Sales taxes & Ownership

[Leeward III]

Sold our boat and made an offer on a larger vessel, we are on the US East coast.
Concerned about sales taxes in the various states and ownership, in our names, LLC or Trust.
We are currently looking at Virginia as our home port, as they have no sales tax on documented vessels. Any advise would be greatly appreciated.

 

[Larry M]

A lot should depend on where the boat is principally moored. You will have Virginia registration with decals. If you keep the boat in another state, some tax collectors walk the docks and see where a boat is registered vs length of stay. A good friend did a Delaware registration and kept his boat in Massachusetts. The boat was impounded in his second year of ownership.

 

[Comodave]

A lot should depend on where the boat is principally moored. You will have Virginia registration with decals. If you keep the boat in another state, some tax collectors walk the docks and see where a boat is registered vs length of stay. A good friend did a Delaware registration and kept his boat in Massachusetts. The boat was impounded in his second year of ownership.

Yup. They are supposed to be registered in the state of principal use.

 

[kthoennes]

Yep, all location dependent. We're residents of South Dakota (real residents, not absentee), one of the lowest tax states in the country. Bought our boat in Massachusetts years ago but took delivery in Rhode Island, because at the time there were MA tax regs and cases that seemed to say Mass was owed sales taxes if you took delivery in Massachusetts regardless of ultimate destination, and they'd even chase you for the difference between their sales tax rate and you home state's rate if you paid sales taxes in your home state. We were assessed (almost negligible) sales taxes back home -- and that's where the boat would be and is principally moored, but we didn't want to give MA any excuse to chase us for taxes. THis was about ten years ago, don't know if the tax regs have changed since then, but even at our low boat price, we were cautious. No need to end up owing hundreds or thousands more if you can legitimately avoid it.

 

[SIBERNUT]

Florida yachts summering in NJ usually had a captain. Every 3 weeks or so, they'd run up to NY & buy fuel to prove not 30 days in the state

 

[PierreR]

some states are different if the boat is purchased from a corporation/trust or purchased by a corp or trust verses by a private individual.

 

[Bacchus]

If buying you may be able to take delivery and register in a state w liw/no sales tax IF YOU QUALIFY with residence or slip reservation,nstorage etc. You MAY be able to bring it into Mass for permanent dockage and only have to pay for the new registration.
Worth checking on the details & requirements.
Normal procedure AFAIK is no sales tax when same owner transfers registration to another state.

 

[Captain_Michael]

In theory you pay sales tax where you will keep the boat. If you buy your boat in CT, for example, and keep it there a year or two then move to VA, you will not have to pay a sales tax upon arrival in VA but instead you pay a use of their waters tax. If the sales tax you paid in one state is lower than the use tax where you moved, you make up the difference when you register. The state where you register will want to see the sales tax records.

As you mentioned, Virginia does not require registration of documented boats, so if you operate a documented boat there, you can escape paying the usage tax which is capped at $2K. I say escaped, because technically you should pay the usage tax, but they have no way of checking since you are not registreing your boat. Sales and usage tax are one time payments.

In addition, in some states, boats are taxed annually as personal property. Usually it is a tax that is uniform within a state, but Virginia allows counties to set their own boat property tax. Many counties in VA do not have one. Shop around. On the other hand, to take advantage of a county where there is no annual tax, you need to keep your boat in that county for over half the year. Marinas and yards are required to keep records of slip leases and storage, and counties do check.

 

[slowgoesit]

Yup. They are supposed to be registered in the state of principal use.

The problem with this idea is that some states require that your register your boat there, assuming that their state is the location of "principle use" in as little as 90 days of presence. So, theoretically, if you stay three month in one such state in a year, you need to register it in that state, with the associated fees, annual use tax, etc, then move on to the next state that has a "90 day requirement", you need to register it again in THAT stated, then the next, etc. Each "registration" comes with the requirement to pay for a full year of taxes. So, once again, theoretically, since there are 4 "90 day periods" plus a few extra days in any given year, you may be legally required to re-register your boat up to 4 times in the same year, just to fulfill the local requirements. Granted, it is unlikely the timing would require that number of re-registers, but say you boating primarily in two adjacent states that have the 90 day requirement: When you move from State A to State B, you register in your new State B. State A's registration becomes null and void. If you move across the line back into State A, you need to register AGAIN back in State A . . . .

