California Consumer Use Tax After Living Aboard In Mexico

[timor-bound]

Hey y'all,

I know this has been asked before, but I can't find the thread or any relevent, recent info.

We bought our boat in San Diego 18 months ago. We bought the boat using an "offshore delivery" method and bought the boat for use outside the state of California. After purchase, we did refit in San Diego and were across the boarder to Mexico in less than 90 days. Our broker led us to believe that we were well within the limits defined for NOT having to pay California consumer use tax.

In the year and a half that we have owned the boat, it has always been in Mexico, and in less than a week, we are heading for the Marquesas. The state of California is trying to tax us a full boat buck for those three months.

A. I don't want to pay it, because I paid for offshore delivery, and also because that is a full month to 6 weeks of cruising kitty for us.

B. I'm afraid if I pay it the state of California will just keep coming back year after year, even though we never plan on returning to the west coast with our boat.

Anybody been through this and successfully fought the tax? Did you use a lawyer? Any tips? For those who paid, did they come back again after the next year?

Thanks!

[dohenyboy]

http://www.boe.ca.gov/lawguides/busi...sutr/1620.html

You have to prove that you fit under the exemption. If you can prove it to perfection, you will win; but may have to appeal. Read this carefully and send them a response. If you do not pay when assessed it will become a lien against you and go on your credit report until paid.


Why can't things remain where i carelessly left them?

[timor-bound]

Thanks for that. It seems pretty clear. You have 90 days or "one-half or more of the time during the six-month period immediately following" purchase to get the boat out of California. We will be good, but it will likely be a prolonged fight.

The other point that we've learned is that the state does their annual roster of boats around Christmas time. If you have a boat in the state that you are trying to get elsewhere, you should try and have it out by the end of November. You may be able to avoid having to go through this process.

As far as I can tell "offshore deliveries" ie transfering ownership of the boat in international waters, doesn't matter. It may be a bogus sales technique. Will find out more on this soon.

[timor-bound]

OK. Just updating in case anybody has this problem in the near future.

Offshore Deliveries exclude the buyer from Sales tax. As soon as the boat re-enters California waters, you then have 90 days to leave before you start getting hit with Consumer Use tax. Here is the regulation: Sales and Use Tax Annotations - 585.8000

[TacomaSailor]

The BIG question about the original post - WHAT tax are you describing?

- USE (sales tax due at the time of purchase)
- PROPERTY (due annually on all boats in California unless you pay a similar tax in another state)

I am currently involved in a similar California tax exercise.

Offshore delivery only limits the need to pay USE tax (sales tax) - it has no impact on the payment of annual California property tax. It sounds like the OP's "a boat buck" is $1,000 which is most likely the property tax on a boat assessed at about $100,000. Sales tax due of $1,000 would be a purchase price of about $12,000 which is not likely.

Looking at the Property Tax issue (ignore all this if you are talking about USE tax):

The key issue is your DOMICILE (not residence)

Domicile is a complicated legal concept that allows California to claim taxing authority over many vehicles (vessels being one of them) that would seemingly be outside their authority. Domicile is where you have the closest personal attachment, where your heart, family, and future intentions place you. If, for any subjective reason the tax folks decide your domicile is California you will be responsible for the tax.

It is your responsibility to PROVE to California Board of Equalization that your domicile is not in California. There are 29-factors that determine domicile and any one or combination of them can be used to bring you under their taxing authority.

Some of the obvious factors that establish a domicile in California:
- registered to vote
- drivers license
- another vehicle registered in California
- own property
- spend more than 181 days a year in California

Another consideration is that IF you were a California resident and you leave California but do not establish a domicile in another US State then you are still a California resident and probably owe the tax. This happened to my brother who moved out of California (where he had lived for 30+ years) and purchased a boat. He then went sailing in Mexico and did not return to California. Years later he tried to purchase a home in Florida and found that California had a lien against him because he did not pay sales and property tax on the boat.

WHY - because he kept his California drivers license and left his IRA with his long term broker in California. Therefore he owed taxes for the entire time he was out of the US and while on the boat in Florida but not yet a Florida resident.

Other factors are less obvious but can be used against you. The great thing is that the hearing officers who will listen to your appeal to determine if the tax is due are employees of the taxing authority. We found out that we probably would owe the San Diego property tax if we turned in our California drives licenses, sold our California car and broke all other relations with California BUT kept our storage unit in San Diego. That would show our domicile was still San Diego because we kept our heirlooms and valuables in the storage unit and did not move them to another state.

The San Diego county assessor just sent me my annual property tax bill and here is what it says about proving I am no longer responsible for the tax:

- provide registration and property tax bill from another state
- provide home residential tax bill or lease from another state
- proof that boat is moored or docked in that other state
- insurance document showing address where boat is docked in another state

IF the boat is permanently removed from the US I must provide
- TIP or Port of Entry document for another country
- Receipts for 12-months slip fees paid in another country

If I do not provide at least one of the above - I owe the tax to San Diego. I am not sure I believe the document because my brother had a TIP for his boat in Mexico and marina receipts for Mexico but he still owed the tax because the hearing officer said his domicile was clearly California due to his CA drivers license and IRA being in California. They also pointed to the fact his children and ex-wife were in California as well as his credit union. Therefore he owed property tax for three-years even though he was never in California.

