Sales Tax and Registation

[John Saylor]

After having been researching numerous boats for many years I am getting ready to make an offer on one. I have a handful of questions related to taxes & registration. But first a little context… I am living on the west coast (of the US) and have found the boat I want to purchase on the east coast (of the US). The purchase price of the boat is in the “few hundred thousand range”. My questions:
1) Can I stipulate in the purchase contract the state of purchase for the purposes of sales tax remittance or is sales tax collected based on the state the boat resides at sale?
2) If there is flexibility, perhaps I can have the sale deemed to have been consummated in another state and have 60-90 days to move the boat to that state?
3) What are the states that are most favorable from a sales tax and registration perspective?
4) Does anyone have any advice on whether I can/should form an LLC and have that entity buy the boat, in order to depreciate the boat and run other boat related expenses through it? Is the foregoing a common practice?
5) Do I need to be a resident of the state in which it is registered?
6) What about registering in a foreign country that may be more favorable, like BVI?

Any answers or insights related to these questions would be welcome.

Thanks in advance.

John

[CFS Klopas]

1. Sales tax is determined by the state the sale takes place in. Furthermore, if the state you register in has a higher sales tax rate than the state you bought it in, you have to pay additional tax.
3. Oregon is pretty good.
5. You do not need to be a resident of the state the boat is registered. You register the boat in the state it is kept in.

[Whatta Life]

Sales tax is determined by the state the boat is going to be kept in. I'm in Florida, If you buy a boat here you have a certain amount of time to get it out of state. You cant just register it in any state you want because the state it will be kept in will want it registered there. Even if you already own a boat but move it to a different state they will want you to change registration.

[marcjsmith]

from an RV point of view. I believe that Montana has a favorable set up where you register an LLC and register the boat in that state. My folks did that for several RV's they bought in the 6 digit range. several states have no sales tax AK, DE, MT, NH, OR



That being said. having your boat registered in one state and stored in another, for the purposes of dodging taxes, localities have figured out a way to get their pound of flesh through at least in MD "Principal Use location" and excise taxes.



I would read all the fine print in your state for boating registration. you still may have fees to pay and stickers to buy....

[denverd0n]

Originally Posted by John Saylor

1) Can I stipulate in the purchase contract the state of purchase for the purposes of sales tax remittance or is sales tax collected based on the state the boat resides at sale?

No. The sale happens where it happens. You cannot just say that it happened somewhere else.

Originally Posted by John Saylor

2) If there is flexibility, perhaps I can have the sale deemed to have been consummated in another state and have 60-90 days to move the boat to that state?

There is flexibility. It varies by state, so you will have to find out the details for the particular state you buy the boat in. In Florida, you have 90 days to move the boat out of the state before you have to pay sales tax. I believe other states have similar provisions.

Originally Posted by John Saylor

3) What are the states that are most favorable from a sales tax and registration perspective?

Registration is almost always dependent on where you keep the boat. If you keep the boat in Florida for more than 90 days, then you MUST register it here, even if you have previously registered it elsewhere. So, generally, you don't get to just pick where to register the boat.

Tax rates vary by state, so you will have to look them up. In Florida, it is 6% with an $18k maximum.

Originally Posted by John Saylor

4) Does anyone have any advice on whether I can/should form an LLC and have that entity buy the boat, in order to depreciate the boat and run other boat related expenses through it? Is the foregoing a common practice?

The cases where an LLC is truly beneficial are pretty limited. Suggest you talk to an attorney about this.

Originally Posted by John Saylor

5) Do I need to be a resident of the state in which it is registered?

Again, you don't get to just pick a random state to register it in. You will have to register it where you keep it. That said, no, you do not have to be a resident of that state.

Originally Posted by John Saylor

6) What about registering in a foreign country that may be more favorable, like BVI?

If you keep it in the US, you are going to have to register it in the US. There may be advantages to documenting it (flagging it) in another nation, but I'm not sure about that.

Good luck.

[flightlead404]

Originally Posted by Whatta Life

You cant just register it in any state you want because the state it will be kept in will want it registered there. Even if you already own a boat but move it to a different state they will want you to change registration.

Maybe someone can provide a little more clarification. In my case the boat floats up and down this year between SC, GA, and FL. I'm not spending 6 months in any one place. I registered the boat in GA as that's the state I'm a resident of, but the boat will spend only a month or so in GA total this year. But it seems like I could have pretty much picked any of the three.

What am I missing?

USCG documented but I don't think that makes any diff.

[Elleroo]

Can someone inform me of the sales tax situation on buying a USA flagged boat, and changing it to a foreign flag, and taking it out of the country

[denverd0n]

Originally Posted by flightlead404

What am I missing?

I don't think you're missing anything. Don't know the specifics for GA or SC, but if the boat spends 90 days in Florida, then the law requires you to register it here. I suspect that other states have similar laws, with (probably) varying time limits.

[Sand crab]

If you purchase the boat in Florida you can buy a 6 month extension to the "get out of my state" clause for $400 before having to pay sales tax. But if you come back in before 18 months (?) then you are liable for the tax bill.
If you are moving around a lot or plan to cruise internationally then a US Documentation is the way to go. No state reg required.