I wish they would just come up with a National registration (wait, they already HAVE that, it's called Federal Documentation!) . . . . but it's all about revenue, not keeping track of the boat . . . .

People have reported here on Trawler Forum that they have received dunning notices from States where they were just passing through. Threatening to put a lien on their boat if they don't pay up, or PROVE that they weren't in that state for longer than whatever their prescribed time is. So the burden of proof is on you, the boat owner to prove that you did NOT break the law! Difficult if you didn't happen to purchase fuel, or stay at a marina in an adjoining state during the period under discussion. Some states just send out blanket registration notices to all boats present where the enforcement officer happened to take a walk one day.
Okay, off my soapbox for now . . . .

 

[Judy at JWY]

Many states differentiate between Sales Tax and Use Tax. Make sure you understand both for State of purchase and the State for primary dockage. Potential for double zapping if not careful.

Perhaps not relevant to the OP, but as a reminder: the State of Florida requires sales tax to be paid on any boat sold. On a FSBO, the buyer must remit the 6%+ sales tax at the time of purchase. IF buying a boat through a licensed yacht broker, the broker can file for sales tax exemptions which can allow the new owner to remain within the state for up to 6 mos. As to use tax, one can cruise in Florida waters without paying the use tax as long as one purchases the proper permits and plays by the rules.

 

[BroadCove]

Post #11 importantly notes the distinction between sales and user taxes. You should also be aware of personal property taxes. Virginia localities can impose an annual personal property tax on vessels. Most do, and it can be a substantial annual expense.

 

[BBS]

The discussion of federal documentation and registration can be confusing for sure. Documenting a vessel with the USCG takes the place of a title, not state registration. Some states, Florida and Michigan come to mind, require documented boats to also be state registered (in any state....they all have reciprocity) to transit there waters. Sort of like needing to have your car registered/licensed in order to drive through other states.
One problem I've run into is that my home state of SC does not require or ALLOW state registration of a documented boat, so in order to travel through some other states I would need to register somewhere other that the state of principle use.

 

[SteveK]

I think y'all should document your boats and pay your fees in Canada. Carry a Canadian flag, then you can freely visit in the USA.

 

[Bacchus]

I think y'all should document your boats and pay your fees in Canada. Carry a Canadian flag, then you can freely visit in the USA.

Visiting state to state w USCG Doc and a state registration isn't a problem...
It's if you stay for an extended time as most places have a "visit" time limit before you are considered "principle use" and need to comply w local reqmts and pay applicable fees... that app,it's across borders as well.

If you mean try to fly under the radar that's a different story.

 

[tiltrider1]

While this is unlikely to apply to our OP. Should he buy a boat that is registered in California he would be forced to pay California sales tax, even if he promptly removed it from the state. Always know for sure the tax laws of California before making a major purchase in that state.

 

[psneeld]

Registration for the most part is no big deal.

It's the sales or use tax that is.

THAT is the important thing to understand and has little to do with registration except that's where many states ask for proof of paying sales/use tax and collect it before issuing registration.

Everything can be legal in many ways, but some states will still impose a tax burden on you for being a resident and if you bring that expensive item into the state for even part of one day, they can come after you for sales tax...unless that state clearly spells out in laws why you wouldn't.

 

[DDW]

Some states just send out blanket registration notices to all boats present where the enforcement officer happened to take a walk one day..

Some states (California) are much lazier than that: they send out a tax bill based on the registration change reported to and by the Coast Guard. It is probably even automated.

While this is unlikely to apply to our OP. Should he buy a boat that is registered in California he would be forced to pay California sales tax, even if he promptly removed it from the state. Always know for sure the tax laws of California before making a major purchase in that state.

