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Old 27-01-2013, 06:46   #1
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Tax Implications

Firstly I am a reident of the UK. I recently purchased a Vista sundeck trawler from a broker in Newport RI. At the time of the purchase the vessel was registered in the USA to an American owner. Once the transaction was completed, I decided to keep the vessel in the USA for a period of time. I tried to obtain insurance from an American company, but as a UK resident with no permanant address in the USA ,this was impossible. I eventualy obtained insurance from a UK company on the condition that the registration was changed to UK . This I promptly done.
It is my intention to cruise the Atlantic ICW from Newport RI to Norfolk VA this spring ,with my family.
This now poses two questions !!!
(1) What tax liabilities do I have to worry about.??
(2) What official document do I require to complete this journey ??

Next year I intend to continue South in the vessel with the eventual destination being Florida. I am aware that my tourist visa only allows me 90 days in the USA. Anyone have any thoughts ?
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Old 27-01-2013, 06:59   #2
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Re: TAX IMPLICATIONS

1) Should be ok on Federal tax as it was previously a US boat. Could possibly get caught by state tax rules though but you usually have 6 months in any one state before you have to worry about that. Check the state laws for anywhere you plan to stay for a significant length of time.

2) You need to get yourself a Cruising License NOW, otherwise, as an 'alien' you have to report to customs and be inspected everytime you move to a different port. With a Cruising License ( valid for one year ) you only have to phone CBP when you move.

Here's a link to the CBP page https://help.cbp.gov/app/answers/det...sing%20license
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Old 27-01-2013, 11:25   #3
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Re: TAX IMPLICATIONS

Rhode Island has no sales tax, but Florida certainly does and Virginia might. Check the BoatUS web site for a summary of state sales tax laws. So in either Virginia or Florida, you will have to pay their sales or use tax. You won't have to pay both. If Virginia's tax rate is 5% you will have to pay that and if Florida is 6% you will have to pay another 1% when you get there.

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Old 27-01-2013, 12:40   #4
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Re: TAX IMPLICATIONS

You should be very cautious about believing tax information from an internet board - including what I'm about to say

The good news is that you won't owe any US taxes because you are a foreign flagged boat although some states require that you have a valid cruising license to qualify.

The problem is that you normally can only apply for a cruising permit at the first port of entry. This would mean that you'd have to leave (Bermuda would be good but not at this time of year) and then return to get the permit. Without the permit, it will be very difficult to cruise the ICW as you will have to clear in at each stop.

You might also want to explore whether you can get a state "registration" in RI. An Australian who bought my boat in RI was able to do this without a RI address and with a foreign passport (although the boat has to be "used" in RI). RI charges no tax and once a boat is RI registered you won't face taxes in other states as long as you don't stay too long. Unfortunately, I doubt that you can be both state registered and foreign flagged at the same time.
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Old 27-01-2013, 12:43   #5
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Re: TAX IMPLICATIONS

No, David. No state sales tax canbe imposed except on actual SALES made IN that state. Since the sale here was made in RI, no other state sales tax can apply to it.

And since the OP is not a resident of any state, no state can impose "use tax" on it, or personal property tax, or any of the other taxes. His UK-flag also removes it from those considerations.

All he has to worry about is RI (no sales tax, no problem) and getting the cruising permit. If that wasn't obtained within a certain time frame, he'll be required to remove the boat from US waters for at least 15 days while re-applying. If they determine that he wasn't in compliance to begin with (took too long to apply) they may not issue a permit, that's discretionary. So there is a clock ticking on this.
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Old 27-01-2013, 12:59   #6
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Re: TAX IMPLICATIONS

States can and often do impose a sales tax on a boat that is kept in the State longer than a set time. The tax is the difference between what was paid at time of sale and what would have been owed if the sale had happened in that State. Don't know about the East Coast but Washington State, which has no income tax, tries to nail any boat that is brought into the State. From what I hear there is no time limit so you could have owned the boat forever and Washington would still try and nail you. You'll want to check what any State that you might be spending a long time in treats imported boats. Most States have statute of limitations for time of ownership on tax liability, a year in CA, IIRC, but you do need to check with the State. Wouldn't affect you if you aren't in the State long enough to trip the importation threshold. Your UK registry may get you out of the hassle but check.
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Old 27-01-2013, 13:47   #7
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Re: TAX IMPLICATIONS

Peter-
There has to be what they call a "nexus" before a state can impose a tax, and for a sales tax, a sale and/or registration have to be involved, not just keeping the boat there. (Although the keeping may require the registration, etc.) Several members have referred to WA state charging an excise tax--which is another animal entirely.
While some states will require a state RESIDENT to pay the difference in sales tax rates, that's a use tax or other tax, again not a sales tax. I'm not trying to debate words here, but if the OP goes looking for taxes, there are many kinds of taxes and sales tax will NOT be an issue for him, as the boat is foreign flagged and no nexus exists to trigger a sales tax in any other state outside of Rhode Island. He's not a resident, he's not registering, etc.
"but check" You're certainly right about that. With every tax agency having web sites and that new telephone-thing installed, it is SO easy to check these days.
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Old 27-01-2013, 14:19   #8
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Re: TAX IMPLICATIONS

Correction for U.S. residents and U.S. registered or documented boats. States can and do impose a use tax on boats that stay a certain amount of time in their waters, varying from 30 days but probably averaging 90 days. However, there are often exemptions available for various reasons, like having paid a tax in another state already or having owned the boat for a certain amount of time out of state. But, the bottom line is the use tax can apply even if you are not a resident of that state. For example, if a U.S. resident bought a boat in RI and brought it to Florida within 6 months of buying the boat Florida would impose a use tax on the boat if it stayed more than 90 days, no matter where the owner is resident.