[Tayana42]

John, you didn’t ask about the possibility of an offshore purchase. Since you live on the west coast you may know that many people in California (which has a high sales tax) buy their boats offshore, physically beyond the three mile limit, and then move them to Mexico for 12 months to avoid sales tax in California. After 12 months they can bring their boat into California and not owe sales tax. On a boat of a few hundred thousand dollars that saves a few tens of thousands of dollars. They still have to pay annual use taxes to the county in which the boat in kept.

If you are buying in Florida and you can take a year to move it to California that may satisfy the offshore purchase criteria. You can call the California State Board Of Equalization and get their helpful advice about the current law and how to document your offshore purchase to avoid taxation issues. The same is often done with airplanes and RVs.

So if you have 90 days to leave Florida and then you cruise through the Caribbean and the canal then wait out the balance of the 12 months in Ensenada, MX you should avoid sales taxes.

[CF32907]

Originally Posted by Sand crab

If you purchase the boat in Florida you can buy a 6 month extension to the "get out of my state" clause for $400 before having to pay sales tax. But if you come back in before 18 months (?) then you are liable for the tax bill.
If you are moving around a lot or plan to cruise internationally then a US Documentation is the way to go. No state reg required.

You are wrong. If you are federally documented you do not get a Florida Title to show ownership, that is what your USCG Doc is for, but you do need to register it in Florida. You will have the colored sticker with the year on the bow. But you will not have FL numbers to put on the hull. Documented boats have to have the vessels name in six inch letter and the hailing port in 4" letters on the transom. Capt. Vince Rakstis, Ret. MS

[smj]

Originally Posted by CF32907

You are wrong. If you are federally documented you do not get a Florida Title to show ownership, that is what your USCG Doc is for, but you do need to register it in Florida. You will have the colored sticker with the year on the bow. But you will not have FL numbers to put on the hull. Documented boats have to have the vessels name in six inch letter and the hailing port in 4" letters on the transom. Capt. Vince Rakstis, Ret. MS

This is incorrect, doesn’t have to be on the transom. Here’s the regulation.

c) Recreational vessels. For vessels documented exclusively for recreation, the name and hailing port must be marked together on some clearly visible exterior part of the hull.

[Sand crab]

Well CF32907 I'm not sure which part of my post you claim is wrong. I said nothing about titling in Florida in my post but because the OP was out of state I assumed by his query that he would be pursuing an out of state registration and/or title. Out of state residents can extend the time they can keep the boat in Florida by up to 180 days after purchase by paying extra. But we don't even know where the OP is considering on purchasing so this discussion may be irrelevant.

https://floridarevenue.com/Forms_lib...t/gt800005.pdf

[pitlaw]

There is a lot of confusion above. DenverdOn has it right. The answers can only be specific to a defined set of plans based on the state tax and boat registration laws applicable. Do you Plan on keeping the vessel in the East? If so where?

I would point out that the sale closing and boat registration are two separate events. Meaning that in most locales where the sale takes place you have time, eg. 30 days to register in a state of your choosing, most often where you keep the boat, at least for an initial period ( caveat I know nothing about CA law.).That is where you will pay the taxes, not where the sale takes place. You cannot register in one tax advantaged state then sail back to your home state tax free. Many states have a tax comity meaning that if you pay x dollars in SC then Fl will give you credit for that amount against what sales tax they may want. ( EG. If you wanted to make FL a permanent home latter). The boat sale contract will not control the registration so it’s meaningless to stipulate the state of residence. So yes you may well have up to 90 days to register inthe state of your choosing, and you may have to provide where in the state she is berthed.

As to an LLC: it may give you some liability protection but so does your liability insurance. It compounds the annual paperwork,taxes and corporate registration,etc. it would not offer tax write off of expenses or depreciation unless you ran it as a for profit business. Some may do it but can they stand an audit? Consult you CPA for that.

You do not need to be a resident of the state it’s registered in. And states like VA and SC and DE are low tax states. But you may find that their local county property taxes make up for some of the saving. In Md you pay a high 5% excise tax but there are no county property taxes.

I have no idea about foreign registration but why complicate things?

So, your plans will provide the answers. You may wish to consult an attorney in the state you want to use as your vessels home state.

[Bill Youmans]

Here is my experience over two years of fighting with the state of Minnesota. Over sales tax on a boat bought three years ago. My recommendations are look at the law in your state online and call the department of revenue to get the exact rules regarding sales tax of a boat you will either buy in that state , keep in that state , or seek title of in that state. In Minnesota Wisconsin and maybe other states certain criteria of the sale need to be followed exactly. Where I got hung up was buying a boat from an individual private party who had it listed with a broker. To avoid sales tax the money cannot flow to the broker in any way. . It must go totally to the individual private seller who then pays the broker sales commission. Any other way even if you show that it was a private sale, and many other conditions were met and the broker only got his commission you (I)will still have to pay the sales tax because it will not be considered a private sale. Letters from the seller and letters from the broker stating all they got was a commission will not matter. Boat Licensing office personnel do not give the right information and neither do most brokers. My mistake (and brokers lack of knowledge) cost me thousands.