In California, if you take delivery 3 miles off shore (or across the border), then leave the state within 180 days, you can avoid sales/use tax (in California). If you take delivery in California, then you owe the tax.

 

[psneeld]

The trick is don't get caught in a state that has a short registration requirement. You may be asked for proof of paying sales tax someplace else. If you can't you will owe that state the difference between what they are asking and zero or what you have paid elsewhere.

 

[twistedtree]

The discussion of federal documentation and registration can be confusing for sure. Documenting a vessel with the USCG takes the place of a title, not state registration. Some states, Florida and Michigan come to mind, require documented boats to also be state registered (in any state....they all have reciprocity) to transit there waters. Sort of like needing to have your car registered/licensed in order to drive through other states.
One problem I've run into is that my home state of SC does not require or ALLOW state registration of a documented boat, so in order to travel through some other states I would need to register somewhere other that the state of principle use.

I have lived in states that do not state-register USCG Documented vessels. They consider the USCG Documentation as satisfying the state registration requirements. I can't say I have thoroughly tested this, but so far I have not had any issues with other states. When asked, I have said my home state doesn't separately register documented boats, and that I am in compliance in my home state. That has always been accepted.

 

[twistedtree]

Registration for the most part is no big deal.

It's the sales or use tax that is.

THAT is the important thing to understand and has little to do with registration except that's where many states ask for proof of paying sales/use tax and collect it before issuing registration.

Everything can be legal in many ways, but some states will still impose a tax burden on you for being a resident and if you bring that expensive item into the state for even part of one day, they can come after you for sales tax...unless that state clearly spells out in laws why you wouldn't.

This is a very important point. What you likely care about, or at least what you care about more is triggering tax liability. Triggering of tax liability often parallels triggering of registration requirements, and registration is often used as the mechanism for tax collection, but not always.

 

[twistedtree]

I think y'all should document your boats and pay your fees in Canada. Carry a Canadian flag, then you can freely visit in the USA.

I think if you are on a cruising permit in the US. i.e. a foreign flagged boat visiting the US, you are subject to the same per-state visitation limits before triggering state taxes and state registration requirements. This likely varies from state to state, but don't assume you are exempt from state visitation limits because you are on a cruising permit.

 

[Judy at JWY]

In Florida, the State has notetakers who walk the docks to look for possible sources of income (like foreign flagged vessels for sale and marking the dates for levying use tax.) Not sure if it is still true, but I had heard that the bridge tenders get a kickback for reporting errant vessels.

 

[SteveK]

I think if you are on a cruising permit in the US. i.e. a foreign flagged boat visiting the US, you are subject to the same per-state visitation limits before triggering state taxes and state registration requirements. This likely varies from state to state, but don't assume you are exempt from state visitation limits because you are on a cruising permit.

Very confusing. With a I-68 cruising permit the Canadian boat can remain in the US for one year, but the crew must return to Canada every 6 months. A permit can be had at the first US entry port. With Nexus you do not need a cruising permit. But you do need to fill out a CBP-1300, except an electronic method is underway where you will neither need a cruising permit or fill out CBP-1300.
UPDATE: CBP is testing the new Vessel Entrance and Clearance System (VECS)
Otherwise in WA for instance I can stay up to 60 days before more paperwork is needed.

 

[psneeld]

From passagemaker magazine....

"The U.S. Coast Guard requires bridgetenders to log the names and times of all boats passing through. They are not just asking out of curiosity. Even if the name is clearly marked on the side of your boat, state the name slowly over the radio and spell it if asked."

 

[delirious duo]

The problem with this idea is that some states require that your register your boat there, assuming that their state is the location of "principle use" in as little as 90 days of presence. So, theoretically, if you stay three month in one such state in a year, you need to register it in that state, with the associated fees, annual use tax, etc, then move on to the next state that has a "90 day requirement", you need to register it again in THAT stated, then the next, etc. Each "registration" comes with the requirement to pay for a full year of taxes. So, once again, theoretically, since there are 4 "90 day periods" plus a few extra days in any given year, you may be legally required to re-register your boat up to 4 times in the same year, just to fulfill the local requirements. Granted, it is unlikely the timing would require that number of re-registers, but say you boating primarily in two adjacent states that have the 90 day requirement: When you move from State A to State B, you register in your new State B. State A's registration becomes null and void. If you move across the line back into State A, you need to register AGAIN back in State A . . . .

