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Old 20-02-2011, 11:48   #1
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Sales Tax Again

State sales tax varies from state to state. But the matter of tax also relates to the use of a boat as far as the IRS is concerned.

For example, is a boat is a residence then the mortgage interest is deductible. The definition what defines a boat as a residence becomes germane. The mortgage interest applies to second homes as well. Below is an interesting article.

In the matter of NYS sales tax there are boats which are exempt from sales tax - commercial boats, race boats. I am not sure about the residence exclusion. Perhaps some lawyer could speak to that.

If someone spends a 6 month season on their boat with a couple of long cruises that would seem to meet the requirement of it being a "residence"...

And what about a boat which serves both as a residence as above and a club racer or an off shore racer? How many races does one need to do the qualify a boat as a racer and claim the sales tax exemption?

A live aboard boat is very different from your typical car which is taxed and registered by the DMV. I assume travel vans / mobile homes do receive a sales tax exemption as a residence.

What is your opinion of this matter? Are these taxes basically predatory and confiscatory and illogical?
Quote:
By ERIC NALDER
SEATTLE POST-INTELLIGENCER INVESTIGATIVE REPORTER
Borrow money to buy a boat. Stuff a mattress into the bow, and drop in a camp stove, a port-a-potty and a sink.
Do all that, and in the eyes of the government, you've got a second home -- and a sizable tax deduction.
For the rest see: Declaring your boat a second home can bring big tax relief
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Old 20-02-2011, 15:30   #2
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Sales or use tax is due on most, maybe all RVs like it is on boats. I am not aware of any "racer" exemption. Lots of people would try to claim their boats as racers if that were the case.

You don't really need to live on the boat to claim the interest as a tax deduction for a second home. There are some very simple rules like having a galley and head that let almost any cruising boat qualify.

David
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Old 21-02-2011, 04:17   #3
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Re: Sales Tax Again

So the conundrum is if it is a second home... or can be declared as such, why is a taxable? House sales are not taxed?

Suppose it was a primary residence?

NYS web site exemptions:

"Exemptions

  • Lifeboats.
  • Any boat registered in another state and not kept in New York for more than 90 consecutive days.
  • Boats racing in competition."
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Old 21-02-2011, 04:41   #4
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Re: Sales Tax Again

As a retired CPA who use to make a living answering these sort of questions, I'd say be very careful with advice you get here. Remember, its a sailing forum not a tax forum. The advice given is frequently worth what you paid for it.

By the way, the newspaper article quoted above is from 2004! Do you think there have been any changes in the tax laws since then?
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Old 21-02-2011, 04:49   #5
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Re: Sales Tax Again

In the spirit of Doodles' wise admonition, above, I offer the following simply as my experience. It may or may not apply to your situation.

Our boat met the federal definition of "second home". It had a bed, head and stove. That allowed us to legally deduct the interest paid on the boat loan from our federal income taxes as an itemized deduction. "Second home" status had absolutely no effect on our obligation to pay Virginia sales tax and personal property tax.
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Old 21-02-2011, 05:14   #6
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Exclamation Re: Sales Tax Again

There is sales tax, then there is use tax, then there is property tax. Buying a boat out of state, and then bringing it into your home state won't necessarily keep you from having to pay sales or use tax on it. Taxing a boat as a second home relates only to property tax and varies by state. Also, if you have a boat flagged in one state, pay property taxes there, and leave it in another state too long, you may be taxed in both states. I live in South Carolina in Charleston County, and property taxes on boats here is so high, I took it to Tortola to get away from the collection vultures. The only way I have found not to get taxed to death with a boat is to buy it and keep it in Rhode Island or Florida, or to flag it in a foreign country, and don't let it rest in any one spot in the US too long. Taxes on boats are not complex, but there is a maze of different laws in different states and counties often applied arbitrarily, enforced without due regard to common sense, counter productive to the creatiion of jobs in the marine industry, and often not understood by even those in legislatures that continue to raise them. I agree the best advice I have seen on this thread is if you have any questions or issues, consult a lawyer. Better to consult a lawyer about boat taxes even before you buy a boat if you want to figure out what it is really going to cost to keep.
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Old 21-02-2011, 08:28   #7
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Re: Sales Tax Again

Frankly, I don't think this matter is too well understood by your average tax preparer. Perhaps the elite tax lawyers who know how to work the loop holes would know something about this matter.
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Old 21-02-2011, 08:36   #8
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Re: Sales Tax Again

Tees advice is exactly right. You have to look at your own specific tax situation based on where you buy the boat, where you keep it, etc. But, yes you can take a mortgage interest deduction on boats with a galley, head, and sleeping accommodations, as either a first or a second home, but that does not eliminate a sales or use tax obligation in any state I know of. Many states also have annual property taxes on boats (not NY) and/or annual registration fees.

If you are more specific about the situation we might be able to give more specific advice. By the way, in my experience you will not necessarily get correct advice from CPAs, tax professionals, or lawyers on this. Most have no clue about boats, boating, or boating laws. There are some specialist firms that do handle boating business that might be worth consulting, but not any old CPA.
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Old 22-02-2011, 10:55   #9
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Re: Sales Tax Again

Quote:
Originally Posted by defjef View Post
What is your opinion of this matter? Are these taxes basically predatory and confiscatory and illogical?
I'm sure that you could argue that--at least in some way--ALL taxes are illogical. No question that all taxes are confiscatory! I mean, that's the whole point of taxes! Predatory? Well, I guess that depends entirely on your point of view.

It's true that sales and use taxes often seem to make even less sense than some other forms of taxation. Structure your purchase so as to reduce your total taxes as much as possible (without violating any laws, obviously) and you have done the best that you can.

Oh, and the people who say that you shouldn't try to avoid these taxes? Ignore them. They are being hypocritical. We all know that they take tax deductions and/or credits themselves. They just call what THEY do to avoid taxes "reasonable," whereas if someone else is willing to put just a little bit more effort into it they will call that "cheating". It's a little bit like driving a car, isn't it? How fast you are going is always "just right" whereas anyone going any faster is always going "too fast."
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