He DID NOT create a new domicile outside California so his domicile remained in California despite him not being in California.

Here are some links to help you understand:
California Offshore Delivery Law Firm - The Law Office of Weil & Associates - Lawyer - Law Firm - Attorney
http://www.aeromarinetaxpros.com/New...reDelivery.pdf
Sales and Use Tax Annotations - 585.8000

In summary:
- you owe the tax until you prove to Equalization Board you don't
- they get to decide if your proof is sufficient


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[dwedeking2]

Thanks for posting that information. I'm looking at possibly buying a boat in san diego and moving it down to Ensenada or La Paz. The whole way you have to deal with California and taxes scares me (was a pain when I first moved out of California years ago)

[ChrisTinaBruce]

Originally Posted by TacomaSailor

We found out that we probably would owe the San Diego property tax if we turned in our California drives licenses, sold our California car and broke all other relations with California BUT kept our storage unit in San Diego. That would show our domicile was still San Diego because we kept our heirlooms and valuables in the storage unit and did not move them to another state.
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How do you go about turning in a California drivers license?

[sailorchic34]

Originally Posted by ChrisTinaBruce

How do you go about turning in a California drivers license?

There in lies the rub. You have to get a drivers license from a different state. South Dakota only needs a reciept for one night in a hotel to get a drivers license there. RV'ers use SD for residency.

To the fine folks at the various county assessors offices, if you have a California drivers license then your a California resident.

In california boats are assessed on January first of each year. If your boat is in California on Janurary on January 1 at midnight, then you own property tax. That is roughly 1% the market value of the boat, each year. Even if you purchased a boat in california say in March that property tax is still due.

Use/sales tax is the same thing. If your a california resident you own a use tax for everything you purchase. Even if it was purchased on line from a different state. If your from out of state, you can sometimes use the offshore sales thingy to get around paying a use tax. But if your a california resident, the franchise tax board will want their pound of flesh. They are very aggressive about that too.

[zeehag]

last i heard we were thanking arnie for extending the need to be outta kali time to one full year.
some are given one month to clear out. many are not that fortunate.

[sailorchic34]

It's worst then then that. Even if your out of cali for a year, The tax folks will still come after you. You must prove that the boat is in another marina with recipts and that you pay taxes elsewhere. I paid Contra costa county property tax for two years as I had not claimed a different marina as home.

I had to not only show proof that the boat was in a different county, but that I was paying taxes for it elsewhere. Lovely folks. IF your only on the hook, they will assume you still need to pay taxes somewhere.

The only up side is if you live on your boat full time you can get a homestead exemption which sets aside part of the tax.

[MYTraveler]

It does seem that the tax is property (about 1%, annually), not use (about 10%, one-time only). But, there is a provision in the use tax that makes the use tax due of property tax is due with respect to any part of the first year of ownership. So, in this case, loosing the battle (over the 1% tax) may also lose the war (the 10% tax).

[TacomaSailor]

Originally Posted by ChrisTinaBruce

How do you go about turning in a California drivers license?

https://www.dmv.ca.gov/portal/dmv/?1...forms/dl/dl142

The following is a quote from the web page:

"This form may be used by individuals to request cancellation or surrender of a driver license or identification card. A cancellation or surrender is requested to DMV when a driver license or identification card holder wishes to voluntarily surrender the cancellation of their card, or when a person cancels a minor's application or driver license."

[TacomaSailor]

Originally Posted by MYTraveler

It does seem that the tax is property (about 1%, annually), not use (about 10%, one-time only). But, there is a provision in the use tax that makes the use tax due of property tax is due with respect to any part of the first year of ownership. So, in this case, loosing the battle (over the 1% tax) may also lose the war (the 10% tax).

The USE tax here in San Diego, as calculated on my recently received tax bill, is 1.17901%. The really GOOD thing is that the county assessor used a boat valuation service (BUC? or NADA?) that valued my boat substantially below what I hope is the actual value.

[MYTraveler]

Originally Posted by TacomaSailor

The USE tax here in San Diego, as calculated on my recently received tax bill, is 1.17901%. The really GOOD thing is that the county assessor used a boat valuation service (BUC? or NADA?) that valued my boat substantially below what I hope is the actual value.

The use tax is effectively a sales tax and is assessed at that rate. Although the local portions of that tax vary, the state portion is effectively 7.5% so your San Diego Use tax must be at least that. You are probably looking at your property tax rate.

[Bill Seal]

Hey, SOMEBODY has to pay for Gov. Moonbeam Brown's Bullet Train to Nowhere.