Sorry For the Sales Tax Registration Question

[Bwester]

I just read through the Thread where some asked a question on Sales Tax and Registeration. I AM SO CONFUSED. So I thought I would tuck my tail, thicken up my skin, and ask a question specifically for myself.

I think it best to start all my Threads just like an AA meeting (Adventure Addict). “I AM A LEARNING NEWBIE. And WILL BE for some time”. I have a boat under contract that we have been searching for the right one for about 6 months. It will be arriving in San Diego in a few weeks after cruising in Mexico for our inspection and survey. If the survey goes well I would be buying the boat while IT is PHYSICALLY located in San Diego temporarily. (Couldn’t get into Mexico to see it. San Diego closest US port). 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. There are a lot of things in play I know like, how long can I stay in California and not be considered a California resident (which I have no desire to become) or to have purchased the boat for use in Calif waters. Should I pay sales tax in Washington where the boat will ultimetaly reside in a couple years or do I have to bite the bullet and pay Calf sales tax? Does Idaho even come into play as an option for sales tax (boat never has or will be in Idaho but it will be my permanent residence? I know we will register the boat with the Coast Guard as a documented vessel just because of the possibilities of going to Mexico. If Mexico doesn’t work out then I will hire a Captain to accompany me up the coast to Washington. Any thought or insight greatly appreciated. And yes I know how difficult it is to beat upw8nd and upstream from S. Calif to Wash8ngton. Difficult and long, not impossible. Thanks everyone, this forum is a great place to learn. It’s what has gotten us this far in realizing our dream of owning a boat.

 

[guy with a boat]

Call Cris Wenthur at Wenthur Law Group in San Diego. He is an expert in exactly these issues. Whatever it costs you is cheap since it will be accurate, reliable, and as cost-effective as possible within the confines of tax law. I have used him multiple times and he is the best. These issues are complicated, mistakes are expensive, and internet tax advice will cost you way more than qualified advice. Trust me on this.

 

[firehoser75]

I don't know that particular lawyer, but the advise is sound in my opinion. Having knowledge of a lawyer someone else has used (assuming no relationship other than satisfied client) is a good start.

 

[Bacchus]

Call Cris Wenthur at Wenthur Law Group in San Diego. He is an expert in exactly these issues. Whatever it costs you is cheap since it will be accurate, reliable, and as cost-effective as possible within the confines of tax law. I have used him multiple times and he is the best. These issues are complicated, mistakes are expensive, and internet tax advice will cost you way more than qualified advice. Trust me on this.

Not only great advice but a recommendation re who to use! Priceless!
OK to get inputs, opinions, etc here or on any forum but use them to formulate questions for the right resource not to make decisions.

 

[sbman]

I agree with the above advice. I'm a California resident and I know that the state is aggressive about pursuing any tax liability they believe they can collect on, and it can be up to you to prove you don't owe it. Hiring a professional to ensure that you take all the right steps to pay only what is actually owed based on the facts of the situation, and knowing what documentation to you'll need to back it up would be worth the expense.

 

[DavidM]

Are you using a California yacht broker. If so they know the California sales tax rules almost as well as any lawyer since they live with them daily.

What I do know is where you live is irrelevant for sales tax purposes, only where the boat lives. If you do a normal closing in California then you will have to pay California sales tax whether you later move it to Mexico, Washington State or wherever.

Expensive boats sometimes do an offshore (literally) California closing and then move the boat out of state quickly. But for our normal trawlers it may not be economical. Ask your broker or lawyer about them.

David

 

[Slowmo]

Getting expert advice is the way to go. You won't be a CA resident unless you remain in the state for 6 months, that's the trigger. However here's the link to the State website related to this:
https://www.cdtfa.ca.gov/industry/vehicles-vessels-aircraft-guide.htm#Vessels

In short, yes, CA will want tax for a transaction that's in State. However there are exceptions including if you have paid use tax in another State. If you plan to make this a WA vessel, perhaps you can record the transaction and obtain the WA registration and use this for an exception to CA tax. However, I think you'd need to show you got the vessel was not domiciled in CA.

 

[Shrew]

https://www.dmv.ca.gov/portal/vehicle-registration/new-registration/register-your-boat-vessel/

Vessels registered in other states have 120 days to register in California.

Vessels operated in California must be registered in California.

Good Luck. It sounds like they've turned the tables to their advantage. If you're not going to live or boat there, I would do whatever I could to purchase and take possession somewhere else.

 

[Shrew]

https://www.cdtfa.ca.gov/industry/vehicles-vessels-aircraft-guide.htm

This site explains the California tax implications and obligations a bit better.

 

[Bwester]

Good Advice

I called the law office recommended in the first response to my question, and was pleasantly surprised at their willingness to talk to me without the meter running. I did receive several options or approaches to the situation from Dane. Basically If not registering it offshore or doing an offshore closing ( literally 3 miles offshore) you have to pay the piper at some point. Turns out Calif is cheaper than Washington now. Other options were to setup an LLC for some ongoing tax relief but you are limited to 180 days a year onboard. Don’t know about everyone else but I don’t want to spend my retirement counting days. Bottom line I was impressed with the law firm recommendation and will probably use them in some capacity. Thanks for the recommendation.

