Purchasing a Canadian flagged boat in Florida

[Fishguy]

Question for Canadian boat owners.
Looking to purchase a Canadian registered sailboat in Florida from a Canadian owner. I am a Canadian resident.
So, Canadian seller & buyer.
Intending to keep the boat in Florida.
The million dollar question.... how to buy without having to pay the Florida state tax?

[Dsanduril]

The sales tax rate in Florida ranges from 6% to 8% depending on location, so if that's a million dollar question then the boat is ~1000000/0.07 = $14.2 million. At that price engage a proper lawyer to solve the question

The real question, if the vessel is to remain in Florida is whether you will keep it there under a cruising permit (have to leave the US every year for at least 10 days to renew) or whether you will import the boat into the US (in which case the tax may be the least of your worries).

[pcmm]

Originally Posted by Dsanduril

The sales tax rate in Florida ranges from 6% to 8% depending on location, so if that's a million dollar question then the boat is ~1000000/0.07 = $14.2 million. At that price engage a proper lawyer to solve the question

The real question, if the vessel is to remain in Florida is whether you will keep it there under a cruising permit (have to leave the US every year for at least 10 days to renew) or whether you will import the boat into the US (in which case the tax may be the least of your worries).

So worst case you have to pay 5-7% LESS tax than in Canada! but you will pay the difference when you eventually want to bring it home. I would talk to a lawyer, but If the purchase happens in Canada between Canadian lawyers and parties, do you owe any taxes to Florida? Is the boat old enough to be covered by their "antique" legislation?

[Fishguy]

PCMM, yep, boat stays in Florida. Not a million $ boat.
So, because we are non US residents engaging in a transaction in Canadian $ and the boat will remain Canadian flagged (essentially just changing the titles registered owner in Canada), is there a way to avoid having to pay Florida sales tax?

[Dsanduril]

Technically the sale you describe can't happen. The transfer would have to take place outside the US, otherwise the boat will have to be imported prior to the sale.

Non-technically, if the sale is between a couple of Canadians, and funds transfer in Canada, how is anyone to know? Such as the state of Florida. Legally the only way to avoid the tax on a sale that takes place in Florida is to remove the boat from Florida.

A nonresident may purchase a boat tax-exempt if sold by or through a registered boat dealer or yacht broker. The nonresident must remove the boat from Florida. The following requirements must be met:

• The purchaser must sign an affidavit stating that he or she has read the law and rules regarding the specific exemption claimed and will remove the boat from Florida.
• A boat of less than 5 net tons of admeasurement must leave Florida within 10 days of purchase or immediately be placed in the care, custody, and control of a registered repair facility for repairs, additions, or alterations. The boat must leave Florida within 20 days after completion of the repairs.
• If the boat is 5 net tons of admeasurement or larger, the purchaser may obtain a set of Florida Department of Revenue boat decals, which authorize the boat to remain in Florida waters up to 90 days after purchase. This 90-day period may be extended to 180 days with the purchase of a 90-day extension decal. You can purchase decals from Revenue’s Boat Enforcement Unit to sell to your customers.
• Within 5 days of the date of sale, the dealer must provide us with a copy of the invoice, bill of sale, and/or closing statement; and the original, signed, removal affidavit.
• Within 10 days of removing the boat, the purchaser must furnish us with proof that the boat left Florida. Receipts for fuel, dockage, or repairs purchased outside Florida are acceptable proof, if they identify the boat.
• Within 30 days of removal, the purchaser must furnish us with written proof that the boat was licensed, registered, titled, or documented outside Florida; or provide evidence that he or she has applied for such.
• This exemption does not apply to a Florida resident, an entity where the controlling person is a Florida resident, or a corporation where any officers or directors are Florida residents.

[rbk]

Originally Posted by Dsanduril

Technically the sale you describe can't happen. The transfer would have to take place outside the US, otherwise the boat will have to be imported prior to the sale.

Non-technically, if the sale is between a couple of Canadians, and funds transfer in Canada, how is anyone to know? Such as the state of Florida. Legally the only way to avoid the tax on a sale that takes place in Florida is to remove the boat from Florida.

Florida most likely but not removed from the US. There are many states that allow this and be tax exempt as long as they are moved out of state within XX time period or risk paying local state tax.

[Dsanduril]

Originally Posted by rbk

Florida most likely but not removed from the US. There are many states that allow this and be tax exempt as long as they are moved out of state within XX time period or risk paying local state tax.

This is one of those "tread very carefully" situations:

Several U.S. Customs and Border Protection (CBP) offices in Florida recently [2016] have taken the position that foreign-flagged yachts that are offered for sale or charter are ineligible for a cruising license regardless of the yachts’ duty status. Customs reasons that any offer to sell or charter a yacht, even an offer that does not trigger liability for duty, amounts to engaging in “trade” and that vessels engaged in trade are ineligible for a cruising license. This article briefly explains the legal background to the current controversy about cruising license eligibility.

