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Old 08-03-2015, 13:47   #1
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California Use Tax

Hey guys,
I did a search and found some things from almost a decade ago and some that really didn't apply to me so I'm opening this up for help. I have received a letter from the California Board of Equalization regarding use tax on my boat. Back story, I am a Louisiana resident, and I bought the boat in Alemeda, CA last Jan(2014) and had the boat immediately shipped to New Orleans where the boat sits currently. I paid the brokerage who was selling the boat for the buyer the amount agreed upon for the boat and I paid the shipping to NOLA. The boat is registered with no state and only with the USCG vessel documentation.

It was my understanding, brokerage and CA title guy advice, that I didn't need to pay CA taxes as I am shipping it out of state and I just have to pay taxes for LA. Well, I get a letter from the BOE and I called to see what the deal was and the guy on the phone said since I was the one who shipped the boat from CA that I still have to pay the tax for Alemeda County(9%). He said if the seller shipped it I would have been fine.

If there were taxes to be paid, wouldn't the seller/brokerage have paid it?

If I do have to pay it, does that mean I can apply that to LA if/when I pay those taxes?

This sounds ridiculous and I just want to get some advice from people who know more about this or live in CA and know the laws better than I. I just don't want to have to pay taxes when I don't have to, my CPA told me they are pretty aggressive when it comes to this stuff.

Regards,

Ronnie
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Old 08-03-2015, 21:42   #2
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Re: California Use Tax

Use Tax is due the state where you register the boat which you are required to do almost everywhere. IF you live in LA then register and pay LA and send Califorinia a copy of the tax paid and tell them to bill LA. Any state you move the boat to after you pay the use tax will give you a credit against there rate. For example the use tax in Florida is 6% if you have already paid 6% in your current state then your tax is paid but if you have paid only 4% use tax in your current state then Florida will want 2% for themselves. Long Story short is you have to pay someone. US Doc's alone only work out of the country.
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Old 08-03-2015, 22:24   #3
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Re: California Use Tax

If you bought the boat then shipped it out of state, you probably created a taxable event for you as the state of transfer was CA. The tax collectors in CA are a greedy ruthless bunch of bastards that won't let go once they've sunk their teeth into you. Need to find out if they can file a lien on the boat that will not go beyond the State Line. If it only affects the boat in CA you are fine as long as you don't take the boat back to CA. If they can cloud the title to the boat, you are stuck if and when you want to sell it. Also may have a problem if you are ever stopped by the police and they do a lien search. That is if they can do a search like they do on autos.

The broker should have known of the tax complication with you taking title and then shipping. They do tax avoiding sales all the time on mega buck boats that go out of State for a period and then come back in tax free. The actual transfer of title takes place at sea or that used to be the way they did it.
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Old 08-03-2015, 23:46   #4
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Re: California Use Tax

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Originally Posted by roverhi View Post
If you bought the boat then shipped it out of state, you probably created a taxable event for you as the state of transfer was CA. The tax collectors in CA are a greedy ruthless bunch of bastards that won't let go once they've sunk their teeth into you. Need to find out if they can file a lien on the boat that will not go beyond the State Line. If it only affects the boat in CA you are fine as long as you don't take the boat back to CA. If they can cloud the title to the boat, you are stuck if and when you want to sell it. Also may have a problem if you are ever stopped by the police and they do a lien search. That is if they can do a search like they do on autos.

The broker should have known of the tax complication with you taking title and then shipping. They do tax avoiding sales all the time on mega buck boats that go out of State for a period and then come back in tax free. The actual transfer of title takes place at sea or that used to be the way they did it.
Thanks for the information, I'm going to try to call them again this week and get more info. I really hope I can get out of it but I think your right. I need to call LA tax office and see if I have to pay twice or the CA tax will be a credit for me..

I read about all the offshore sales of boats, crazy loophole! They have brokerages and law offices that specializes in that too.

On the broker, he was kinda shady come to find out. He dropped the ball on a few things and still has yet to send me the original paperwork (brochures, original receipt, etc) that he said would be put in the boat before shipment. I couldn't be there as I was at work.. So I don't think he was on top of important things like taxes.

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Old 09-03-2015, 00:17   #5
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Re: California Use Tax

I hate to say this but I believe you are out of luck on this one. We bought a boat in San Francisco in 2013 and did extensive research about how to avoid paying tax in both CA and our home state of WA. In order to not trigger a taxable event, you need to conduct an offshore delivery and then remove the boat from the state within 180 days (which we did). In early 2014, we were contacted by the CA Board of Equalization (BoE) about paying taxes and I responded with an explanation of what we did along with a copy of our affidavit of offshore delivery and a copy of our WA registration showing that WA state taxes were paid. Note that our boat is USCG documented, but are still required to register in WA for tax purposes only. Once they received the paperwork, the BoE thanked us and the matter was done.

As an aside, I contacted the BoE prior to the purchase to find out exactly what we needed to do and the person I spoke with was professional, courteous and went above and beyond in trying to get answers to questions pertaining to my specific situation. And again, when contacted the following year about paying tax, that person was courteous and never gave the impression that we had done anything wrong. It was clear that he was simply doing his job and once I made my case even thanked me for being prepared. I say this because while I think by the letter of the law you may have no recourse, speaking with the BoE folks and explaining your situation may be your best (and only) option at this point.

