State of residency for a full time live-aboard

My wife and I will close on the purchase of a 2005 Monk 36 next week. We will both be retired in the next couple of months and plan to be full-time live-aboards with no dirt residence. Trying to balance issues of state of residence, sales tax on boat, state income tax, annual property tax, boat registration, etc. We are considering establishing Florida residency and mailing address through St Brendan's, but don't want to be hit with Florida's high sales tax on the boat. Any recommendations?
Thank you.

If you buy a boat in Florida you have x days, 30 or 90 as I recall, to clear the state before you become liable for Florida sales tax. It doesn't matter where your state of residency is, it could be Florida for all it matters as long as you get out of the state by the deadline.

Then federally document the boat and keep moving and don't spend more than a few months in each state. Be sure and do not stay in a marina January 1. Some states require marina operators to report boats as of that date and then they try to tax you, either sales or property or both.

I sold the boat a few years later and paid no sales or property tax during the time I owned it.

David

Thanks David. Florida gives 90 days. We won't get on-board until the first week of July. Due to insurance requirements we have to move it out of Florida for the hurricane season. Our plan is to start the Great Loop next Spring. In the meantime we don't plan to spend any significant time in one place.

DavidM said:

If you buy a boat in Florida you have x days, 30 or 90 as I recall, to clear the state before you become liable for Florida sales tax. It doesn't matter where your state of residency is, it could be Florida for all it matters as long as you get out of the state by the deadline.

Then federally document the boat and keep moving and don't spend more than a few months in each state. Be sure and do not stay in a marina January 1. Some states require marina operators to report boats as of that date and then they try to tax you, either sales or property or both.

I sold the boat a few years later and paid no sales or property tax during the time I owned it.

David

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Be careful if you bring the boat into Michigan. The LE here look for boats that are not state registered somewhere. They want to collect the sales tax. Best thing would be to find a state that has a low sales tax and establish residency there and pay the sales tax. Then you have a leg to stand on as to whether or not sales tax is due in a given state. But some states will still go after the sales tax if you stay too long, some states over 90 days, and do not register the boat in that state. You should check carefully so you don’t run against any state laws. They have a lot of resources to go after you and unless you have a lot of resources to fight them they will win.

For what it’s worth, we used St Brendan’s Isle for mail forwarding for several years and I would recommend them. We used my sisters address in FL for a dirt dwelling but know cruisers who set up FL residency with SBI’s help. We brought our boat in from a no sales tax state (Alaska) and registered it when we became Florida residents. We paid no sails tax since we had satisfied the taxing jurisdiction from where we came from. Florida is boater friendly (for the most part) if you play by the rules.

Larry M said:

We brought our boat in from a no sales tax state (Alaska) and registered it when we became Florida residents. We paid no sails tax since we had satisfied the taxing jurisdiction from where we came from. Florida is boater friendly (for the most part) if you play by the rules.

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Good luck with THAT argument, at least here in Washington State, and others as well. If your boat stays in WA water more than xx days (I forget how many), you WILL pay state sales tax, based on the difference between what you've previously paid elsewhere, and what is due in WA. And WA State doesn't care if you domicile in Florida and claim residence on the moon. Simply "...satisfying the taxing jurisdiction where you came from", overstaying your welcome, and assuming you won't then pay state taxes is simply not universally accurate. Maybe so in FL, but again, NOT a universal truth.

In general, the federal government is uneasy with anyone not holding a legitimate street address somewhere in CONUS or AK or HI. And each state is equally argumentative regarding taxation of those that choose to be mobile rather than living at a fixed address. Full-time RVers have a similar issue, and you may wish to poke around in that arena to get an idea how they deal with similar domicile and/or residence issues.

To the original poster: DO YOUR OWN DUE DILIGENCE! Lots of your $$ at risk with the wrong choice of domicile AND residence. Methinks professional legal advice might be in your best interest here.

Regards,

Pete

Yes, an attorney experienced in maritime law. Don’t take our advice on legal matters, on boat maintenance sure thing, but not legal things.

Florida is a state in which it's easy to establish residency and many advantages. There are other states to do so as well. A word about residency. Multiple states may try to claim you, primarily for the purpose of income taxes. Generally, you will remain legally a resident of your current state until you take all the steps necessary to establish in another state. That includes are or part of these items-residency, address, bank account, drivers license, auto registration and insurance, voter registration. You can't just select a state and say you're a resident, you must do some things to prove you are.