However, how all this applies to a UK citizen owning a UK registered boat I have no idea. It would seem to me he has to somehow get a cruising permit for the vessel since it is now UK registered. I think you might have to visit the customs folks in Newport to sort it out, but hopefully it doesn't require you to first leave the country and then return with the boat.
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Old 28-01-2013, 07:37   #9
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Re: TAX IMPLICATIONS

Wow. Yet again, all kinds of GROSSLY inaccurate information being passed off as facts.

Do not believe ANY of the above. Find out for yourself. Each state has a website with information about what will trigger a requirement to pay sales or use tax, and what will trigger a requirement to register the boat. You need to take the time to go to those websites for each state you plan to spend time in.

Good luck.
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Old 02-02-2013, 04:44   #10
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Re: TAX IMPLICATIONS

Many thanks for all the replies.
I have contacted homeland security at Providence RI.
There are two options open to me.
(1) Leave the US and return, clearing customs, then apply for a cruising licence.( For me this is not an option)
(2) Telephone homeland security at every marina I dock at. They will then decide if they need to board my vessel . A fee of $17.50 FOR EVERY SUBMISSION. Each area has a sector office, for instance, Newport RI is in the New England sector, this earea extends all the way down to New York
Clearing customs will not be an issue as we will complete that at Boston O' Hare airport.
Before I leave Newport RI on my journey South, I will present my self to Customs & Homeland security at Providence RI, TO CONFIRM ALL OF THE ABOVE.
The last thing I need, is to be arrested for non complience with Homeland Security.!!!!!!!!!!!!!
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Old 02-02-2013, 05:17   #11
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Re: TAX IMPLICATIONS

I bought an American boat in Georgia in 2011. Had it reregistered in Australia. Got a cruising permit from the local customs office (didn't have to leave and reenter) but also had to inform the authorities everytime I moved it in the States. You need a B1/B2 visa.
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Old 02-02-2013, 06:44   #12
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Re: TAX IMPLICATIONS

Thanks for that, I think I will stick to plan A. That is, visiting customs and immigration at Providence RI before I leave Newport RI.
The officer I spoke to at customs Providence was quite a decent guy. I have his name so I will ask for him when I arrive there. All I want is a definative answer and a piece of official paper to back it up. That way, I should be able to keep the right side of the law all the way down to my destination, Norfolk VA.
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Old 02-02-2013, 07:37   #13
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Re: TAX IMPLICATIONS

"All I want is a definative answer and a piece of official paper to back it up."
Exactly right.
Unfortunately in the US, what someone tells you verbally doesn't bind or excuse them or you if they were wrong. Some years ago I had a string of problems (not with Customs) and recorded a number of calls. Every time someone said "That's wrong, I/they could never have said that" I said "Would you like to hear the tape?" and was greeted with dead silence. Oddly enough today, almost all smartphones sold in the US have the call recording feature permanently disabled. Apple doesn't provide code for it, and Android provides code (and requires all phones to carry the complete code set) but the phone carriers remove it and lock it out. Hmmm...

Your best bet is to either write to your contact, on paper, or send a written (paper or email) enquiry to Customs & Immigration, and ask them specifically "I was told...I would like to confirm that I understand...1..2...3...correctly?" and ask for a written response. And often when you ask for a written response from our bureaucracies, your enquiry simply disappears, or is answered by a boilerplate that is totally off point, as no one wants to be responsible for an answer.

Sometimes you get lucky, and you'll get the response.

I've been told, and read on the ICE(?) web site some time ago, that a cruising permit is normally granted only if you are purchasing the boat in the US, or you are OUTside the US when applying for it. So the advice to clear in and then apply for it, is something to confirm in writing at the earliest opportunity.

If they can't behave hospitably, just tell 'em you're a Brit, you don't accept the Treaty of Paris, and you've returned to sack and pillage DC, again. They'll either give a good laugh and welcome you in, or lock you up for a long time.

:-)
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Old 02-02-2013, 07:48   #14
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Re: TAX IMPLICATIONS

Yep, I agree with that. I have never had a problem with US officials on my numerous trips to the USA. It's the accent I think.
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Old 02-02-2013, 07:51   #15
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Re: TAX IMPLICATIONS

I've had good experiences when dealing with US Customs when I've gone to their offices in a "can you help me?" mode. The enforcement people in the field are another matter.

I'd make one more try to see if they could waive the requirement to leave the country before getting a cruising permit. Unusual circumstances. It's winter and it wouldn't be safe for your boat. You bought the boat too late in they year to leave, etc.

Might work.
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