Under federal law, a foreign-flagged vessel “used only for pleasure” is eligible for a cruising license, which enables the vessel to cruise freely in U.S. waters, provided the vessel’s flag state recognizes similar privileges for U.S.-documented vessels cruising in the flag state’s waters [46 U.S.C. § 60504 (2012)]. A federal regulation, 19 C.F.R. § 4.94 (2016), in addition to listing compliant flag states, provides that a cruising license will be issued to a foreign-flagged vessel “subject to the condition that the vessel shall not engage in trade or violate the laws of the United States in any respect.” The regulation does not say what it means to “engage in trade.”

In 1983, Customs added a warning regarding dutiability to the text of the cruising license, which is prescribed by regulation [48 Fed. Reg. 48,653 (Oct. 20, 1983)]. The warning advises owners that offering a foreign-flagged yacht for sale or charter generally triggers liability for duty. At the time, Customs explained that it was adding the warning to alert owners of foreign-flagged yachts to existing law regarding dutiability. Customs did not suggest that the warning was meant to expand the requirements for issuing a cruising license, which have nothing to do with a yacht’s duty status. Customs also acknowledged that the warning would not apply to all foreign-flagged yachts, some of which are not dutiable because they are already duty-paid or were U.S.-built and never exported.

Against this background, Customs recently has taken the position that the warning means that a foreign-flagged yacht offered for sale or charter is ineligible for a cruising license, even if the yacht is non-dutiable. Customs apparently reasons that the language regarding offers to sell or charter relates to the prohibition on engaging in trade: a foreign-flagged yacht is engaged in trade, and therefore ineligible for a cruising license, if offered for sale or charter. However, as explained above, the language about offers to sell or charter was added only to alert owners to existing law regarding dutiability, not to expand the requirements for issuing a cruising license, which are unrelated to dutiability.

[rbk]

Originally Posted by Dsanduril

This is one of those "tread very carefully" situations:

Agreed. From what I’ve heard Florida is quite strict on taxes and permits. Might be worth the OP looking at the regulations in nearby states. You can always have it delivered prior to purchase by the owners or delivery crew and pay/split the cost etc then once the sale is complete move back to Florida. I thought I’d read somewhere that regardless of registration Florida has boat tax if you stay past XX days? Might be somewhere else though. Usually if you’re staying in one location for a long duration you’ll owe some sort of local tax/permit whatever they try and disguise it as.

[Montanan]

Originally Posted by Dsanduril

This is one of those "tread very carefully" situations:

Indeed this is one of those "tread very carefully" situations:

Foreign-flagged vessels or boats holding a valid “License to Cruise in the Waters of the United States” issued by the United States Customs Service pursuant to 19 Code of Federal Regulation 4.94 are not subject to Florida use tax. Reference document from the Florida Department of Revenue linked below: https://floridarevenue.com/Forms_lib...t/gt800005.pdf

Hence of keen issue is that once a boat is offered for trade, e.g. for sale or charter, it has lost its validity for a cruising license, therefore sales and use taxation would be applicable. The status of the boat has changed once it ha gone from a guest boat just cruising through to a boat offered for commerce.



Quote:
Several U.S. Customs and Border Protection (CBP) offices in Florida recently [2016] have taken the position that foreign-flagged yachts that are offered for sale or charter are ineligible for a cruising license regardless of the yachts’ duty status. Customs reasons that any offer to sell or charter a yacht, even an offer that does not trigger liability for duty, amounts to engaging in “trade” and that vessels engaged in trade are ineligible for a cruising license. This article briefly explains the legal background to the current controversy about cruising license eligibility.

Under federal law, a foreign-flagged vessel “used only for pleasure” is eligible for a cruising license, which enables the vessel to cruise freely in U.S. waters, provided the vessel’s flag state recognizes similar privileges for U.S.-documented vessels cruising in the flag state’s waters [46 U.S.C. § 60504 (2012)]. A federal regulation, 19 C.F.R. § 4.94 (2016), in addition to listing compliant flag states, provides that a cruising license will be issued to a foreign-flagged vessel “subject to the condition that the vessel shall not engage in trade or violate the laws of the United States in any respect.” The regulation does not say what it means to “engage in trade.”

In 1983, Customs added a warning regarding dutiability to the text of the cruising license, which is prescribed by regulation [48 Fed. Reg. 48,653 (Oct. 20, 1983)]. The warning advises owners that offering a foreign-flagged yacht for sale or charter generally triggers liability for duty. At the time, Customs explained that it was adding the warning to alert owners of foreign-flagged yachts to existing law regarding dutiability. Customs did not suggest that the warning was meant to expand the requirements for issuing a cruising license, which have nothing to do with a yacht’s duty status. Customs also acknowledged that the warning would not apply to all foreign-flagged yachts, some of which are not dutiable because they are already duty-paid or were U.S.-built and never exported.

