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Old 20-06-2011, 11:26   #1
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Buying Mexico, bringing to California - Tax question

Greetings all,

I am buying a USCG documented vessel in Mexico and trailering up to California, where I am a resident.

So far I understand the following to be true:

There will be no sales tax in Mexico.
I need to accompany the boat across the border into the states.

Unclear on:
Does the USCG registration need to be completed at the time of sale in Mexico?
If not, and I do it in the states, does the previous owner need to be present?
Will California ding me on property taxes?
What effect would using a Colorado address for registration have on the tax liability?

I am turning around and sailing the boat back to Mexico after a few months of working on it here, but will be sailing back to the states again in about a year.

Many thanks,
Brian
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Old 20-06-2011, 12:37   #2
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Re: Buying Mexico, bringing to California - Tax question

I just bought my Potter 19 in Az, brought back to CO and paid no tax, just paid for the registration sticker, CO does not title boats. Not sure if this applies to you. BTW when I got CG certification on my last boat, the previous owner did not need to be present.
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Old 20-06-2011, 20:44   #3
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Re: Buying Mexico, bringing to California - Tax question

You will pay no sales tax (keep bus tickets, airline tickets, dinner receipts, etc.). Every year you will have to pay the California value tax. The rule is if your boat, rv or airplane is in California on the 1st of January you pay the tax for the entire year. No pro-rating. Doesn't matter if its been 1 day or 12 months, transient boat or not. It's California.
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Old 20-06-2011, 21:19   #4
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Re: Buying Mexico, bringing to California - Tax question

The situation keeps changing - you should check out the FAX at the California Board of Equity (the folks who would asses a sales tax on you) and the Coast Guard Documentation Center. It is possible you could back yourself into a very expensive situation inadvertently without information...
Yards in Mexico are reasonable, some let you do your own work; if you are planning on sailing back and forth to California you might want to consider just doing the work in Mexico and skip the commutes.

Michael
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Old 20-06-2011, 23:08   #5
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Re: Buying Mexico, bringing to California - Tax question

My advice is purchase the boat in Mexico but do not bring it into California until at least 91 days after the sale is consumated. Have a Notario Publico notarize all the sales documents as well as any brokerage and financial documents as to where and when the sale was completed. Keep ALL receipts for moorage, slip rental, work done on the boat, take pictures regularly with a local newspaper showing the date the photo was taken in Mexico, save all fuel, parts and personal expense receipts and be prepared to show this the the CA Franchise Tax Board to prove that you have kept the vessel outside of CA waters for the required period of time to avoid sales tax.
I purchased a boat quite a number of years ago in Washington State, cruised up as far as Desolation Sound in BC for 4-5 months before coming down the coast. Sold the boat 5 years later in CA and they came after me after the sale alleging I bought the boat in CA. I had to fly back to BC and secure marina receipts, fuel purchase receipts, parts and yard receipts covering the period 5 years after the fact even though the Bill of Sale plainly stated I had bought the boat outside CA. CA state govt could care less about your story if they can see a way to nail you. One error I made was keeping an empty slip in my name in San Diego while I was away because moorage was so tight at that time.
As a result I have not bought anything in CA or traveled to that state even for a cup of coffee for several years now. Capt Phil
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Old 20-06-2011, 23:48   #6
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Re: Buying Mexico, bringing to California - Tax question

You do not need to accompany the boat across the boarder. The boat must be accompanied by proper documentation (documentation/registration, ID/passport, Temporary Import Permit).

You can get your Temporary Import Permit here;
Banco Nacional del Ejército Fuerza Aérea y Armada, S.N.C.

If you purchased the vessel through a broker, most likely they will hire (and charge you) a marine documentation service to handle the documentation. If it was a private sale you will need to handle the documentation via the US Coast Guard or you may pay a documentation service. In either case, the previous owner need not be present.

USCG National Vessel Documentation Center, Home Page

Being a California resident you will need to have the vessel outside of California for 12 months to avoid the Use Tax imposed by the State Department of Equalization.

A Colorado address will not help you. Colorado residency would change the time requirements the vessel needs to be outside of California.

California State Board of Equalization
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Old 22-06-2011, 18:23   #7
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Re: Buying Mexico, bringing to California - Tax question

That's very helpful, gentlemen, thank you.

There is a provision in California sales and use tax law for returning to CA within the 12 month period for repairs and refit. Summarized as follows:

"A vessel that is returned to California after the purchase for "repair, retrofit, or modification" will not be subject to the tax, and the "one year clock" will continue to "tick" during the repair project.”

Source: CA Offshore Delivery Law Firm - The Law Office of Weil & Associates - Lawyer - Law Firm - Attorney

Does anyone have any experience with this?

Thanks again,
Brian
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