Now where your boat is registered or documented has nothing to do with your state of residency except if you keep your boat in your state of residency, you may be expected to register it there and will be expected to pay use taxes. Each state is different however and for this I'd consult a top quality boat documentation company in addition to a lawyer. This is not maritime law, however.

jungpeter said:

Good luck with THAT argument, at least here in Washington State, and others as well. If your boat stays in WA water more than xx days (I forget how many), you WILL pay state sales tax, based on the difference between what you've previously paid elsewhere, and what is due in WA.

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And California is even more aggressive, as it takes the position that even if you spend most of your time in another state, you may still be a California resident for state income tax purposes. And you won't know until you get audited and assessed with 2 or 3 years' penalties and interest. Moreover, there is a move afoot here to enact a 10-year wealth tax. Anticipating that many people would leave the state as a result, they would have it continue to apply for the balance of those 10 years, regardless of whether you are no longer a resident.

I can’t speak to Florida. I can tell you that it gets quite complicated in Washington. For every rule there is an exception. It’s not true that you will pay sales tax on a boat brought permanently to Washington but it also not an untrue statement. The answer depends on many things like your residency, length of ownership and what taxes were previously paid. However, ignoring the rules will guarantee you more trouble Than it’s worth.

You can get cute, register the boat in Oregon with no sales tax, move it out of Florida and then keep moving until enough years have past that you can move it into a state with depreciating sales tax schedule where you will qualify for low or no sales tax but if you screw it up it could get expensive. You will also need to hire professional help to figure out all the hoops to stay legal.

California is the worst. Even If an Oregon resident buys a boat in California and moves it immediately to Oregon. California will still come after the Oregon resident for sales tax. If you don’t pay it they will file for a judgement in an Oregon court to take your assets to satisfy the claim.

Coming from Washington I had to get an exception ruling from the California Board of Equalization so that Brokers could close the deal with out taking California Sales Tax. Of course, I only got the favorable ruling because I was pay Washington Sales Tax on the same day and it was higher than California’s tax rate.

BandB said:

Florida is a state in which it's easy to establish residency and many advantages. There are other states to do so as well. A word about residency. Multiple states may try to claim you, primarily for the purpose of income taxes. Generally, you will remain legally a resident of your current state until you take all the steps necessary to establish in another state. That includes are or part of these items-residency, address, bank account, drivers license, auto registration and insurance, voter registration. You can't just select a state and say you're a resident, you must do some things to prove you are.

Now where your boat is registered or documented has nothing to do with your state of residency except if you keep your boat in your state of residency, you may be expected to register it there and will be expected to pay use taxes. Each state is different however and for this I'd consult a top quality boat documentation company in addition to a lawyer. This is not maritime law, however.

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Residency isn’t the hard part, it’s domicile which is in their judgment where your heart is and their view of whether you ever intend to return.

bowball said:

Residency isn’t the hard part, it’s domicile which is in their judgment where your heart is and their view of whether you ever intend to return.

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You are correct that the appropriate term is domicile, but the tests I mentioned are the key. We convinced the state of NC on our move to FL but we made a clean break.

BandB said:

You are correct that the appropriate term is domicile, but the tests I mentioned are the key. We convinced the state of NC on our move to FL but we made a clean break.

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Those tests and indeed all other objective tests are only the mere beginning in states like NY and CA, and there is much beyond that the state will interpret to its advantage, including asserting that despite all of that you intend to come back in the future. I fought my state for six years when I permanently left the state, with lawyers, accountants, and a former head of the their tax authority. I know well what I write. Do not expect an honest evaluation of the facts. Your ultimate remedy is to go into public court, which becomes very expensive, and all the while they have a 10% interest rate that is accruing... I won, but it was a more of a moral victory at that point, certainly not financially.

BandB said:

You are correct that the appropriate term is domicile, but the tests I mentioned are the key. We convinced the state of NC on our move to FL but we made a clean break.

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I believe that probably is true in many states, suggest as NC as you state. However, those tests (and others) are only the mere beginning in NY and CA, for example, and there is much beyond that the state will interpret to its advantage, including asserting that despite meeting all of those objective factors you mention and more, that you still intend to come back in the future.

I lived it for six years, so you can trust me on this one.

Does any of this change if you have a “domicile “, actual home, in a given state and want to spend X months on your boat in a different state?

All of this discussion of domicile or residency is irrelevant when talking about sales or property tax on a boat. All that counts is where the boat is USED. In general, the state where the boat is used the preponderance of the time is where it is liable for tax. If you keep moving and don't stay at a marina on January 1, you should avoid all taxes.

