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Old 24-10-2016, 18:45   #1
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Sales tax and use tax

Hi,

I am buying a new sailboat, the builder is asking where do we want the boat to be deliver, explaining the tax impact and proposing to deliver It in RI. We are planning to sail the Great Lakes for couple of years than the east cost. So sailing the summer and storing the boat where we will be at the time, means different states each time.

The question:
How do you handle the question of the sale/use tax?
Can you store the boat in a state where you did not pay sale tax or you nee to comed back every time in the state where you registered It?

Thanks

SB
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Old 24-10-2016, 19:48   #2
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Re: Sales tax and use tax

Congrats on the new boat!

If the delivery happens in RI , then you move it to a another state relatively soon, you will pay according to the state to where it is moved, one time. You won't have to pay again in a couple of years if you return to the east coast.

Some states are more aggressive than others. Best to check the laws of where you plan to sail and where you will store it in the offseason for the first year or two.

What are you buying and what part of the Great Lakes do you plan to sail.
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Old 25-10-2016, 05:12   #3
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Re: Sales tax and use tax

Belated greetings and welcome aboard the CF, SB.
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Old 25-10-2016, 06:11   #4
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Re: Sales tax and use tax

The laws are different in every state, so you are really going to have to research all of the states that you expect to be in for at least the first few years of your ownership.

I can explain how it works in Florida. Many states are similar, but none that I know of are exactly the same (which is why you are going to have to research each state).

If you buy a boat in Florida, and do not move it out of the state within 90 days (or 180 days, under specific circumstances) then you must pay sales tax. If you buy a boat in another state, and bring it to Florida within 6 months, then you will have to pay use tax in Florida (but will get a credit for sales/use tax already paid). If you own and use the boat outside of Florida for more than 6 months, then no tax is due when you eventually bring the boat to Florida. (Note that the "and use" part is important; if you buy the boat outside of Florida, let it sit for 6 months and a day, and then bring it to Florida, then you WILL owe tax.)

Like I said, many states have laws that are similar. That is, buy it and keep it in the state, pay tax. Buy it elsewhere and bring it in, pay a tax with a credit for tax already paid. Buy and use elsewhere for a long enough period and no tax due. The time frames and tax rates vary widely. The specifics also vary. If you want to legally minimize your tax due then you have to do your homework on every state involved.

Good luck.
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Old 25-10-2016, 07:12   #5
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Re: Sales tax and use tax

Boats docked in Connecticut for 60 days or less will be exempt from the 6.35 percent sales and use tax on boats costing more than $100,000.

Connecticut Tax Exempt for boats in Winter Storage between Oct 1st to April 30th.
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Old 25-10-2016, 07:41   #6
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Re: Sales tax and use tax

Also keep in mind that even if you think you understand different states' rules about taxing the boats within its borders various state officials at the lower level may still interpret them differently than would seem obvious from reading the plain text. I've had several boats registered in same state and on one occasion the clerk totally misread the law and to my raising the issue that previous clerks interpreted the law differently (correctly) she just shrugged and said they were wrong. It took a few days run around and getting to her higher ups but finally the correct interpretation was established. This was not exactly tax related but rather title related and involved titling a boat from a non-title state. The clerk wanted me to go back to the seller, have him title the boat either in that non-title state (!) or here locally and then transfer the ownership to me via title endorsement. Totally ridiculous and I am still not sure how a person like that can keep her job other than the fact it's a gov't union job or some such. As it turned out her supervisor produced a manual which listed all of the 50 states and possessions procedures and titling rules and regs, as well as other countries. I asked where to get a copy of such manual but was told this is very internal and not available to the public as it would assist those intent on avoiding the law and paying taxes. Like saying you can't read the statutes because these will give you an idea how to circumvent them.
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Old 25-10-2016, 09:31   #7
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Re: Sales tax and use tax

The sales and use tax question is a good one. In general it is governed by the states and varies from state to state in application. For the most part, the location (and duration of time) where the boat is, determines whether a state sales or use tax applies. As you can see from the prior posts, it is different for each location. A good place to start your research is on the BoatUS Government affairs (States) website located here:

State Boating Information Home - Government Affairs - BoatUS

Once you have a basic understanding of the state regulations requiring tax (and potential registrations, grace periods, etc.), it would be wise to go to the state taxation websites for the states you are interested in cruising, to doublecheck the regulations (and any recent changes). You can also call the tax authorities directly.

Here's another example. I purchased my boat in Massachusetts as a non-resident of the state. I removed the boat from MA waters under the grace period, and therefore had no sales tax liability since I was not a resident. I moved the boat to Rhode Island, which has no sales or use tax liability, but requires state registration. I live in another Mid-Atlantic state, which has a sales and use tax, but I have no liability there, unless I return the boat to that state's waters, in which case I'm liable for use tax, as a resident.
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Old 25-10-2016, 10:58   #8
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Re: Sales tax and use tax

Quote:
Originally Posted by Saaabb View Post
Hi,

I am buying a new sailboat, the builder is asking where do we want the boat to be deliver, explaining the tax impact and proposing to deliver It in RI. We are planning to sail the Great Lakes for couple of years than the east cost. So sailing the summer and storing the boat where we will be at the time, means different states each time.