 

[tiltrider1]

You have found a source for quality answers and that is good. Some information that was left out of the discussion, is a California yacht broker involved, either as the selling or buyer’s broker? Where is the boat currently registered. The answers to these two questions affect what can and can’t be done. I’m continuing this conversation for others as you have already been advised on the many options.

Based on the information I have it sounds like the safest easiest path is to pay the California sales tax and register it in California. Now you can stay as long as you want and head to Mexico when you want. If you do go to Anacortes you will not need to pay Washington any sals tax, just the registration fee once you reach your time limit in the state of Washington.

An offshore transaction is a possibility and due to your Idaho residency you could avoid some sales tax but you would need to carefully follow all the rules and California is very likely to make you prove that you did follow all the rules. I would definitely want a lawyer advising me if I was trying to find a way of paying less sales tax on a California registered boat.

 

[markpierce]

If the boat is documented, it is not subject to Calif. state registration. (Most other states will require state registration on a documented boat.)

If the boat remains in California on January first, there will be property tax assessed for the following fiscal year even if you sell or move the boat before the beginning of the new fiscal year.

California aggressively pursues collection of sales/use and property taxes. I'd change the documented home port to an out-of-state location ASAP to reduce the chance California will pursue you even if the boat will have moved out of state, preferably a location where the government does not assess property taxes on boats.

 

[Crusty Chief]

Look into Registering the boat in Oregon, and use Home port of Idaho for your CC Documentation. We are Nevada Residents, Pairadice is CC Documented as home Port, Las Vegas. No sales Tax or annual property tax. But get some legal advise. Might be cheaper to take possession off shore, and hire a captain to take it to Ensenada until you can figure things out legally. Just 2 Cents from us and no legal background.
We do have to be cautious with regards to time in each state while we cruise, but an expensive boat will cost a small fortune in one time sales tax and annual property tax.
Again, seek legal help.
Cheers

 

[denverd0n]

The hailing port that you use when Coast Guard documenting your boat has ABSOLUTELY NOTHING to do with taxes or registration. NOTHING!

Sales tax depends on where the sale takes place. Use tax depends on where you use the boat. Registration depends on where the boat actually is kept. Property tax depends on where the boat is (sometimes, as in California, on a particular day, sometimes for a particular number of days).

None of these things has anything at all to do with the hailing port you choose when you document your boat (if you do document it).

 

[DDW]

The short answer is you can be exempt from CA sales tax if you take delivery outside of CA (like offshore or in Mexico) and keep the boat out of CA for 180 of the first 360 days of use. They will come after you and you have to apply for and be able to prove the above. When you move the boat to Washington, after 60 days you will owe Washington sales tax. But, Washington will give you credit for sales tax paid in another jurisdiction. If you paid 8% in CA and end up in a 10% Washington county, you'll still have to pay 2%. Buy the boat offshore and keep it in Oregon of Canada, you might avoid tax altogether with careful planning.

 

[JLD]

I think we need a little more detail.
- are you planning on doing extensive cruising in Mexico? 6 months? 6 years?
- what is the cost of the boat? I might do things differently on a $1,000,000 boat (I wish!) versus a $100,000 boat.

With this statement "After cruising Mexico we intend to bring the boat up to Anacortes Washington where it will hopefully STAY.", I don't know how you avoid paying sales tax. You won't be able to register the boat in Oregon and keep it in Washington.

Working off of DDW's post, If I were in this situation, I would probably just go ahead and pay the CA sales tax. This way I could take my time to learn the boat/move aboard, then cruise to Mexico when I was ready, not to meet some forced time constraint. Enjoy Mexico and cruise to Washington again at my convenience. Pay the difference in sales tax between WA and CA, and enjoy the boat in the Pacific Northwest.

Jim

 

[Shrew]

The hailing port that you use when Coast Guard documenting your boat has ABSOLUTELY NOTHING to do with taxes or registration. NOTHING!

Sales tax depends on where the sale takes place. Use tax depends on where you use the boat. Registration depends on where the boat actually is kept. Property tax depends on where the boat is (sometimes, as in California, on a particular day, sometimes for a particular number of days).

None of these things has anything at all to do with the hailing port you choose when you document your boat (if you do document it).

Not in all states. (not in many states). CT taxes boats. I've bought several boats in CT. I've registered it in NH, and RI. No CT sales tax. In many (not all) states, the tax is paid based on the registration, not the location of the sale.

This is the problem with these threads. It really does depend on the states involved, not individuals personal experiences in other states.

 

[denverd0n]

CT taxes boats. I've bought several boats in CT. I've registered it in NH, and RI. No CT sales tax.

Okay. That is unusual, but I'm not surprised that there are exceptions to the rule.


Nonetheless, the main point I was trying to make is that the hailing port you choose, when you document your boat, has NOTHING to do with taxes, registration, or anything else like that. You cannot avoid taxes, avoid registration, or any other sort of fees by choosing the "right" place as your hailing port (as was implied in post #13, which I was responding to).