TAX - Buying a sailboat in California (San Diego) out of state

[Ruso]

"RUN" was little exaggeration.. As I see it now I don't want to give any reason to decline my "use" tax waiver. The safety comes first, for sure, and the reason I am looking a boat in CA - not in Mexico.. Because "Sea ready" statement is very different between Mexico and USA..

[Montanan]

Originally Posted by Ruso

I don't think so.. "use" is a key word. It was well outlined in the doc I posted early here. As soon as you "use" the boat - BOOM! you owe the "use" tax
Most expensive one time "pleasure" ride

Ruso:

Be sure to not use the boat's head when you are in Cali waters, that may subject you to use tax. Hold it until you get three miles out or into Mexican waters.

Don't know anything about the rules for use of heads in Mexico.

[contrail]

Originally Posted by Montanan

No California sales or use tax should apply because your purchase was more than 12 months ago and the boat remained out of California for that period of time before you become a resident.

It sounds like you will likely be "importing" the boat into the USA when you move to California since it was made in SA and may not have previously been imported before your purchase in BVI. Check with the Donald as to what the tariff will be when you want to bring into to the USA. US Customs can advise in that regard and you will likely need to register in California unless the boat is documented by the USCG. Not sure about your citizenship as to if you can document the boat in the USA.

It will become subject to property tax when it is brought into California for other than a temporary transit period. Contact the applicable county assessor when you get the boat settled into it mooring / marina.

Thanks, Montanan! As it happens we did import back in 2004, and the Miami Customs did acknowledge that no duty was due. The boat is documented, in Delaware, and I am a US citizen.


Cheers,
Tim

[Ruso]

Originally Posted by Montanan

Ruso:

Be sure to not use the boat's head when you are in Cali waters, that may subject you to use tax. Hold it until you get three miles out or into Mexican waters.

Don't know anything about the rules for use of heads in Mexico.

You can imagine my sentiments toward CA after living there for 15 years and escaped to AZ... Ohh peed across state line and never been there since. I will hold it for sure as long as required.. to do it again

[john61ct]

Originally Posted by contrail

The boat is documented, in Delaware

Do you mean registered with the state?

Documented with federal USCG with a DE hailing port?

Or both?

The latter becomes your Title.

[contrail]

USCG documented with Delaware hailing port. NOT state registered.

[rmlarson1098]

Originally Posted by john61ct

Yes, you are required to pay the tax.

Why is that so hard?

Why is it so hard? Because California sucks. We too are AZ residents, and I'd drive to the east coast (or Oregon/Washington) to buy a boat before I bought anything in California.
The same strong-arm thievery applies to buying a vehicle in CA as well. As non-California residents, our new (in 2004) made in Montclair, CA motorhome had to be 'delivered' to a neighboring state unless we paid California use tax, which meant some so-called 'professional' driver put the first several hundred miles on our odometer. I never got over it, although after protesting strongly in writing I did receive a nice letter from Gov. Arnold defending the rip-off.
Just don't like their Gestapo-like, bullying tactics. Sorry for the rant.

[Montanan]

Originally Posted by rmlarson1098

Why is it so hard? Because California sucks. We too are AZ residents, and I'd drive to the east coast (or Oregon/Washington) to buy a boat before I bought anything in California.
The same strong-arm thievery applies to buying a vehicle in CA as well. As non-California residents, our new (in 2004) made in Montclair, CA motorhome had to be 'delivered' to a neighboring state unless we paid California use tax, which meant some so-called 'professional' driver put the first several hundred miles on our odometer. I never got over it, although after protesting strongly in writing I did receive a nice letter from Gov. Arnold defending the rip-off.
Just don't like their Gestapo-like, bullying tactics. Sorry for the rant.

Rants duly noted and not respected.

FYI.

In order to pay for state and local government services, Arizona's sales and excise taxes are 27 percent above the national average.

By way of example. The combined sales tax rate for Phoenix, AZ is 8.6%. This is the total of state, county and city sales tax rates. The Arizona state sales tax rate is currently 5.6%. The Maricopa County sales tax rate is 0.7%. Phoenix sales tax rate is 2.3%.

Whereas the sales tax in San Diego, California is 7.75%. The 7.75% sales tax rate in San Diego consists of 6.00% California state sales tax, 0.25% San Diego County sales tax and 1.50% Special tax. There is no applicable city tax.

Measured relative to personal income, Arizona has the 8th highest sales and excise tax collections in the entire country. According to the Institute on Taxation and Economic Policy (ITEP), the poorest 20 percent of Arizona households spend 8.3 percent of their income on these taxes, compared to just 1.1 percent of income for the state’s most affluent residents.

