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Old 30-10-2014, 21:41   #1
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Sales use Tax HELP!!!

Hello everyone. S/V Prism is currently trying to make it to mexico, we are currently holed up in A9 "Cruiser Anchorage" San Diego waiting for better wind that looks like it will come on monday. We tried to tie up any loose ends months earlier, Thinking we where all good. Back story:
Bought our HC33 in Olympia WA May 10, 2013 Did not pay WA sales Tax we where out of WA within the 90 days cruising the OR coast and CA
Sailed Down the coast and didn't officially get a slip in Berkeley CA until Oct.1 2013
We then outfitted the boat for an entire year.
Checked out of our Berkeley Slip September 24th 2014.

Last month we got a letter from the state of California wanting to see how much sales tax was paid in WA and how much we payed for the boat. After getting off the the phone with the the BOE head office I believe the guy on the the phone unofficially told me the only way not to be liable for CA sales tax if the boat was brought to CA strictly for outfitting. Which it was. We sent the letter back listing "bought out of state with no intent to use in CA" due to the outfit line. Well the day before leaving Berkeley we get a letter back from BOE not digging it. Basically saying if you brought the boat into CA within the first year of ownership you intend to use it here. Truly not the case for us.We are literarily on our way out of the country for a sizable amount of time, getting our Zarpe (official boat check out of the USA) on monday. We do not plan on sailing back to CA nor ever selling in CA. Should we go threw all of the hoops trying to make this work before we leave with what seems like a pretty unlikely chance of getting them to understand our situation. IF we bail Im guessing they will put a Lien on the boat, not sure if that will effect selling the boat outside of CA or outside the country. I wish this was a trivial amount of cash I could just write a check for but sales tax here is near 10% and this would literally kill our cursing kitty. Looking for any advice. as of now we are going to proceed with getting copies of pretty much our entire outfit with receipts and maintenance logs, marina bills and get a copy of our zarpe in there as well showing we are in fact leaving CA and the US for that matter. Im just worried if they are still not satisfied with that and if we ever do want to sell Prism we will run in the this massive lien that has been building interest over years.
Any Help to people with experience/knowledge would be HUGE!!!

Cheers,

Jon and Shannon
Svprism.com
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Old 30-10-2014, 22:27   #2
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Re: Sales use Tax HELP!!!

I believe that "outfitting only" would mean that the boat is on the hard for the time it is in the state. The phrasing used in the FAQs is "emergency repairs." Did you sail it at all while outfitting? Did you live aboard?

CA is aggressive in getting their taxes. You need to become fully informed, from legally qualified sources, before deciding what to do.
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Old 30-10-2014, 22:35   #3
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Re: Sales use Tax HELP!!!

Prism
No specific knowledge to your situation, but as you have seen, the relentless county tax collectors are looking not only for sales taxes, but an ongoing personal property tax based on their valuation of your boat. They will take what you paid, add the sales tax and that will establish the first years assessment.
Some may depend whether the boat is documented or registered with the Coast Guard (i.e. CF xxxx), and home port.
My suggestion is to find a maritime attorney in San Diego for assistance, and clear this up as best you can before you depart. Should you return to California or Washington in the future and register the boat, the county may be writing you more letters, claiming an 'escape assessment' is due.


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Old 30-10-2014, 22:36   #4
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Re: Sales use Tax HELP!!!

Boat was in the water for the majority of the time, being hauled in august- early September. Living abroad. We used the boat rarely, mostly to check out if certain pieces of gear worked or not and shaking out problems.
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Old 30-10-2014, 22:37   #5
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Re: Sales use Tax HELP!!!

Boat is US documented, home port Berkeley CA. Looking in maritime attorneys now.
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Old 30-10-2014, 22:46   #6
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Re: Sales use Tax HELP!!!

SVPrism
Once you clear this hurdle, make sure all the registration numbers on the boat match the paperwork in hand. Also know where the hull identification numbers are. Especially important if you are going to Mexico where their tax collectors impounded a number of US vessels in a large marina because of lack of documents or the inspectors couldn't find the hull registration numbers. More of a problem for absentee owners than liveaboards.


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Old 30-10-2014, 22:49   #7
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Re: Sales use Tax HELP!!!

As someone who does pay his sales tax, here is my take :

You were resident in the states when you bought the boat, and were for another 18 months afterwards. That means you should be paying sales tax SOMEWHERE - either WA, CA, or some other home state. The spirit of the law is not that you can just keep moving the boat around, and never pay sales tax.

I don't know what on earth made you think you could avoid it.

Cough up the cash, you haven't got a (moral) leg to stand on.
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Old 30-10-2014, 23:00   #8
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Re: Sales use Tax HELP!!!

