Boat Purchase - Tax Question

[Stu Jackson]

Didn't John Kerry try that trick?

It's never a good idea in matters like this to depend on opinion. Why not ask both state tax authorities? Their opinion is probably better than any Internet forum.

Don's right. Look, this very same question has been "debated" endlessly on www.cruisersforum.com for years, with hundreds of different posts and Q&As.

Don's answer is the right one, and complements my earlier posts.

Do your own homework and research. All it takes is a few clicks on govt websites.

 

[Charles Erwin]

All government organizations confiscate the funds of its citizens via fees and taxes. After all there is just no other way for government to obtain money to pay for what it does (apart from fines of course).

Begin by knowing that the tax and fee regimes are not the same amoungst the States and that Federal constitutional restraints are in play so as to foster commerce between the states. So here is the general idea and in each case the facts underpinning the movement of property between the State of purchase, State of use, and State of owner residence ends up mattering.

Sales and use taxes

In the case of States that finance their operation with sales taxes (not all do) the State will extract a sales tax if the transaction is between that taxing States residents. And - every State that has a sales tax also has a use tax. The difference is that the sales tax is imposed on transactions between residents of the taxing State (or transactions involving a sale by non-resident to a resident of the taxing State) whereas a use tax is imposed on the property if the property is present within the taxing state for a period of time - usually so many months within any calendar year - no matter the owner is not a resident of the taxing State.

For example, an Oregon citizen owns a boat in Washington. Washington cannot impose a sales tax even if the boat was purchased from a Washington resident. Neither can Washington impose a sales tax upon a sale between a Nevada resident and an Oregon resident.

Since a taxing State cannot impose a sales tax upon citizens of other states the taxing State imposes a use tax instead. I imagine you see now that the sales and use taxes are different in their application - however the use tax rate is nearly always identical to the sales tax rate. There are two things to know when it comes to these type taxes -- they are one-time deal; and - because of federal constitutional restraints - if you already paid a sales or use tax in one state you get 100% credit against a sales or use tax sought to be imposed by any other state.

Property taxes

California has sales taxes, use taxes, and property taxes. Property taxes are due every year - they are not a one time deal like sales or use taxes - and depend exclusively upon physical presence or property within a state for a period of time. California administers property taxes based upon whether the property is in California on a given day and if so then the property is presumed to be subject to the property tax. The owner of the property involved must prove the property is not subject to the property tax in order to obtain relief - and he must do so promptly. Unlike the sales or use tax - generally you get no credit for having paid a property tax in a foreign state.

Fees

Most states require registration of a boat used in that state for specific period of time. Generally it does not matter who owns the boat nor where the boat might be. However, such registration fees paid to a neighbor state may exempt you from fees sought by the state where the boat is located. Registration fees are just like sales taxes which are imposed if you are a resident of the taxing State but they may also be due even if you have already paid a registration fee in your home state.

And you do not avoid registration fees based upon the fact that boat is federally documented (registered.)

By the way non-US boat owners get different and special treatment when it comes to taxes so you need wonder no longer why big time boats are very often Caymans or UK flagged.

I hope this helps - but the fact remains your choices are : Read and understand the law of the States you are involved with; hire somebody who is well qualified to sort it out with you; or take your chances all alone.

Charles

 

[rfrye1]

Yes I'd check with the broker and file all proper paperwork in NY to avoid the NY Tax and keep copies. I bought my boat and Moor my boat in San Diego, but live in Phoenix. Fifteen years ago, CA still required Sales Tax (8%), even though we did USCG Documentation Reg. But.... Current State law then was if the boat was "out of the Country" for at least 100 days for the first 6 months of ownership, no sales tax was owed. Needless to say, many boats spent 100 days down in Mexico at the "Ensenada Yacht Club" back then vs. paying 8% sales tax.

 

[seadaddler]

I learned the hard way,if you do not register or keep or store in NY you don't need to
pay NY sales Tax.
As long as you pay the Tax where you live or store or keep or using the boat,NY
came after me because I used the boat in NY waters before shipping to Florida.
I made the mistake of using my NY address instead of using my Florida address
on all my paper work when I purchased in Conn and moved to Florida.
Nick

 

[NotCook]

If you buy in NY and bring it to California, then you pay the sales tax to California. For CA residents, you may have noticed that your CA income tax return asks you to report out-of-state purchases above a certain amount and used here, so they can be TAXED!

The reason some states call it a "Sales or Use Tax" is so they can collect it even if you bought out of state. If you can avoid paying the tax to NY, do so. Not sure about CA, but some states do NOT credit what you paid in another state. Most do, and you only pay the difference if more. But, as Gambit and Gunni both stated, you will need to report it when you register the boat in CA, or at least when you file your taxes. In my experience, neither where you bought or where you live matter as much as where you register and keep the vessel. If you don't pay it right away, expect to pay a penalty and interest in addition...