A High Tax State for the Poor

While Arizona’s state and local taxes average 9.8 percent of income, differently positioned taxpayers experience Arizona’s tax system very differently. For the top 1 percent of Arizona households (a group with an average income over $970,000), the Grand Canyon State’s decision to levy low income taxes has indeed been an enormous boon. This group pays just 4.7 percent of their income in Arizona taxes—the 18th lowest (or 32nd highest) state and local tax bill for this group in the entire country.

But while Arizona’s reputation as a “low tax state” is accurate for wealthy households, it bears little resemblance to reality for the state’s less affluent residents. The poorest 20 percent of Arizona taxpayers (earning an average income of $12,200 per year) actually face the 5th highest state and local tax bill in the entire country, at 12.9 percent of income. Similarly, among the next 20 percent of taxpayers (with an average income of $27,000 in Arizona), state and local taxes are the 5th highest nationally.

Arizona’s comparatively regressive and imbalanced tax system, with its heavy reliance on sales and excise taxes, is pushing the state’s impoverished taxpayers deeper into poverty. The state’s low reliance on personal income taxes has been a major contributor to its reputation as a “low tax state,” but it comes at a steep price in terms of higher tax rates on low-income families.

When you do business in a community one should expect to comply with that community's rules and customs.

[Montanan]

Originally Posted by contrail

Thanks, Montanan! As it happens we did import back in 2004, and the Miami Customs did acknowledge that no duty was due. The boat is documented, in Delaware, and I am a US citizen.


Cheers,
Tim

Then you are good to go and will just pay property tax on your USCG documented boat when it is brought into California's jurisdiction, there being no Federal customs duty on your previously imported boat, or state sales/use taxation exposure with your relocation of the long owned vessel.

FYI, a boat is not documented in Delaware [or any other state], it is documented in the USA by the Federal government. It may have as a documented "hailing port" some listed place in Delaware, [or any number of places in the USA and territories or possession of the USA]. There does not need to be any connection by you or the boat as to your choice of a "hailing port". You can pick from a long list of places in the USA, including oddities like cemeteries, schools, places of worship, parks, ranches, farms, indian reservations, hospitals, etc. as a hailing port. The official list of allowed hailing port places runs into the tens of thousands. Actually, it is hard to find "a place" that is not included in the list of places. If "a place" is commonly known by members of a community by a name, then it likely will end up being on the list of places or will become added to the official list of places.

And the vessel may need to also be "registered" in a State in which it has situs [depends on specific state requirements], but a US documented boat will not be titled in a State as titling is provided to the vessel by the Federal government when the vessel becomes documented. The vessel is not allowed to be titled at both the State and the Federal government, one or the other, never both.

Hope you will enjoy being in the Golden State.

[Paul L]

Montanan
You seem to have some good knowledge of the Cal tax system. How come they do not implement a use-tax on boats that have been owned outside the state for over a year? It seems like most all the large boating states, like Fla or WA, do. It seems like a hole in their system.

[Montanan]

Originally Posted by Paul L

Montanan
You seem to have some good knowledge of the Cal tax system. How come they do not implement a use-tax on boats that have been owned outside the state for over a year? It seems like most all the large boating states, like Fla or WA, do. It seems like a hole in their system.

Well we can all likely agree that it is better to have a hole in the tax system then a hole in the hull.

Two things. If you give a legislature an idea as to means towards increasing revenue they may take you up on such. Taxes and logic are not commonly used in the same thought. Ditto as to taxes and fairness or reasonableness.

There are many bases for taxation; income, consumption, value added, excise, wealth, property, transactions, inheritance/death, occupancy, residency, characteristics [length, type, purpose, horsepower], etc.

Tax rules are very factually specific, can be very complex and inconsistent and of course subject to change.

It is legal to avoid taxes but not to evade taxes.

Finally, it's just money and money is meant to be spent, by you or by others.

As to the State of Washington there is watercraft excise tax (0.5 percent of the vessel's value) use tax, unless sales tax or use tax was previously paid or the vessel is otherwise exempt from sales or use tax.
Watercraft Excise Tax
The watercraft excise tax generally applies to all
registered boats that are 16 feet or longer or equipped
with a motor capacity of more than 10 horsepower.
Excise tax is calculated at one-half of one percent of
the boat’s fair market value. A vessel is exempt from
the watercraft excise tax if it is:
- used exclusively for commercial fishing purposes
- less than 16 feet in overall length and is not used
on federally regulated waters
- owned and held for sale by a dealer
- owned by certain nonprofit youth organizations

Use tax applies to the use of articles within the state
acquired without payment of sales tax. Thus, articles
purchased for use in the state are subject to sales tax
or use tax, but not both.

