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Old 21-07-2008, 12:32   #1
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Michigan Use Tax

Does anyone know if the broker fee can be deducted from the total sale price to reduce the use tax penalty in Michigan? The boat is being purchased out of the State.

In my case the 10% deposit check was written to the broker not the seller. It seems like I should win on a technicality. Furthermore, without a broker the actual sale price (hence the true boat value) would have been less.
Many Thanks!
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Old 21-07-2008, 12:41   #2
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If Michigan is like states that I've registered boats in, they will go by the bottom line price on the sales agreement.
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Old 21-07-2008, 12:55   #3
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Quote:
It seems like I should win on a technicality.
Not to the state. The total sales price on the invoice shows you prepaid 10%. The broker has a contract with the seller that says the seller pays the broker a commission. Your contract says you are paying the seller. With two written signed contracts in agreemnt I'm not seeing a technicality. All the money adds up.
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Old 21-07-2008, 13:01   #4
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Furthermore, without a broker the actual sale price (hence the true boat value) would have been less.
I think you could also say there would have been no sale and so you would not have bought the boat and you would now owe no tax.

The key is there was a broker. If you had paid less the state would not ask for more tax. I think any tax collector would be fair about that. I think if you could have paid less you surely would have done so.
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Old 21-07-2008, 13:19   #5
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Let me state it a different way. If I say to the seller let me pay the broker his fee instead and I write him the check for his fee. Then the bill of sale would reflect my total out of pocket less the sellers fee. What difference does it make to the seller or the broker. The bill of sale is what the state uses to asses the use fee.
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Old 21-07-2008, 13:27   #6
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how much difference can it possibly make, if you are using the vessel in a given state surely you should pay the taxes on the total purchase price. Part of this goes to keeping the waterways clean etc etc. Not trying to flame you, but lots of people complain about the lack of resources, state of the water etc, but no one wants to pay the bill
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Old 21-07-2008, 13:43   #7
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Rhosyn Mor, I'm sure the great State of Michigan would be happy if you donated $2000.00 to their general fund. I generally donate to worthy causes. Cheers!
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Old 21-07-2008, 14:07   #8
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Let me state it a different way. If I say to the seller let me pay the broker his fee instead and I write him the check for his fee. Then the bill of sale would reflect my total out of pocket less the sellers fee. What difference does it make to the seller or the broker. The bill of sale is what the state uses to asses the use fee.
How you work the money is not the issue it is about the purchase contract. The tax is on the contract not the money. Were it otherwise there would be more tax scams than you could think of. The seller wrote the contract with the broker and you write the contract to the seller using the broker.

The broker collects his fee by contract he has it locked solid. Doing it the way you suggest would be ilegal in most states since brokers are licensed. The only reason what so ever is not to protect buyers (in case anyone thinks so). They don't want the brokers to scam the tax money. They saw you coming with this one a very very long time ago. The broker has records subject to verification.

The better approach is don't buy the boat but tell the seller to expire the listing contract with the broker and then pull the listing then take the same money from you directly. The seller figures you want to scam the broker so why wouldn't you scam him and tells you to take a flier. If the broker could prove it they could sue the seller. The seller takes all the risk on this one and makes no additional money. The system does not favor the tax scam.

We had a really good one a while ago. You sail the boat offshore and buy the boat. Since you bought the boat in international waters do you still owe the tax?
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Old 21-07-2008, 14:51   #9
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The Michigan tax is a "use tax" and not a sales tax (not sure what the difference is) on the price of the asset. That said, I will surely pay all of the tax owned and was just exploring the nub of the issue (to see if I was missing anything.) Many Thanks!
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Old 21-07-2008, 14:58   #10
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Sales tax is rendered at the time of purchase and use tax is when you bought it some place else or it was a delayed transaction. It covers buying the boat in Illinois and hauling it home to Michigan too. It coveres expensive things you buy overseas and declare on the cutoms forms. Some states are more agressive at collecting it than others.
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Old 13-09-2008, 20:30   #11
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I bought a boat out of state and brought it to Michigan. I paid a SALES tax of 6% on the sale price.
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Old 16-09-2008, 18:00   #12
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Some years ago, I bought a new boat. While there were no broker fees, there were shipping, handling, and preparation fees, all of which managed to raise the cost well above the sale price of the boat. When my accountant looked at the bill of sale, he recommended that I have all associated costs billed on seperate invoices. The dealer balked and I cancelled the entire contract for the boat. To say the least, he couldn't rewrite the invoices fast enough.
My account told me that, according to state law, when shipping, handling and set-up were billed seperate invoices, they weren't taxed because the state does not tax labor charges.
My advice to you is to investigate your state laws concerning what is required to be legally taxed and what is exempt. That will keep you in good stead with the tax boys.
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Old 16-09-2008, 18:10   #13
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The taxes are the same

Sales and Use taxes are the same at 6%. 6% of 10k = $600 not $2k. But the reality of it is if your bill of sale doesn't show the $10k in the purchase price it's highly unlikely anyone would ever know. We can't keep the violent criminals in jail let alone the white collar crooks.

I won't tell as our problems in this state reach far beyond your $600
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Old 17-09-2008, 04:36   #14
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When buying used boats with outboard motors, buy the motor separately. Most states have a tax on BOATS, collected when you register the BOAT with the state.
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Old 17-09-2008, 06:33   #15
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???

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Originally Posted by rigamarole View Post
Sales and Use taxes are the same at 6%. 6% of 10k = $600 not $2k. But the reality of it is if your bill of sale doesn't show the $10k in the purchase price it's highly unlikely anyone would ever know. We can't keep the violent criminals in jail let alone the white collar crooks.

I won't tell as our problems in this state reach far beyond your $600

I think if you do a closer read on the note it implies that the tax liability on the broker fee is the $2K...

Furthermore, as citizens of the US we are responsible to pay all of the legally owned taxes not more! No where in the thread is it implied that anyone is trying to beat the State of Michigan out of what is legally owed.
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