Against this background, Customs recently has taken the position that the warning means that a foreign-flagged yacht offered for sale or charter is ineligible for a cruising license, even if the yacht is non-dutiable. Customs apparently reasons that the language regarding offers to sell or charter relates to the prohibition on engaging in trade: a foreign-flagged yacht is engaged in trade, and therefore ineligible for a cruising license, if offered for sale or charter. However, as explained above, the language about offers to sell or charter was added only to alert owners to existing law regarding dutiability, not to expand the requirements for issuing a cruising license, which are unrelated to dutiability.

[Dsanduril]

Here's the actual text from a cruising license:

If the vessel is sold or chartered, or offered for sale or charter, in the circumstances described, without the owner first having filed a consumption entry and having paid duty, the vessel may be subject to seizure or to a monetary claim equal to the value of the vessel. See Chapter 89, Additional U.S. Note 1, HTSUS, and subheadings 8903.10, 8903.91, 8903.92, 8903.99.10, 8903.99.20, and 8903.99.90, HTSUS.

[wannacat]

The "seizure " referenced in the above only applies if sold to a US citizen.
Since you stated Canadian to Canadian this doesn't apply. The broker will be able to guide you through this sale, if private sale then go in person to the Customs office for the area that the boat is in and get it from the horses mouth!
I am Canadian and purchased my boat 9 years ago in Florida that was US flagged at the time. We did an "offshore closing" which I don't know is allowed now or not? Doesn't matter as long as you remove the boat from the US within 90 days as stated in previous posts. Yes , you can ask for an extension if repairs being done in a yard.
So within 90 days we sailed to Bimini for a week. Your passports will be stamped upon entry to The Bahamas and they will also issue you a cruising permit there, fees dependant on your length.
Then you can return to Florida and get a 1 year cruising permit for less than $20. 2 different options will then be yours, if you leave your boat in one Customs area only, they will seize your boat papers and give you a certified copy. This allows you to move around that area only. Then within the year before you leave you return to the Customs office and retrieve your original papers but have to leave US waters within 48hrs. Weekends and holidays don't count, so if you go in Friday you have until Tuesday.
Option 2 is if you want to move around, then they apparently issue you a cruising permit but then you have to check into different ports or Customs offices as you move around. That I'm not real familiar with as I've never done that.
I've left my Canadian flagged boat in Lauderdale for 10 years now legally doing what I first described.
Any other questions you can PM me. Good luck with it !

[Montanan]

The moment a foreign flagged boat in the USA is offered for sale or charter it has thence been entered into the purpose of trade and a cruising license would no longer be valid and thus Florida Use taxation would no longer be exempt for the foreign flagged vessel. Reference post #9 above for the specific Florida Use Tax exemption requirements Bolded below are parts Title 19 of the Code of Federal Regulations of most relevance in this regard.

§ 4.94 Yacht privileges and obligations.
(a) Any documented vessel with a pleasure license endorsement, as well as any undocumented American pleasure vessel, shall be used exclusively for pleasure and shall not transport merchandise nor carry passengers for pay. Such a vessel which is not engaged in any trade nor in any way violating the Customs or navigation laws of the U.S. may proceed from port to port in the U.S. or to foreign ports without clearing and is not subject to entry upon its arrival in a port of the U.S., provided it has not visited a hovering vessel, received merchandise while in the customs waters beyond the territorial sea, or received merchandise while on the high seas. Such a vessel shall immediately report arrival to Customs when arriving in any port or place within the U.S., including the U.S. Virgin Islands, from a foreign port or place.

(b) A cruising license may be issued to a yacht of a foreign country only if it has been made to appear to the satisfaction of the Secretary of the Treasury that yachts of the United States are allowed to arrive at and depart from ports in such foreign country and to cruise in the waters of such ports without entering or clearing at the customhouse thereof and without the payment of any charges for entering or clearing, dues, duty per ton, tonnage, taxes, or charges for cruising licenses. It has been made to appear to the satisfaction of the Secretary of the Treasury that yachts of the United States are granted such privileges in the following countries:

Argentina
Australia
Austria
Bahama Islands
Belgium
Bermuda
Canada
Denmark
Finland
France
Germany, Federal Republic of
Greece
Honduras
Ireland
Italy
Jamaica
Liberia
Marshall Islands
Netherlands
New Zealand
Norway
Saint Kitts and Nevis
Saint Vincent and the Grenadines
Sweden
Switzerland
Turkey
United Kingdom and the Dependencies: the Anguilla Islands, the Isle of Man, the British Virgin Islands, the Cayman Islands, and the Turks and Caicos Islands