Sales tax is based on the selling price, while use tax is
based on the value of the article when it is first used
in Washington. The value includes any delivery charges
paid to the seller.
You owe use tax if you acquired your boat without
paying sales tax.
Sales tax and use tax rates are the same and,
depending on location, range from 7 to 9.5 percent.
If you purchase your boat from a Washington retailer,
the retailer will collect the sales tax due based on the
rate in effect at the retailer’s location. If you purchase
your boat from an individual or from out-of-state, the
county auditor or licensing agent will collect the use
tax based on the location the boat will be kept. If your
boat is not required to be registered, you may pay the
use tax by completing a Use Tax Return.

Retail sales and use tax exemptions for boats are limited
to the following:
- boats 30 feet or longer owned by nonresident
individuals and brought into this state temporarily
for their use or enjoyment if the owner purchases a
vessel use permit, explained in Nonresident Boats
Purchases
- boats owned by nonresidents and brought into this
state temporarily for their use or enjoyment. Refer
to the Registration for Nonresidents section
- boats purchased in this state by nonresidents for
use outside of Washington, subject to the conditions
explained in Nonresident Boats Purchases
- boats purchased primarily for use in conducting
interstate or foreign commerce by transporting persons
or property for hire, or for use in conducting commercial
deep sea fishing operations outside the territorial
waters of this state. (“Primarily” means more than 50
percent of the time. If the boat is not used primarily for
the exempt purpose, sales or use tax applies.)
f boats purchased only to rent/lease or charter at
substantially fair rental value without an operator. The
lessor must collect sales tax on the lease payments. (If
the boat is leased or rented with an operator, or provided
to others at substantially less than fair rental value, the
lessor owes use tax on the full value of the boat.)

Nonresident Boats Purchases
Sales tax exemptions are available to a nonresident
who purchases a boat in Washington for use outside
the state if:
- the boat requires Coast Guard registration or
registration by the state of principal use, and it will not
be used within Washington for more than 45 days, and
an appropriate exemption certificate is completed at
the time of sale.
- the boat is 30 feet or longer and the buyer is a
nonresident individual who, when purchasing the
boat, purchases a one-time vessel use permit from
the boat dealer. The cost of the permit is $500 for
boats 50 feet in length or less and $800 for boats
over 50 feet. The nonresident individual must make
an irrevocable election to take the exemption and
complete an affidavit. The vessel use permit, which
must be displayed on the boat, allows the nonresident
individual to use the boat in Washington for up to
12 continuous months without being subject to
registration and use tax requirements. After the
permit expires, the nonresident individual may not
use the boat in Washington for 24 months after the
permit expires. Any use of the boat in Washington
before the 24-month period ends will subject the
nonresident individual to the state’s registration
and use tax requirements. After the 24-month
period ends, the nonresident individual may use the
vessel in Washington as explained in the section
discussing registration requirements for nonresidents.
Nonresident entities, such as partnerships,
corporations, limited liability companies, etc., are not
eligible for this exemption. Not all boat dealers have
chosen to sell the vessel use permits.
- the boat is 30 feet or longer and the buyer is a
nonresident individual who, after purchasing the boat
from someone other than a boat dealer, purchases a
one-time vessel use permit as described above within
14 days of purchasing the boat.

[Paul L]

Two things. If you give a legislature an idea as to means towards increasing revenue they may take you up on such. Taxes and logic are not commonly used in the same thought. Ditto as to taxes and fairness or reasonableness.

OK, I'll keep the use-tax for boats idea a secret, so those pesky Sacremento types won't have a clue about what they are missing

[rmlarson1098]

Originally Posted by Montanan

Rants duly noted and not respected.

FYI.

In order to pay for state and local government services, Arizona's sales and excise taxes are 27 percent above the national average.

By way of example. The combined sales tax rate for Phoenix, AZ is 8.6%. This is the total of state, county and city sales tax rates. The Arizona state sales tax rate is currently 5.6%. The Maricopa County sales tax rate is 0.7%. Phoenix sales tax rate is 2.3%.

Whereas the sales tax in San Diego, California is 7.75%. The 7.75% sales tax rate in San Diego consists of 6.00% California state sales tax, 0.25% San Diego County sales tax and 1.50% Special tax. There is no applicable city tax.

Measured relative to personal income, Arizona has the 8th highest sales and excise tax collections in the entire country. According to the Institute on Taxation and Economic Policy (ITEP), the poorest 20 percent of Arizona households spend 8.3 percent of their income on these taxes, compared to just 1.1 percent of income for the state’s most affluent residents.

A High Tax State for the Poor

While Arizona’s state and local taxes average 9.8 percent of income, differently positioned taxpayers experience Arizona’s tax system very differently. For the top 1 percent of Arizona households (a group with an average income over $970,000), the Grand Canyon State’s decision to levy low income taxes has indeed been an enormous boon. This group pays just 4.7 percent of their income in Arizona taxes—the 18th lowest (or 32nd highest) state and local tax bill for this group in the entire country.

