Avoiding California tax (legally)

[Water Dragon]

In a few months, I expect to be going to the west coast to buy a boat. It will be an inexpensive boat that I will be fixing up. Given that I will be doing this work in the winter, California seems like the best choice of where to go. (Besides, Oregon and Washington don't seem all that much better as far as taxes and fees go; I'd prefer to register in my home state of South Dakota.)

My intention is to stay only long enough to get the boat seaworthy, and then go traveling state to state, and later internationally. California DMV web site says vessels "must be registered in California within 120 days of being brought into the state, if it will be used upon California waterways the majority of the time." Without knowing what boat I will get and what work it needs, it's hard to say if 120 days will be enough to get my work done. Does time spent hauled out count toward the 120 days? If the boat leaves California, even for just one day, does that reset the 120 days?

[Kenomac]

Offshore delivery, then make sure you're not in any marina or yacht storage facility when the taxman takes the annual inventory sometime between Dec. 15 and the end of February. It's the only way. Been there, done that.

It only works for non Cailfornia residents.

[CrustyChief]

Move it to Oregon as soon as possible. Take delivery offshore, fix and relocate. Register in Oregon, no sales tax or property tax.
Good luck

[Water Dragon]

Regarding offshore delivery: will it work just as well to drive to Arizona and sign the papers there? I ask in case I end up with a boat that needs some repair before it can safely sail three miles out to sea.

[CrustyChief]

Originally Posted by Water Dragon

Regarding offshore delivery: will it work just as well to drive to Arizona and sign the papers there? I ask in case I end up with a boat that needs some repair before it can safely sail three miles out to sea.

Are you gonna truck it to Arizona? If not, taking delivery offshore is noted during the sale transaction by Lon and Lat to show it was in international waters.

Being from Nevada, I chose Oregon to dock my boat in because both California and Wash want there property tax and sales tax. My boat was close to half a mil, so very important for me to consider options. If your initial purchase is say less than 50k, then it's a different story. But leave it in Cali or Wash long enuff, your gonna get a visit by Mr. taxman.

Hope you get a smoking deal on a boat that can't make it initially to sign papers on international waters. How you gonna do a decent survey if it won't?

Best of luck

[Jman]

Many other threads on this. If your intention is operate and locate the boat (in most states that collect tax) for a given period of time (120 days CA, 90 FL, etc.) then you are liable for the taxes. It does not matter what the hailing port is, where you live, or if you pop out of the state for a few days (the later probably counts as tax evasion). If your intentions are clear, you are liable for the tax. Can/will they catch up with you? Who knows? It does not make it any less illegal.

I am not sure I understand the international water argument. Buy the boat in California, and move it as quickly as possible to an untaxed state, if that is where you are going to operate out of. Buying boats in one state state, moving it to its "home", completing any state registration, tax obligations, etc. happens every day.

It is amazing to me that no one in a state that collects taxes thinks twice about paying sales tax on their cars, flat screen tvs, washing machines, etc. but will jump through just about any kind loop hole they can find with a boat.


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[Water Dragon]

Originally Posted by Jman

It does not matter what the hailing port is, where you live, or if you pop out of the state for a few days (the later probably counts as tax evasion). If your intentions are clear, you are liable for the tax.

Hi Jman. To answer your implied question: no, I don't intend to continually pop in and out of California to evade the tax. I only want to buy a boat, get it into suitable condition for a voyage up the coast (which repair and refit may take several months) and leave the state, at which point I'll be pretty much done with California other than maybe an occasional short visit.

Originally Posted by Jman

It is amazing to me that no one in a state that collects taxes thinks twice about paying sales tax on their cars, flat screen tvs, washing machines, etc. but will jump through just about any kind loop hole they can find with a boat.