(c) In order to obtain a cruising license for a yacht of any country listed in paragraph (b) of this section, there shall be filed with the port director an application therefor executed by either the yacht owner or the master which shall set forth the owner's name and address and identify the vessel by flag, rig, name, and such other matters as are usually descriptive of a vessel. The application shall also include a description of the waters in which the yacht will cruise, and a statement of the probable time it will remain in such waters. Upon approval of the application, the port director will issue a cruising license in the form prescribed by paragraph (d) of this section permitting the yacht, for a stated period not to exceed one year, to arrive and depart from the United States and to cruise in specified waters of the United States without entering and clearing, without filing manifests and obtaining or delivering permits to proceed, and without the payment of entrance and clearance fees, or fees for receiving manifests and granting permits to proceed, duty on tonnage, tonnage tax, or light money. The license shall be granted subject to the condition that the vessel shall not engage in trade or violate the laws of the United States in any respect. Upon the vessel's arrival at any port or place within the U.S. or the U.S. Virgin Islands, the master shall comply with 19 U.S.C. 1433 by immediately reporting arrival at the nearest Customs facility or other place designated by the port director. Individuals shall remain on board until directed otherwise by the appropriate Customs officer, as provided in 19 U.S.C. 1459.

(d) Cruising licenses shall be in the following form:

License To Cruise in the Waters of the United States
To Port Directors:
For a period of ____ from ____(Date) the ____(Flag) ____ (Rig) yacht ____(Name) belonging to ________ of (Owner's name) ________(Address) shall be permitted to arrive at and depart from the United States and to cruise in the waters of the Customs port of

(Name of port or ports)
without entering and clearing, without filing manifests and obtaining or delivering permits to proceed, and without the payment of entry and clearance fees, or fees for receiving manifests and granting permits to proceed, duty on tonnage, tonnage tax, or light money.
This license is granted subject to the condition that the yacht named herein shall not engage in trade or violate the laws of the United States in any respect. Upon arrival at each port or place in the United States, the master shall report the fact of arrival to the Customs officer at the nearest customhouse. Such report shall be immediately made.

Issued this _____ day of _______, 19__

(Port Director of Customs)
Warning: This vessel is dutiable:

(1) If owned by a resident of the United States (including Puerto Rico), or brought into the United States (including Puerto Rico), for sale or charter to a resident thereof, or

(2) If brought into the United States (including Puerto Rico) by a nonresident free of duty as part of personal effects and sold or chartered within one year from date of entry.

Any offer to sell or charter (for example, a listing with yacht brokers or agents) is considered evidence that the vessel was brought in for sale or charter to a resident or, if made within one year of entry of a vessel brought in free of duty as personal effects, that the vessel no longer is for the personal use of the non-resident.

If the vessel is sold or chartered, or offered for sale or charter, in the circumstances described, without the owner first having filed a consumption entry and having paid duty, the vessel may be subject to seizure or to a monetary claim equal to the value of the vessel. See Chapter 89, Additional U.S. Note 1, HTSUS, and subheadings 8903.10, 8903.91, 8903.92, 8903.99.10, 8903.99.20, and 8903.99.90, HTSUS.

(e) A foreign-flag yacht which is not in possession of a cruising license shall be required to comply with the laws applicable to foreign vessels arriving at, departing from, and proceeding between ports of the United States.

[T.D. 69-266, 34 FR 20423, Dec. 31, 1969]

[Montanan]

Edit to my post above:

The moment a foreign flagged boat in the USA is offered for sale or charter to a resident, it has thence been entered into the purpose of trade and a cruising license would no longer be valid and thus Florida Use taxation would no longer be exempt for the foreign flagged vessel. Reference post #9 above for the specific Florida Use Tax exemption requirements Bolded below are parts Title 19 of the Code of Federal Regulations of most relevance in this regard. Of potential debatable issue is whether an offer to sale or charter to a non-resident triggers the invalidity of the vessels cruising license. Reference: https://www.bohonnon.com/Firm-News-a...-Vessels.shtml A" foreign flag vessel may be offered for sale while in the U.S. if any offering is restricted to non-U.S. residents. This is the reason why one will often see yachting magazines with a restriction in an advertisement such as "vessel is not offered for sale or charter to U.S. residents." The vessel owner and the broker should be careful as to how and to whom the vessel is advertised/shown because, as stated above, the maximum sanction for violation of the Customs laws is forfeiture of the vessel. Thus, notwithstanding the restriction, if the vessel is shown to, or the owner entertains an offer from, a U.S. resident while the vessel is located in the U.S., Customs could seize it." Also Reference: https://megayachtnews.com/2014/10/fy...ts-u-s-waters/