But while Arizona’s reputation as a “low tax state” is accurate for wealthy households, it bears little resemblance to reality for the state’s less affluent residents. The poorest 20 percent of Arizona taxpayers (earning an average income of $12,200 per year) actually face the 5th highest state and local tax bill in the entire country, at 12.9 percent of income. Similarly, among the next 20 percent of taxpayers (with an average income of $27,000 in Arizona), state and local taxes are the 5th highest nationally.

Arizona’s comparatively regressive and imbalanced tax system, with its heavy reliance on sales and excise taxes, is pushing the state’s impoverished taxpayers deeper into poverty. The state’s low reliance on personal income taxes has been a major contributor to its reputation as a “low tax state,” but it comes at a steep price in terms of higher tax rates on low-income families.

When you do business in a community one should expect to comply with that community's rules and customs.

While I agree that Arizona is a regressive and imbalanced system, it pales compared to the 'Use Tax' by the tax folks against non-residents in California. I know well that (as a barely middle class resident) I will pay more sales tax in Pima County, AZ than I would in CA. And I'm good with that. I'm not at all anti-tax, or anti-California for that matter. But the CA tax collection thugs are notoriously eager to harass and chase down non-residents that 'do business' in the Golden State. We 'do business' quite a lot in California, an exciting, beautiful, and progressive state that we mostly enjoy. But before I'm shaken down for sales/use tax in buying a boat or a vehicle there, I'd happily pay a bundle more and buy someplace else. Just me I guess. I dislike being treated like a criminal.

[Ruso]

Gentlemen, Arguing Tax Rate of Abstract is pointless..
As end user paying taxes..
Arizona don't have "use" tax on private party cars and boats purchase in or out of state - I always do private party. Out of state boat owners pay registration ("use tax" or "property tax") little expensive but fixed around $300 -which close to CA if your boat valued $30K (valued - totally up to tax authorities)
I had two almost identical houses in Orange County CA and Mesa AZ. OK... AZ house way better.. same sq feet.
CA house price 3 times more expensive. Property Tax in CA - $4.6K, in AZ - $800
I really don't care for 2% difference on sale price - difference in Property Tax well covers it.

[contrail]

Originally Posted by Montanan

Then you are good to go and will just pay property tax on your USCG documented boat when it is brought into California's jurisdiction, there being no Federal customs duty on your previously imported boat, or state sales/use taxation exposure with your relocation of the long owned vessel.

FYI, a boat is not documented in Delaware [or any other state], it is documented in the USA by the Federal government. It may have as a documented "hailing port" some listed place in Delaware, [or any number of places in the USA and territories or possession of the USA]. There does not need to be any connection by you or the boat as to your choice of a "hailing port". You can pick from a long list of places in the USA, including oddities like cemeteries, schools, places of worship, parks, ranches, farms, indian reservations, hospitals, etc. as a hailing port. The official list of allowed hailing port places runs into the tens of thousands. Actually, it is hard to find "a place" that is not included in the list of places. If "a place" is commonly known by members of a community by a name, then it likely will end up being on the list of places or will become added to the official list of places.

And the vessel may need to also be "registered" in a State in which it has situs [depends on specific state requirements], but a US documented boat will not be titled in a State as titling is provided to the vessel by the Federal government when the vessel becomes documented. The vessel is not allowed to be titled at both the State and the Federal government, one or the other, never both.

Hope you will enjoy being in the Golden State.

Actually, I lived and owned a boat in California, before going cruising and living in Mexico and the Caribbean, and totally understand the reasons people are irritated by a number of things. I was, as well. It's not high on my list of future residencies, but it is somewhere on that list, so this thread invited my curiosity regarding what I might be looking at



I do understand that USCG boats are documented federally, and not "in" a particular state, but, in practice, many DO refer to the hailing port as where the boat is documented. In my case, the actually documenting was accomplished in Florida, although the hailing port is in Delaware.



However, at least when Jet Stream was documented, hailing ports had to be at least incorporated townships, with a mayor and city council, etc. Perhaps that law has changed, since, or perhaps you are mistaken, but a hailing port absolutely could not be simply "a place", and certainly not a park. In fact, our first choice was a park, and it was turned down and we were told about the incorporated township rule. Hence, instead of Bombay Hook, Delaware, or Hardscrabble, our first two choices, Jet Stream's hailing port is Slaughter Beach, which, unfortunately, often elicits dismay. Slaughter Beach is a very small place, population of about 100 (fifteen years ago), but it was a big deal in the 1930's, until it got wiped out in a hurricane. Crucially, it still has a mayor and city council!


If that law has been changed to something like what you described, I would be all for it, so I do hope you are correct.



Cheers,
Tim