David

cyranog said:

plan to be full-time live-aboards with no dirt residence. Trying to balance issues of:

state of residence
sales tax on boat
state income tax
annual property tax
boat registration
etc.

We are considering establishing Florida residency and mailing address through St Brendan's, but don't want to be hit with Florida's high sales tax on the boat.

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1) I'd choose a state for residency that doesn't have state income taxes.

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming, all have no income taxes. (NOTE: New Hampshire, however, taxes interest and dividends)

2) sales tax on boat. This is dictated by the state that you register the vessel in, in most cases. Consider registering in a state the doesn't charge taxes, or has very low taxes.

Alaska, Delaware, Montana, New Hampshire, and Oregon

3) annual property tax on what?? Charged by whom??

4) Boats are registered where the boat lives, not where you live. I have owned boats registered is several different states over the years. I've never owned a boat registered in the state of my legal residence.

Your best bet is to document the vessel, which has the USCG (Federal) issuing your title). You may need to register the vessel in more than one state depending on the requirements of each state and how long the boat is kept there. If you never keep your vessel in one state longer than that state requires, then you could never have to register the vessel.

tiltrider1 said:

California is the worst. Even If an Oregon resident buys a boat in California and moves it immediately to Oregon. California will still come after the Oregon resident for sales tax. If you don’t pay it they will file for a judgement in an Oregon court to take your assets to satisfy the claim.

Coming from Washington I had to get an exception ruling from the California Board of Equalization so that Brokers could close the deal with out taking California Sales Tax. Of course, I only got the favorable ruling because I was pay Washington Sales Tax on the same day and it was higher than California’s tax rate.

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MYTraveler said:

And California is even more aggressive, as it takes the position that even if you spend most of your time in another state, you may still be a California resident for state income tax purposes. And you won't know until you get audited and assessed with 2 or 3 years' penalties and interest. Moreover, there is a move afoot here to enact a 10-year wealth tax. Anticipating that many people would leave the state as a result, they would have it continue to apply for the balance of those 10 years, regardless of whether you are no longer a resident.

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We bought ASD in Kookafornia. We avoided the CA taxes by taking delivery 5nm offshore.

However, even though we are Alaska residence, the State of Washington got us with a non-resident user fee which happens to be equal to the sales tax.

Shrew said:

1) I'd choose a state for residency that doesn't have state income taxes.

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming, all have no income taxes. (NOTE: New Hampshire, however, taxes interest and dividends)

2) sales tax on boat. This is dictated by the state that you register the vessel in, in most cases. Consider registering in a state the doesn't charge taxes, or has very low taxes.

Alaska, Delaware, Montana, New Hampshire, and Oregon

3) annual property tax on what?? Charged by whom??

4) Boats are registered where the boat lives, not where you live. I have owned boats registered is several different states over the years. I've never owned a boat registered in the state of my legal residence.

Your best bet is to document the vessel, which has the USCG (Federal) issuing your title). You may need to register the vessel in more than one state depending on the requirements of each state and how long the boat is kept there. If you never keep your vessel in one state longer than that state requires, then you could never have to register the vessel.

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Re #3, it goes by various names, but some states charge an annual property/excise tax. In WA is 0.5% of the boats value, with a prescribed depreciation schedule over something like 15 years. California does the same which is why transients get out of marinas around January 1st which is when the "census" takes place. MA has an annual personal property excise tax which includes boats, but comparatively speaking, it's a small amount.


Re #4, all the regulations do indeed say you register where the boat is primarily used, but for some cruising boats, that is not an identifiable place since the boat is regularly moving from state to state. In that case, how do you pick which state? I have faced this with the past two boats, I never met the requirements to register or pay taxes in any of the states that I visited, so there was no justification for registering in any of them, and doing so would have triggered collection of taxes that are not actually due. So I registered in the state where I'm a resident. It just so happens that those states accept USCG Documentations in lieu of state registration, so my documentation also met the state's requirements. And the boat never entered the state, so never triggered taxes.

bowball said:

I believe that probably is true in many states, suggest as NC as you state. However, those tests (and others) are only the mere beginning in NY and CA, for example, and there is much beyond that the state will interpret to its advantage, including asserting that despite meeting all of those objective factors you mention and more, that you still intend to come back in the future.

I lived it for six years, so you can trust me on this one.