 

[Charles Erwin]

The reason some states call it a "Sales or Use Tax" is so they can collect it even if you bought out of state. - - - Not sure about CA, but some states do NOT credit what you paid in another state. - - - In my experience, neither where you bought or where you live matter as much as where you register and keep the vessel. If you don't pay it right away, expect to pay a penalty and interest in addition...

Interesting notions.

One assumes that you are entitled to make such statements because you have the facts that back them up. Can you please tell us which states do not allow credit for sister state sales/use taxes?

The location of the boat is important - I agree - but can you explain why where you purchased makes any difference in the total amount of sales/use tax you might be liable to pay?

Charles

 

[NotCook]

The location of the boat is important - I agree - but can you explain why where you purchased makes any difference in the total amount of sales/use tax you might be liable to pay?

I specifically did not say where you purchased makes a difference. As I said, in my experience, it doesn't. When we bought our boat in Maryland, from an owner in Florida, while I resided in Indiana, neither Florida, Maryland nor Indiana had any interest in collecting sales takes. Nor did Michigan where we stored it for the winter. BUT, Ohio, where we docked it for 2 1/2 months, wanted use tax, plus interest.

You made a very detailed, and presumably, learned, original post more so that most of us. Good for you.

 

[Bob S]

Great post. So what happens when you buy a boat in Canada and bring it to the states or from the states and bring it to Canada?

 

[Stu Jackson]

or from the states and bring it to Canada?

Bob,

You do your research & homework on the appropriate govt websites, like this one:

http://www.cbsa.gc.ca/import/imp-mar-eng.html

 

[BigEasy]

The only way to know for sure is to send a hypothetical email to get an opinion in writing as to the tax liability for boat sales.
The local government tax collector for locale in which the boat is moored.
The state tax collector / department of revenue for the state in which the boat is moored.
Finally, the state agency that registers all boats for the state in which the boat is moored.
In Louisiana, private sales between two individuals are considered non taxable. If a broker is involved in listing the boat, sales tax must be paid to the local government & state government---period. One must sign a document attesting to the disposition of the sale; trying to avoid the sales tax is fraud & if you get caught you're in big trouble. Also, gone are the days that you could register a boat in Delaware as an LLC and bring the boat into LA tax free. If the boat is used in LA, it has to be registered in LA, regardless if it is documented. When it is registered in LA, you must prove that sales tax was paid either in LA or in another state. The Delaware LLC is not going to "hold water" any longer. Again, the only way around the tax issue is to arrange for a private or casual sale between two private individuals without broker involvement, in LA.

 

[Crazy Dave Condon]

Rgranger; If a used or new boat is titled and registered, sales tax is collected by the state with personal property taxes paid to the county or city it is in. Not sure how that will work since you live in one place but the boat is in another as you are at a private dock but suggest that you pay it where the boat is located. Marinas are required to report to their respective county or city. However the VA registration form does request where the boat is moored and reported to the appropriate county.

As for federal documentated boats say at a private dock, counties along the coast do send out the hatchet men to check.
Jim Seamans use to moore his 356 in MD as there are no personal property taxes vs. VA where he lived but did pay a one time hefty sales tax to MD but over time was cheaper to go that route. For the snow birds going to Florida, many states are clamping down as to time limits before the tax man comment.

 

[SEMPERAVANTI41]

Refer to NYS tax form DTF-804 (https://dmv.ny.gov/forms/dtf804.pdf). There is a full credit available between NY and CA (and 7 other states) for sales tax paid. I recently purchased my boat in FL. I paid the 6% due in Fl and when I paid sales tax in NY I received a full credit for what I paid in Fl and only had to pay the difference in NY, which changes county by county. In my county the rate is 8.675%. I paid this sales tax direct to NYS DMV even though the boat is documented with no state registration.

 

[joker460]

Great post. So what happens when you buy a boat in Canada and bring it to the states or from the states and bring it to Canada?

We bought our boat in Atlanta and only paid the price of the boat. Trucked it to Wilson,NY. Sailed it across to Pickering ,Ontario and when we arrived at port, made our call to customs, and had to pay the HST Tax via plastic.

 

[MitchM]

call NY tax division and ask them. then call CA and ask them. when buying our last boat out of CT , we paid sales tax for PA on full value, as that was where we live. we could not have registered the boat in CT without paying sales tax to CT. the CT original owner's registration was cancelled upon sale.

 

[MitchM]

if you are importing a pre owned boat made in an EU country into CA (also an EU member) there are certain tax advantages. USA is not EU so US made boats are more expensive tax wise for a CA resident . check with CA customs.