Where I come from, tax on vehicles is 3%. I buy inexpensive cars; the most tax I've ever paid for a single purchase was about $150. Cali sales tax for, say, a $10,000 boat would be more than I've ever paid a state for ALL taxes throughout any given year. Yeah, I don't make much, and I don't spend much, and that tax is a big deal to me. If legally avoiding the Cali tax should prove impracticable, I'll try to find a boat in Oregon and work on it in the rain all winter. Or find something else to do till spring. I don't even really mind if I get a $5,000 boat and spend six months or more fixing it up. It's all good. Thanks for the input, everyone.

[SV THIRD DAY]

We have played this game three times and screwing up the smallest detail or paperwork will cost you the tax my friend. So first if you are serious (and with no offense to anecdotal stories and advice givers in this thread) don't take second hand or dated advice that could cost you thousands of dollars and a California Boat lien if wrong.

Contact someone who does vessel documentation for a living and knows the latest ins and outs.
We used the Dona Jenkins Agency for all three of our boat purchases to successfully avoid the California Taxes.

Dona Jenkins Maritime Document Service, Inc.

Call them or email them for assistance, but if there is serious money at stake then get some expert advice and assistance.

[TacomaSailor]

You need to read the many other threads about California Tax. This is not a simple subject. I have worked with a California Tax Attorney for some time and am still rather confused and am trying to do exactly what you are considering.

There are two different taxes to consider and the timing and requirements are very different for each one:

Use Tax and Personal Property Tax

Use tax is what many would consider Sales Tax and is due either within roughly 60-days of receiving the bill from the California Tax people or within 12-months of purchase if they do not send you a bill (documented boat) or on the last day of the month after your purchase if undocumented.

There are various ways to get around the Use Tax but they are complicated and require very careful consideration of many issues of timing, intent, locale, usage, maintenance, license of the service provider...etc.

Personal Property Tax is what is due if you keep the boat anywhere in California and do not pay a similar tax in another state. This tax is dependent on local tax rates but will be roughly 1% of the "assessed value." That value is determined by you in your declaration of the sales price when you pay the use tax. Boats found in California around January 1 seem to be the ones that make it onto the Tax list.

Taking the boat out of the state for a month or so will not get you off the tax list if you had a slip rental agreement immediately before and after the month you were gone.

California is very aggressive about tax collection and will hound you anywhere in the US if they feel you have tried to dodge a tax they consider legitimate. The key to that statement is 'what they consider legitimate.' They (Board of Equalization) decide if you owe the tax, they review your claim it is not owed, they rule on your claim, and then they review your appeal. My attorney says it typically costs several thousand dollars to get your claim of 'tax exemption' out of the BoE system and into the state court system.

You cannot fight them once they decide you owe a tax.

WHY come to California? Florida has just as many cheap boats and is much kinder in regards taxes.

Taking the boat to the Ensenada marinas to avoid California Taxes may not work, as a money saver, any longer because you must pay hundreds of dollars to get the boat into Mexico and then $21 every single time you want to cross the border from the US back into Mexico and you need a US Passport which costs $110 if you do not already have one.

[SV THIRD DAY]

Just crossed the border at TJ twice in the last week....nothing different, no $21 fee.

[TacomaSailor]

Originally Posted by SV THIRD DAY

Just crossed the border at TJ twice in the last week....nothing different, no $21 fee.

Sorry - I forgot to qualify it - IF you walk or plan to stay more than 7-days. At least that is what the head of Mexican Immigration said in an interview that was published in the San Diego newspapers.

It's Mexico's turn to boost border enforcement -- with a new pedestrian crossing into Tijuana - LA Times

"Mexican immigration officials are preparing to step up enforcement of a rule stipulating that foreigners present passports when entering Mexico and that those on business or who plan to stay for more than a week pay a 330-peso fee, about $19."

Another quotation stated it was a single entry permit.

But, it's Mexico and it could have all changed by now.

[denverd0n]

So, to summarize all of the above. If you want to legally avoid California tax, it's really pretty simple:

1. Don't buy the boat in California.
2. Don't keep the boat in California.
3. Don't stay very long when passing through California.

Fail on any one of these and you can expect a visit from the California tax man. Simple. Right?