I wish they would just come up with a National registration (wait, they already HAVE that, it's called Federal Documentation!) . . . . but it's all about revenue, not keeping track of the boat . . . .

People have reported here on Trawler Forum that they have received dunning notices from States where they were just passing through. Threatening to put a lien on their boat if they don't pay up, or PROVE that they weren't in that state for longer than whatever their prescribed time is. So the burden of proof is on you, the boat owner to prove that you did NOT break the law! Difficult if you didn't happen to purchase fuel, or stay at a marina in an adjoining state during the period under discussion. Some states just send out blanket registration notices to all boats present where the enforcement officer happened to take a walk one day.
Okay, off my soapbox for now . . . .

What states are that aggressive it sounds mostly like east coast issue reading this thread.

 

[twistedtree]

Very confusing. With a I-68 cruising permit the Canadian boat can remain in the US for one year, but the crew must return to Canada every 6 months. A permit can be had at the first US entry port. With Nexus you do not need a cruising permit. But you do need to fill out a CBP-1300, except an electronic method is underway where you will neither need a cruising permit or fill out CBP-1300.
UPDATE: CBP is testing the new Vessel Entrance and Clearance System (VECS)
Otherwise in WA for instance I can stay up to 60 days before more paperwork is needed.

This last part is what I was referring to. Regardless of your 1 year cruising permit, you are still subject to state limitations. Hang out too long in WA, and you will owe 8-10% of the boats value in use tax.

 

[CaptTom]

There's always a lot of confusion around this topic.

First, registration vs. documentation. States can not require you to display registration numbers on a US federally documented vessel. They can require you to pay sales tax, use tax, excise tax, etc. They can require you to "register" and display a registration sticker. Just not the numbers.

Second, state fishing expeditions. Yes, some states (both East and West coasts) have been known to download the USCG documentation database and send out tax bills to any owners with a hailing port in their state. Even though hailing ports need not be the location of principle use. I know the USCG doesn't publish this information any more, but perhaps states can still get it through some official channel.

With tax disputes, you are guilty until proven innocent. You need to maintain good records to defend against any accusation that you might owe tax.

 

[psneeld]

What states are that aggressive it sounds mostly like east coast issue reading this thread.

I would venture to say because there are many more coastal states and easier cruising grounds to go state to state in everything from canoes to motoryachts, and just sheer numbers of boats....tax dollars are a bigger deal.

 

[Larry M]

What states are that aggressive it sounds mostly like east coast issue reading this thread.

Washington State has formal limits that are followed for the most part. Tax officials walk the docks regularly and marinas work with the department of revenue. I did a delivery to Cap Sante Marina, in Anacortes. A California owner and the marina would only sign a moorage contract for 60 days that could later be extended for another 60 days with a permit in hand.

Boaters visiting Washington state

Boaters visiting Washington may recreate on state waters for up to 60 days without a permit as long as the vessel is registered in another state or has current U.S. Coast Guard documentation.

If you plan to be on Washington waters longer, apply for a permit on or before the 60th day of your visit. To get a permit, visit any Vehicle Licensing Office, bring your unexpired state vessel registration and identification from your state. You may renew the permit once for an additional 60 days. When the renewed permit expires, you must either register your boat in Washington or remove your boat from Washington waters.

https://parks.wa.gov/about/rules-and-safety/recreational-boating-laws-regulations/boat-registration

 

[SteveK]

@Larry M
Confusing. What you quoted must be only for US flagged boats. Many Canadians moor in Point Roberts and Blaine marinas, I did as well, may again. We need a permit with annual fees. No issues once the decal is on the window.
For us visiting up to 60 days and then a cruising permit for one year, leave and come back, do over.