Closing Tomorrow! What Do I Do About Taxes & Insurance ?

[Gracias]

Hey everyone --

I've been lurking here for months now and have gotten a LOT of good info (and some laughs, too). Now I'm finally getting a boat again. Tomorrow I'm supposed to close on a sweet little IP 27.

Here's the thing, though: I'm in FL to buy the boat, but I've been traveling mostly the past couple of years and don't have a US address where I really live. I have a PO box in Texas for my business (it's on the internet and my assistant lives there and forwards biz and personal stuff on to me). Most recently I spent a couple months in the FL panhandle but before that I was in Mexico for six months ... and on and on.

My plan is to stay here a couple months, tops, until it warms up a bit up north, then cruise the east coast up to Maine and so on for the summer, then back down south and off to the Bahamas after hurricane season.

So ... anyone been in this spot? (I looked through the threads but didn't find anything that fits exactly.) I need to know what place to use for insurance purposes, for registration purposes (and sales tax -- or to avoid sales tax since I'm not really a resident FL or any state), and even for homeport on the CG documentation.

I'm a bit confused by all this and it seems like everything just speeded up immensely since the seller and I just shook hands today on a final deal after the survey. (Must be that speedy sensation causing me to now feel a weird mix of really, really excited and also kind of sick to my stomach. I've wanted a sailboat for a long time, haven't had one for 17 years, and now here it is! Yikes!)

Anyway, I sure hope someone here can point me in the right direction.

Thanks y'all. I sure do appreciate your help and I appreciate YOU, too.

Beckers

[Hudson Force]

You may not want the Florida residence in your situation, but google "Saint Brendan's Isle" for a residence opportunity that caters to cruisers. 'take care and joy, Aythya crew

[Intentional Drifter]

What does your drivers license and passport say? Use those and it will be simpler for other matters, too. Customs folks prefer it when ship's papers match the other stuff, too.

Don't forget your ship's radio license, EPIRB registration (if you have one), CG documentation, etc. The more the names and addresses match, the better.

ID

[hellosailor]

As ID said.

In most states, if you can't prove you reside someplace else and paid taxes there...somewhere between 90 and 183 days and you are likely to be "adopted" by the local authorities and presented with your tax bills as a local resident. And in some places, you'll be declared a resident (and owe taxes) simply by being there for too long.

You'll need to pick a piper, and then pay 'em.

[denverd0n]

Originally Posted by Gracias

...even for homeport on the CG documentation.

This part is easy. Pick any town, real or imaginary. The Coast Guard does not care if the homeport on your documentation and on your boat is your ACTUAL homeport or not.

[lasketella]

I am in a somewhat similar dilemma. Beckers, I'm glad you started this thread. I am also about to purchase a 37' Hunter in Michigan. This will be my 1st ever watercraft purchase and I have way more questions than answers. Primarily, I want to know what's going to happen with the sales tax...

I know Michigan charges a 6% sales tax on boats purchased in that state (privately or otherwise). But in my home state of Minnesota, sales tax is not levied on private party sale of used watercraft. In most states this kind of tax is assessed when one goes to register the boat (based on the bill of sale). However, I plan on registering the boat in Minnesota (where I live and plan to keep the boat). I've already talked to the MN DNR and they have confirmed that I need not pay any sales tax on this transaction. However, the broker who matched me up with the seller is telling me that I need to pay HIM the sales tax. The title is still in the sellers name (not the brokers).

Is this broker just going to pocket the "tax"??? What does a broker do with the taxes?? He knows I am novice at this which makes me a little disinclined to trust him.

So, long question short... MN resident wants to buy a boat in MI to bring back to MN and register (in MN). MI says pay sales tax. MN says no sales tax.

- Do I have to pay sales tax?
- If so, is it right to pay the sales tax to the broker if the boat is still titled to the original owner?

many thanks,
Lance
PS: brand new here

[Minggat]

I do the St. Berndens Isle thing. Works for me. They can expalin how it all works.

Funny how we see our lives as simple, but the world does not know how to handle us. Just a simple question like where are you from gets messy.

I'm from So Cal, I live on my boat, which is in Mexico- dry storage, I'm working in Asia-long term. So home is......elusive.

[DavidGC]

Lance -
I've never lived in Mich or Minn, but when I have bought two boats out of state and the way it has worked is that as long as the bill of sale was made out to an address outside the state of sale, you did not pay a sales tax to the home state. When you go to register in the new state, they will charge you whatever tax they usually charge (based on the bill of sale.

I don't want to say this broker is being dishonest, but a call to the tax office in Mich and whatever agency registers boats in Minn should tell you all you need to know.

DC

[S/V_Surya]

The only boat tax criteria is if you reside in the local for the state established minimum time. If they wanted to they get information from the marina. In california its where you are on march 15 so each state varies. My boat is in Maryand and I paid the tax, my dingy is registered in delaware (no tax). My boat is documented in Pennsylvania and I carry an Arizona Driver lic. (long story there). You need an address or PO to get CG documents. Other than that and if you are on the move I would use a no sales tax state to register.

On a side note I tried to register dingy in Maryland but I bought dingy on ebay and HN numbers were removed. Maryland would not except bill of sale. Delaware on the other hand after confirming boat was legit gave me registration and new HN numbers.