[zeehag]

if you buy a boat in kali you want to avoid the sales tax, take it out of country for a year. arnie made the length of time 365 days from 90 as one of his last acts. so take boat to ensenada as do most other folks, and keep it in a marina in enseanda and go from there. the repair prices in ensenada are similar to cali prices, a s baja naval is a usa run company with proximity to the source of their parts, san diego marine exchange.
you do NOT have to register with state as well as document with uscg. one is adequate. some states require registration as well as documentation.
have fun. there are many unloved boats in kali. you should be able to find one that suits ye fairly easily.
if you cannot move boat immediately out of cali, you have 1 month to do so. after one month you will be paying the sales tax of about 8.75 percent of purchase price, as assessed by the cali bureau of equalization. if you state register, you pay the tax to the dmv.
if you choose to stay the month in kali, you MUST advise the ca board of equalization directly .

[zeehag]

Originally Posted by TacomaSailor

You need to read the many other threads about California Tax. This is not a simple subject. I have worked with a California Tax Attorney for some time and am still rather confused and am trying to do exactly what you are considering.

There are two different taxes to consider and the timing and requirements are very different for each one:

Use Tax and Personal Property Tax

Use tax is what many would consider Sales Tax and is due either within roughly 60-days of receiving the bill from the California Tax people or within 12-months of purchase if they do not send you a bill (documented boat) or on the last day of the month after your purchase if undocumented.

There are various ways to get around the Use Tax but they are complicated and require very careful consideration of many issues of timing, intent, locale, usage, maintenance, license of the service provider...etc.

Personal Property Tax is what is due if you keep the boat anywhere in California and do not pay a similar tax in another state. This tax is dependent on local tax rates but will be roughly 1% of the "assessed value." That value is determined by you in your declaration of the sales price when you pay the use tax. Boats found in California around January 1 seem to be the ones that make it onto the Tax list.

Taking the boat out of the state for a month or so will not get you off the tax list if you had a slip rental agreement immediately before and after the month you were gone.

California is very aggressive about tax collection and will hound you anywhere in the US if they feel you have tried to dodge a tax they consider legitimate. The key to that statement is 'what they consider legitimate.' They (Board of Equalization) decide if you owe the tax, they review your claim it is not owed, they rule on your claim, and then they review your appeal. My attorney says it typically costs several thousand dollars to get your claim of 'tax exemption' out of the BoE system and into the state court system.

You cannot fight them once they decide you owe a tax.

WHY come to California? Florida has just as many cheap boats and is much kinder in regards taxes.

Taking the boat to the Ensenada marinas to avoid California Taxes may not work, as a money saver, any longer because you must pay hundreds of dollars to get the boat into Mexico and then $21 every single time you want to cross the border from the US back into Mexico and you need a US Passport which costs $110 if you do not already have one.

that is frank bs.
visa for 6 months is 23 usd. 6 months. it is a singlel entry visa. there are other types of visas available in mexico, some multiple access.. by car ye dont have to pay 23 usd, as ye dont check into mexico when coming here, as ye do when sailing into a port of entry .
so much false info.
when mexico plans on changing something, it takes a while to effect. so faar, passport requirement is one of those developing situations wherein you can still enter using drivers license.
inaccuraciies and fear mongering do not make friends nor educate souls.
people still cross border in cars with use of cali drivers license.
passsport is useful for travel, yes, but baja cali mexico is still southern cali. there is nothing special about baja.
what folks do not understand about baja is that it is still southern california. english is spoken, usa parts are available readily. i found ensenada to be an extension of lot angeles and san diego. however, marinas are available for the used to be called 90 day yacht club with folks waiting out the time parameters for avoidance of cali taxes.

[Departing2017]

We're going through this right now. We took delivery three miles offshore. Sailed back into San Diego to drop off seller (acceptable under state tax law) and dropped the vessel at the yard for a bottom job (also acceptable as long as receipts document all dates the boat is in California).

Once the work was done, we sailed her to her new slip in Ensenada


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