the boat is in Mexico currently, it will have a TIP (temporary import permit). You will need to get that cancelled before you can apply for a new TIP in your name. So be sure to get the TIP from the previous owner. Cancelling and reissue can take time, so plan accordingly.

Important - Get the previous owner to cancel his own TIP before the boat title is transferred. It's done at a BanJercito (Military Bank). If you try to cancel a previous owners TIP without him present you will have a "heap of misery". There are locations of BanJercito in the US but it's easier to have the previous owner do it in Mexico at the same time he gets his Zarpe. Once you own the boat you can get a TIP in your name through the mail or at your first port of entry that has a BanJerciro - easier via mail before you head to Mexico then you don't have to worry about making landfall where there is a Port Captain but no BanJercito. The TIP's are good for 10 years and can be renewed.

 

[Ka_sea_ta]

TT is right about use tax and sales tax, use tax is also called registration it is paid annually and makes no difference if the boat is documented or not. Sales is paid when you purchase a boat... If you register the boat in WA you pay the difference in sales tax if you paid less sales tax then the prevailing rate where you register the boat. IIRC if you owned the boat for more then 2 years when you first register in WA. then the sales tax requirement goes away...

 

[rjwilliams11741]

TT is right about use tax and sales tax, use tax is also called registration it is paid annually and makes no difference if the boat is documented or not. Sales is paid when you purchase a boat... If you register the boat in WA you pay the difference in sales tax if you paid less sales tax then the prevailing rate where you register the boat. IIRC if you owned the boat for more then 2 years when you first register in WA. then the sales tax requirement goes away...

Perfect reason to cruise Mexico for at least 2 years and a day. We cruised as far south as Huatauco, up into the Sea of Cortes on two different occasions and many passages from between Mazatlan and Manzanillo. Only place we disliked was Cabo.

 

[Stabi]

I currently live in Boise Idaho and will keep a PO Box here and will return here with a physical residence at some time in the future.

Since you live in and will return to Idaho, you can tell the state of WA to pound sand, and either pay Idaho sales tax which will help the Idaho Schools etc. or depending where in the PNW you want to cruise, leave the boat in Canada, which up to this year was a great option. Do not forget that WA will then want $.005 of the value every year for their sticker. And the best part is that They Tell You what the value of your boat is, it does not matter what you paid for it.

 

[twistedtree]

TT is right about use tax and sales tax, use tax is also called registration it is paid annually and makes no difference if the boat is documented or not. Sales is paid when you purchase a boat... If you register the boat in WA you pay the difference in sales tax if you paid less sales tax then the prevailing rate where you register the boat. IIRC if you owned the boat for more then 2 years when you first register in WA. then the sales tax requirement goes away...

Maybe it's just semantics, but I believe the Use Tax is a one time tax at a rate equal to the Sale Tax rate. The annual tax is at a much lower rate (1/2 of one percent, I believe) and is due annually. That's probably what you pay when you register each year. The Use Tax I think is collected when you register for the first time, but subsequent years it's the annual excise tax that you pay, plus I'm sure a registration fee.



I'm also pretty sure that WA does NOT have an exemption for boats owned more than a certain amount of time, though many other states do. If you bring a boat into the state to keep it there, you have to pay the Use Tax no matter how long you have owned the boat elsewhere.

 

[ghostrider454]

Since you live in and will return to Idaho, you can tell the state of WA to pound sand, and either pay Idaho sales tax which will help the Idaho Schools etc. or depending where in the PNW you want to cruise, leave the boat in Canada, which up to this year was a great option. Do not forget that WA will then want $.005 of the value every year for their sticker. And the best part is that They Tell You what the value of your boat is, it does not matter what you paid for it.

Over the years we've had several trawlers, tugs and sailboat doing offshore purchases, bringing the boats up to Canada with Montana registrations (no tax). Canada is still a better option than quirky Mexico.

 

[DDW]

I'm also pretty sure that WA does NOT have an exemption for boats owned more than a certain amount of time, though many other states do. If you bring a boat into the state to keep it there, you have to pay the Use Tax no matter how long you have owned the boat elsewhere.

There is no exemption in WA for a resident, and tax is owed after 60 days there by anyone (resident or not). Can be delayed with cruising permits for an additional 120 days though it is a paperwork PITA.

The California exemption (out of state delivery and 180 of first 360 days out of state) is strangely permanent. You can then bring the boat into the state, even as a resident, and owe no tax. There is no pre-application for this process, they will come after you for tax and you then apply for the exemption (by definition, cannot be done sooner than 180 days anyway). You write them a letter including proof that the boat was "being used" for the 180 days (marina receipts, fuel receipts, etc.) then after a long time you get a letter saying you are exempt. I've been through this a couple of times.

Obviously, avoiding tax in California which you later pay to Washington saves no money. So it really only makes sense if you are going to keep the boat in Oregon, or Canada, or some other effectively tax free jurisdiction.

 

[Ka_sea_ta]

Maybe it's just semantics, but I believe the Use Tax is a one time tax at a rate equal to the Sale Tax rate. The annual tax is at a much lower rate (1/2 of one percent, I believe) and is due annually. That's probably what you pay when you register each year. The Use Tax I think is collected when you register for the first time, but subsequent years it's the annual excise tax that you pay, plus I'm sure a registration fee.