[denverd0n]

I agree with the suggestion that you need to check with the appropriate state agency in Mich. to see of you really need to pay taxes. My guess is that you don't. f the broker continues to insist that you have to pay the tax, tell him you have been in contact with the state agency and are going to pay the taxes directly to the state.

Unless the state agency actually tells you that you MUST pay the taxes to the broker as a part of the closing on the boat, I would NOT make out a check to the broker that includes the taxes!

[nautical62]

I purchased my Hunter 30 in Florida less than a year ago, but do not live there. My experience is they don't really care where you live. For the most part it seemed to me if you are going to buy the boat there and keep it there for 90 days or more, they want sales tax and registration.

I also don't know if the 90 day rule applies equally to reciprocity with other states or not having a boat registered at all. I image a call to any county office will give you accurate up to date information regarding this.

A previous boat that I purchased in Florida, I took out of state immediately and paid sales tax and registered it in my home state where it was much less expensive and when returning to Florida stayed less than the 90 days.

If you will not be staying in any one spot, it may make sense to get your boat documented but not register it with any state. (If possible). Your "Home Port" does not have to be any where you have regularly kept the boat. I own two documented boats and have never had either in their home port. One is not registered with any U.S. state.

Regarding taking it to the Bahamas: Federal U.S. documentation should be fine for entry. You will get a Bahamas cruising/fishing permit for $150 for your boat which is good for one year and allows free re-entry with in 90 days. Stays of over a year require a $500 extension which you can do for up to 3 years or you can pay duty of 10% of the value of the boat. Of course this is all subject to change. Your visa will likely be issued for a shorter period of time than one year. I've never been hassled by Bahamian officials for having a boat registered in a state that differs from my home residence.

[nautical62]

Originally Posted by lasketella

I
...Is this broker just going to pocket the "tax"??? What does a broker do with the taxes?? He knows I am novice at this which makes me a little disinclined to trust him.

So, long question short... MN resident wants to buy a boat in MI to bring back to MN and register (in MN). MI says pay sales tax. MN says no sales tax.

- Do I have to pay sales tax?
- If so, is it right to pay the sales tax to the broker if the boat is still titled to the original owner?

many thanks,
Lance
PS: brand new here

Lance - I'm not familiar with all the laws of all the states you mentioned, but have dealt with MN and FL. My guess is this:

The broker, does not want to pocket the money. They want everything wrapped up nice a simple. Having you pay the tax in MI, keeps it simple for them as they don't have to worry about proving to the state they don't owe tax on boat they sold.

My guess Lance is that you should be able to bring the boat to MN and register it there according to what ever registration and taxation laws they have there. What I would do is call the county in MI where you are buying the boat and ask them directly if you need to pay tax on a boat that it is not staying in the state. (This is usually handled by either the county department of motor vehicles or registrar's office)

MN, should accept a registration and title signed over to you by the previous owner regardless of the state. You should not have to register it elsewhere first to register it and be legal in MN. Again talk to your county to verify this.

I've purchased many boats in other states requiring registration and the above has always been the case for me.

[hellosailor]

Urgently suggest you read
SOS - Dealer Manual by Chapter
and open the link to Chapter 8, pages 9 and on.

It appears (from a fast read) that Michigan requires the dealer to collect tax in all but three express situations:
1-If the dealer is delivering the vehicle (car or boat) out of state
2-If you have a transit tag for the vehicle
3-If there is some ither specific exemption.

If *you* or *your* rep is taking the boat out of state for delivery, the dealer still has to charge tax. Apparently not the most enlightened tax law, so I'd suggest reading up on it and if necessary, hold back one dollar at closing so the sale is not completed and you can make the other arrangements "pending final payment" and do that in writing.

[lasketella]

thank you all for the advice. Hellosailor, I took a look at the link you posted. I called the MI dept of Treasury on this and they said the transit permit can only apply to automobiles (not boats)... I thought I had my golden ticket there for a minute!!

... Anyway, for those that may be interested in in how this is playing out... I contacted a Technical Analyst for the MI dept of Treasury about this issue. It boils down to whether or not I take delivery of the boat in MI or if the seller/broker/dealer delivers the boat to me. If I take delivery within the state, I pay the 6% to MI, no way around it in that scenario. He told me that the only way around paying the 6% sales tax to the broker (ultimately the state) is if the boat is delivered to me. He told me that the seller/broker and I could sail out into Lake Michigan (away from proper MI state borders) and sign the boat over to me. In this scenario, officially, the seller is delivering the boat to me out of state. It is then the sellers responsibility to pay the sales tax to the state in which he/she resides upon registration. However, in this case, non-dealership used boat sales in the state of MN aren't taxed, so I would be free from paying taxes altogether. This idea came straight from the MI tax collector himself!!!

Now the only trick is to convince my easily spookable broker to go along with this plan. The MI Tax guy gave me his contact info to forward to the broker if he had any questions... Now I wait to see if the broker will play ball!! Wish me luck!

[Intentional Drifter]

Well, Lance, ultimately you still hold the cards that the broker wants more than anything else -- your money! Tell him that if he wants to make the sale, then he will take a little boat trip!

If he still doesn't want to do that, tell him that there are 3 other Hunter 37's already in MN, so maybe you'll just go check them out, first, just to make sure.

Remember, you're talking several thousand dollars, here. Would you rather put that money into your own boat, or the State of Michigan's coffers? For the difference, you might find that one of the MN boats gives you more. Believe me, he won't like hearing that.

ID