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I think our situation would have held up even in NY and CA as I've got neighbors who left both. However, one must cut all ties. One family wanted to keep their old house as a rental and was strongly advised not to do soo as that would indicate intent of returning. One owned a couple of commercial buildings and was warned apportionment of income would kill them and sold. We sold our home, our boat, quit our jobs, sold one car, and immediately bought a home in Fort Lauderdale. Closed all old bank accounts.

The point you do make is also true that old states want to hold on while new states want to claim. I knew someone who moved from NY to GA while working for a company with locations in both states and both claimed them as residents and actually both had strong cases based on their own rules.

For tax and other purposes (jury duty, state money benefits, etc.) most jurisdictions use the "Physical Presence" test. This is the number of days of the year you spend physically located in a given state. On a boat or in tree house or are actually "homeless," it does not matter. If you are really homeless of course you will get a lot more state benefits than if you live on a yacht.

It doesn't matter if your boat is USCG Documented or just state registered in any state or territory. Its where you are physically located for a certain number of days out of the year. Should you like to go circumnavigating around the world for a few years your legal residency, and therefore your tax liability may follow. California is a very aggressive state about this and I'm sure there are others.

In some states physical presence is 180 days, Hawaii is 200 days and so far has had little or no taxes on older used boats and renewal fees have been reasonable.

SD: No state income tax, no property tax on boats, and we don't care if you or the boat ever set foot here. Although on the other hand, if your boat is used in SD for more than 60 days, you're supposed to register it here, if it's otherwise registered or fed documented elsewhere. You register it in the county of your residency (well, declared residency anyway), not where the boat is located. Our annual state registration is $40.

We documented our boats (including this one) in Rhode Island. It’s held in a trust. Dinghy is state registered. Need to think about liability as well as taxes. Get professional advice. Go through that once so your actions fit your particulars. Unless law or particulars change don’t need to redecide every time you buy/sell. We are always a “yacht in transit”. RI has no boat sales tax. If you are a resident of some states and your vessel isn’t in transit just coming to that state for a day or two will invoke sales tax. Believe NY, Conn, and MA are like that. Our prior senator got whacked with taxes doing that with his sailboat. Being in transit saves some import fees in certain countries as well. Important for parts.
Big difference between domicile and residence. Even with St.Brendan’s found it very helpful to continue to have a dirt dwelling. Used that address for income and other taxes as well as government and legal stuff. Had conversations with lawyer, accountant, financial advisor before deciding what to do.

kthoennes said:

SD: No state income tax, no property tax on boats, and we don't care if you or the boat ever set foot here. Although on the other hand, if your boat is used in SD for more than 60 days, you're supposed to register it here, if it's otherwise registered or fed documented elsewhere. You register it in the county of your residency (well, declared residency anyway), not where the boat is located. Our annual state registration is $40.

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Yes, but if you register it in SD and keep it in, say, Michigan, Michigan will come after you for sales tax and registration fees plus penalties. Michigan has been pretty aggressive about that in the last few years. When we had a boat in California they were also very aggressive about it.

Mass and Connecticut investigate documented boats with different home ports then that state. If you’re a resident of that state they snag you. Some states distinguish between wet/dry and cruising/in for repair or service when calculating number of days. Important to know that as you pass through them.

This question has been addressed on numerous boating forums over the years with results similar to this thread. Opinions all over the place. You must first decide type of ownership, Joint, trust, etc., then type of registration, US or state. Many states require registration so being stateless probably isn't an option. Residency is an entirely different question.

An attorney is not going to provide any advice on sketchy schemes to avoid taxes and I suspect most local attorneys have zero knowledge of various state boating laws. FL brokers selling $500,000 boats probably have the process down pat.

I can't add anything to the google opinions but I would suggest resolving this prior to purchase.

Montana LLC

Comodave said:

Yes, but if you register it in SD and keep it in, say, Michigan, Michigan will come after you for sales tax and registration fees plus penalties. Michigan has been pretty aggressive about that in the last few years. When we had a boat in California they were also very aggressive about it.

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That's right. South Dakota doesn't care if your boat ever touches SD soil or water, but most states where you do keep it will sure care. They want your money.

Just remember, even though boat registration is where sales/use tax is usually collected in many states....

State tax laws and registration/residency laws aren't necessarily in lock step.

Many a boat was safe from tax till the moment it entered a state where the owner owned property and could be considered a resident...even if for only a minute in state waters...that was a taxable event on the boat.

Learn the difference.... many boaters and internet advice doesn't have all the facts to stay out of trouble in many situations.