The question:
How do you handle the question of the sale/use tax?
Can you store the boat in a state where you did not pay sale tax or you nee to comed back every time in the state where you registered It?

Thanks

SB
I am not familiar with the term use tax. I believe SC calls it property tax and if a boat is in a county for a period of time they want their cut. Changing marinas may throw them a curve? At one time it was a standing joke about the tax man walking the docks and if finding an out of state boat checking with the dock master as to its length of stay. FYI
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Old 25-10-2016, 11:36   #9
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Re: Sales tax and use tax

Lots of good advice here. Be warned that if your ID is not from the state of registration you may have a problem. Many cops would see that as a red flag.
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Old 25-10-2016, 12:00   #10
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Re: Sales tax and use tax

Use and property tax are not the same thing. Many states levy a "personal property tax" on items such as cars, boats and airplanes. This is typically an annual tax paid at the time of registration, depending on the state. Pp tax typically declines with the depreciated value of the asset over time - that is, if boats can be considered assets .

Use tax directly related to sales tax. The theory for a state to collect a use tax is for purchases made outside the state (which would not normally be subject to that state's sales tax), but are physically "used" in that state (hence the name). You didn't buy the boat in state XYZ, but you're using in state XYZ, so they levy a use tax - often at the same rate as their sales tax.
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Old 25-10-2016, 14:20   #11
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Re: Sales tax and use tax

Quote:
Originally Posted by denverd0n View Post
The laws are different in every state, so you are really going to have to research all of the states that you expect to be in for at least the first few years of your ownership.

I can explain how it works in Florida. Many states are similar, but none that I know of are exactly the same (which is why you are going to have to research each state).

If you buy a boat in Florida, and do not move it out of the state within 90 days (or 180 days, under specific circumstances) then you must pay sales tax. If you buy a boat in another state, and bring it to Florida within 6 months, then you will have to pay use tax in Florida (but will get a credit for sales/use tax already paid). If you own and use the boat outside of Florida for more than 6 months, then no tax is due when you eventually bring the boat to Florida. (Note that the "and use" part is important; if you buy the boat outside of Florida, let it sit for 6 months and a day, and then bring it to Florida, then you WILL owe tax.)

Like I said, many states have laws that are similar. That is, buy it and keep it in the state, pay tax. Buy it elsewhere and bring it in, pay a tax with a credit for tax already paid. Buy and use elsewhere for a long enough period and no tax due. The time frames and tax rates vary widely. The specifics also vary. If you want to legally minimize your tax due then you have to do your homework on every state involved.

Good luck.
Yup. Each state a different country when it comes to taxes on boats, how aggressive they are, how bureaucratic, and the penalties they hand out. Most, like Maine require a copy of sales tax paid otherwise they will charge you again. Some do not require registration if you are documented; others do. Its a real nightmare. Good news is that many marinas do not require any tax docs and usually states do not patrol private marinas.
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Old 27-10-2016, 16:58   #12
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Re: Sales tax and use tax

Thanks for the quality of the information,

I realized It is a complex topic, do you know If you can keep for a winter your boat in a state that you did not pay the sales tax?

Thanks,

Saaabb
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Old 27-10-2016, 17:09   #13
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Re: Sales tax and use tax

In the Northwest Oregon is a no sales tax state while Washington does have a sales tax and will attempt to collect a use tax for a vessel in their waters over sixty days in a given year.
Do check with the state or better with the titling agency in your area.
Congrats on the boat.
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Old 27-10-2016, 18:26   #14
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Re: Sales tax and use tax

Quote:
Originally Posted by Saaabb View Post
Thanks for the quality of the information,

I realized It is a complex topic, do you know If you can keep for a winter your boat in a state that you did not pay the sales tax?

Thanks,

Saaabb
That's a very tricky question as most states base their boat tax schemes, at least officially, on the area where the boat is used not where it is kept off season. But then again I would seek a professional's advice, even though it may not be definitive any way.

I often wonder the wisdom of "season based" tax scheme when often the season is well under 50% of the year such as New England, Great Lakes, etc. and the off season storage state is often not the same as the season's use state.
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Old 27-10-2016, 18:45   #15
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Re: Sales tax and use tax

Quote:
Originally Posted by Saaabb View Post

I realized It is a complex topic, do you know If you can keep for a winter your boat in a state that you did not pay the sales tax?
Keep in mind that it is about "recently" purchased boats and that it definitely depends on the states involved. In Massachusetts, storage counts. So if I buy a boat in Rhode Island during the summer where there is no sales or use tax on boats, but store it in Massachusetts that winter, I owe a sales or use tax. How would Massachusetts find out? One way is that the USCG shares info with the states, so if you live in a state like Massachusetts and haven't paid taxes on a boat that was recently documented with the USCG, Massachusetts will come looking to collect. If you have documentation (invoices are a good start) that shows you keep your boat in another state year round, they shouldn't try to collect. As Dirty Harry said, "Do you feel lucky?".

As far as how recently, a year from when you purchase the boat is a good minimum. Two years would be safer.

You need to do your own research though.
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