I'm also pretty sure that WA does NOT have an exemption for boats owned more than a certain amount of time, though many other states do. If you bring a boat into the state to keep it there, you have to pay the Use Tax no matter how long you have owned the boat elsewhere.

I stand corrected. you are right... It's been several years since I last registered a vehicle/vessel purchased out of state, for some reason 2 years of ownership seemed to stick as the time necessary for exemption of use (sales) tax.... I guess my memory is just one more thing failing with age...

 

[JLD]

Since you live in and will return to Idaho, you can tell the state of WA to pound sand, and either pay Idaho sales tax which will help the Idaho Schools etc. or depending where in the PNW you want to cruise, leave the boat in Canada, which up to this year was a great option. Do not forget that WA will then want $.005 of the value every year for their sticker. And the best part is that They Tell You what the value of your boat is, it does not matter what you paid for it.

Are you saying that a non-resident can take their boat into Canada, leave it there indefinitely, and not have to pay any registration fees/taxes?

Jim

 

[ghostrider454]

Are you saying that a non-resident can take their boat into Canada, leave it there indefinitely, and not have to pay any registration fees/taxes? Jim

It was, which is why so many American boats are up there as liveaboards. Plus the covered boathouses and moorages - you only pay a little amount of tax on them.

 

[DDW]

Are you saying that a non-resident can take their boat into Canada, leave it there indefinitely, and not have to pay any registration fees/taxes?

Jim

No.

A boat brought into Canada by a non-resident is treated as personal property, like your car or your luggage. You are allowed to import it temporarily, but it must be exported within 12 months (with limited exceptions) or you will owe GST and PST taxes (around 12 - 15% of value). Technically, if you leave it there and leave the country you are supposed to file some paperwork (form E29B), but few do and most Canadian Border agents will blankly stare at the question. If you export it again - even for a day - the new import restarts the 12 month clock. This is covered in Memorandum D2-1-1-eng from the Canadian Border Services Agency:

9. Baggage and conveyances temporarily imported by non-residents of Canada may remain in Canada duty and tax-free until the expiration of the date they intend to leave Canada or 12 months after the date of importation.

And

(e) where the baggage or conveyances are imported by
a visitor, the visitor declares that the visitor intends
(i) to leave Canada on a specified date, or
(ii) to make a series of visits to Canada within the succeeding 12 months and specifies the date on which the visitor intends to leave Canada at the end of the final visit of the visitor;

 

[ghostrider454]

https://canadianvesselregistry.ca/how-to-import-a-vessel-into-canada/

We registered our vessels upon completion of the year

 

[Devoted Sun]

Paid my Taxes

As always, this forum is full of great people to guide us. This is my third boat over 28' but the first two were in NJ with standard registration and titling.
Thanks so much and I post my results to maybe help someone else.

Finally resolved the issue of paying sales tax on a boat I bought and left in Florida as a New Jersey resident. Took several tries. NJ sales tax is 6% but 3.38? for boat purchases, Florida is 6 %, but if I pay in Jersey, I still have to pay the 2.62% tax in Florida to make up for the 6%. I contacted the Florida Department of Revenue and they gave me an audit and even waived the penalty. Now I have documented proof I payed my taxes and now I will register, as I am a documented vessel, in Florida, and will probably have to pay a use tax when there, and will register is with Jersey when I get it here, or maybe just keep going and follow the loop Thanks Again to all that helped with information.

 

[Devoted Sun]

you were right

You owe a state sales tax, possibly multiple states. There's a lot of info on the web about what Florida requires and when they require it, but I didn't look for NJ. I'm not a lawyer, you don't necessarily need one, but you do need the help of others who understand the requirements for both states. Those collecting the taxes don't always know the right answer either, or you may get different answer on different days. You'll get advice here, but I recommend you use the advice you get here as a guide, not THE answer.

Good luck!

Greg.

You were right about the tax collectors not knowing the answers, and different answers each day. Lee county told me to contact USCG documentation service, they don't collect tax (duh), that's why I waited to get my documentation only to find out and now I am going to get hit with late fees. Florida department of revenue got me settled, and even removed the late fees, so I am fortunate there. All done and settled. Thanks for the help.

 

[menzies]

No use tax in Florida. Just annual registration.

Don't need numbers on the bow either since you are documented. Just put the current registration sticker somewhere visible on the starboard side of the boat.

 

[Devoted Sun]

The COUNTY revenue office probably didn't know any better. Boat taxes are collected by the STATE revenue office in Tallahasee.

This is correct. Thanks

 

[Bkay]

Devoted Sun - I'm glad you followed up with the results. There is a lot of great advice and some not so good advice here. It's hard to tell the difference sometimes. I appreciate you giving an accurate followup.

Especially since tax issues like this are local - your experience in those states is different than what you'd see in two different states.

 

[bligh]

After perusing the replies to the OP's question I have concluded this thread is the best argument to abolish the internet. The amount of misinformation posted here is overwhelming. Talk about 'fake news.' I couldn't even read to the second page.



I'm stunned how many members here who are quite ignorant of tax law chime in with their 'expert' opinions. Most of you don't even know it's you.