On the other hand, your broker really screwed you... any broker from CA should know about the offshore delivery and why it is done. The seller's broker was from the east coast and our broker from WA and both knew all about it.
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Old 09-03-2015, 00:25   #6
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Re: California Use Tax

By the way, keep a copy of everything. The BOE waited a couple of years, and then demanded that I prove that I paid the use tax when I bought the boat. Fortunately I had a copy of the DMV registration form. Yes, not content with charging me once, they tried to charge me twice.
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Old 09-03-2015, 15:38   #7
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Re: California Use Tax

Thought this was a good thread to address with the following question.
We bought a 40 + LOA sloop in Florida several years ago. We are California residents and when we purchased the boat we used a California address for Coast Guard Documentation ( hailing port) eventhough we and the vessel were in Florida ( where we paid the full purchase tax). While the boat was home ported in Florida, we visited her for long periods of time and sailed the Atlantic, The Bahamas, etc. Then, late in 2014, we derigged the boat and had her trucked to California. Prior to this, the boat had never been in California. Recently, because of required marina reporting, we received a questionnaire from the county ( LA ) regarding unsecured property tax which, I assume, will be for 2015. Do we need to worry about unsecured property tax for the period of time the boat was in Florida (its "situs" ?) - before bringing her to California?

Thanks for the consideration,
HV
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Old 11-03-2015, 14:16   #8
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Re: California Use Tax

Quote:
Originally Posted by Pyxis156 View Post
I hate to say this but I believe you are out of luck on this one. We bought a boat in San Francisco in 2013 and did extensive research about how to avoid paying tax in both CA and our home state of WA. In order to not trigger a taxable event, you need to conduct an offshore delivery and then remove the boat from the state within 180 days (which we did). In early 2014, we were contacted by the CA Board of Equalization (BoE) about paying taxes and I responded with an explanation of what we did along with a copy of our affidavit of offshore delivery and a copy of our WA registration showing that WA state taxes were paid. Note that our boat is USCG documented, but are still required to register in WA for tax purposes only. Once they received the paperwork, the BoE thanked us and the matter was done.

As an aside, I contacted the BoE prior to the purchase to find out exactly what we needed to do and the person I spoke with was professional, courteous and went above and beyond in trying to get answers to questions pertaining to my specific situation. And again, when contacted the following year about paying tax, that person was courteous and never gave the impression that we had done anything wrong. It was clear that he was simply doing his job and once I made my case even thanked me for being prepared. I say this because while I think by the letter of the law you may have no recourse, speaking with the BoE folks and explaining your situation may be your best (and only) option at this point.

On the other hand, your broker really screwed you... any broker from CA should know about the offshore delivery and why it is done. The seller's broker was from the east coast and our broker from WA and both knew all about it.
Thanks for your experience on this, I think I'm out of luck too. The guy I spoke with on the phone with BoE was nice and friendly. He gave me the publication information where to find more information on the use tax. I just didn't want to pay it and find out later on I didn't have to or something. I wanted to be knowledgeable before I just fork over money to a state on the other side of the continent.

- Ronnie...on the geaux
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Old 11-03-2015, 14:16   #9
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Re: California Use Tax

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Originally Posted by MarkSF View Post
By the way, keep a copy of everything. The BOE waited a couple of years, and then demanded that I prove that I paid the use tax when I bought the boat. Fortunately I had a copy of the DMV registration form. Yes, not content with charging me once, they tried to charge me twice.
Thanks, will do. I'm trying to keep everything now records wise.

- Ronnie...on the geaux
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Old 11-03-2015, 17:25   #10
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Re: California Use Tax

Perhaps my original question was not framed right. Sorry. First, " use tax" should read "unsecured property tax" ( once known as a "luxury" tax). The "use" tax is essentially a sales tax but an unsecured property tax is something else and its nature varies from state-to-state. When we purchased our vessel in Florida we were aware we had the option of taking her off shore, to another state, whatever for three months in order to avoid paying the Florida sales tax. However, because of logistics that was not an option. We bit the bullet and paid the full tax in Florida. Though we are California residents, California was fine with that as long as we had proof of the Florida payment ( which, of course we had.) On the other hand, we had another boat in California. We are required to pay an unsecured property tax on that vessel every year ( it used to be called a "luxury" tax ). When we arrived in California with the boat purchased in Florida, it was unclear at which date the unsecured property tax would be initiated on the new boat -( purchased in Florida and never having sailed the west coast until arriving with us) Speaking with the San Diego, Ca Maritime Tax Assessor's Office yesterday
( we knew they would have much experience with this kind of question ) they said we would begin to be charged the unsecured property tax the first year the vessel was in California on January 1st. In other words, if the boat arrived in California on January 1st of 2015, August 1st of 2015, or December 31 of 2015 the same fee would apply. Unlike secured property tax, there is no pro rationing. That was good news for us since the official made it clear we would not owe any unsecured taxes for the time the vessel was in Florida - before first arriving in California. The period includes multiple years, so it was great news. Hope this is clear.
Thanks,
HV
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