I have doubts about sales tax, but since you stayed in California for so long, you will probably not be able to get out of property tax. We all pay it, just as if you stayed in Wash. Death and Taxes will always get you. _____Grant.
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Old 30-10-2014, 23:06   #9
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Re: Sales use Tax HELP!!!

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I have doubts about sales tax, but since you stayed in California for so long, you will probably not be able to get out of property tax. We all pay it, just as if you stayed in Wash. Death and Taxes will always get you. _____Grant.
Perhaps you could explain the reasoning behind those doubts?

I bought a car 18 months ago, and just sold it. Clearly I had no intention of keeping it long term, so I should get my sales tax back.

Are you saying that everyone should pay sales tax on TVs, cars, planes, appliances, you name it, except for boat owners who shouldn't have to pay as long as they keep moving the boat and say they're not intending to come back? In what way would that be fair?
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Old 30-10-2014, 23:47   #10
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Re: Sales use Tax HELP!!!

Believe the tax people use March as the date of record for owing taxes. If you are in a slip at that time, you'll get dinged for the tax. Not sure about boat yards but we got hit for the tax in a do it yourself boatyard on a vacant lot in Costa Mesa many years ago. The marina's are required to report whose there. The California Tax authorities make the Stasi look like a Boy Scouts. If you bought the boat in WA, you should have paid the tax there so they will credit you with that tax paid. Other than that, you'll owe saies tax over and above the differential between CA and WA tax. The Counties also assess a use tax annually but it's not nearly as onerous as their sales tax.

People must really love the weather in CA. If you make any real money there, the State and Fed's will get you for 50% of your income not including the 15.3% FICA tax on the first $113.000.
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Old 31-10-2014, 00:10   #11
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Re: Sales use Tax HELP!!!

Hey Prism,

We have been following your blog for a while. Keep up the posts. If you leave a state before 90 days after the sale without intention to return you do not owe taxes in the state of purchase. If your would have moved the boat strait from Washington to Mexico, I think you would have been good to go. Unfortunately, because the state can prove residency in California for a period of 18 months, you will have to pay sales tax in California. Keep us posted.
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Old 31-10-2014, 00:11   #12
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Re: Sales use Tax HELP!!!

Quote:
Originally Posted by MarkSF View Post
As someone who does pay his sales tax, here is my take :

You were resident in the states when you bought the boat, and were for another 18 months afterwards. That means you should be paying sales tax SOMEWHERE - either WA, CA, or some other home state. The spirit of the law is not that you can just keep moving the boat around, and never pay sales tax.

I don't know what on earth made you think you could avoid it.

Cough up the cash, you haven't got a (moral) leg to stand on.
There is nothing "moral" about paying taxes and you don't make yourself a better person by being "someone who does pay his sales tax". Likewise, there is nothing immoral about not paying taxes if you are not legally required to. Its just a question of the law and whether it applies or not. There is no such thing as a "spirit" to tax laws. Some states don't have a sales tax, so if the person bought a boat in such a state and stayed there, should they just make a donation to California?
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Old 31-10-2014, 03:19   #13
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Re: Sales use Tax HELP!!!

The law is that as long as the boat is registered in CA, you pay taxes on it, period. Now, the sales tax issue may need to be worked out with the assessor in the county where you are registered. Yes, CA is hard to get out of. Mo' bettah you register the boat in another State!

But you'll still have to sort out the fitting out business. Good luck. Maybe an attorney could help, maybe hinder.



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Old 31-10-2014, 04:57   #14
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Re: Sales use Tax HELP!!!

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Originally Posted by Ann T. Cate View Post
The law is that as long as the boat is registered in CA, you pay taxes on it, period. Now, the sales tax issue may need to be worked out with the assessor in the county where you are registered. Yes, CA is hard to get out of. Mo' bettah you register the boat in another State!

But you'll still have to sort out the fitting out business. Good luck. Maybe an attorney could help, maybe hinder.



Ann
Actually, the law is that as long as the boat is physically in CA as of a certain date you pay taxes, regardless of registration/documentation.
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Old 31-10-2014, 05:10   #15
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Re: Sales use Tax HELP!!!

I have a major issue with property tax myself, I think its wrong plain and simple. I see it as having to continue to pay for something that I own, and that's not right.

But, you got caught plain and simple, they are going to get their money. You are most likely like me, I make good money, but not enough to afford to pay tax attorneys etc. to keep me from paying taxes, because frankly the wealthy pay little if any in taxes.

I sold a boat and my airplane in Jan of this year, guess what, I still get to pay property taxes on both, even though I haven't seen either nor had use of them for the last ten months or so.

I bought our boat in FL, paid FL taxes and keep it in FL, with it registered in FL., Home port in Fl
My understanding is if Ga. finds out about it, I will owe Ga property taxes each year as I'm a Ga. resident

I think if you hadn't put your boats home port in California, you might have a more believable case, that won't help.
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