Use Tax When Buying a Boat

[sailamaryllis]

We are residents of the USVI. We are interested in a boat for sale in California. Our intention is to buy the boat, gear-up and leave. Will we be expempt from use tax? Is there a 'grace period' that allows you to get ready to leave (like 30 days to get out of the state?). The CA tax info that I've looked at online applies to CA residents. I can't find anything about non-residents coming to CA to make a purchase and then leaving. The boat is US documented and we will change the registry from CA to USVI. Anyone have any experience with this?

[bobconnie]

Change the Fed Registration, Change the hailing port, that should handle it ! Im not to sure how long you have to leave after the sale but this has worked for me buying boats in Cali and registering in AK and OR both and was never botherd! just my 2 cents

[MarkSF]

Originally Posted by sailamaryllis

We are residents of the USVI. We are interested in a boat for sale in California. Our intention is to buy the boat, gear-up and leave. Will we be expempt from use tax? Is there a 'grace period' that allows you to get ready to leave (like 30 days to get out of the state?). The CA tax info that I've looked at online applies to CA residents. I can't find anything about non-residents coming to CA to make a purchase and then leaving. The boat is US documented and we will change the registry from CA to USVI. Anyone have any experience with this?

Click below.

FAQ - Use Tax Exemptions or Exclusions - Board of Equalization

Under (d). The 12-month rule seems to apply. It must be in California for less than 6 months out of the first year to avoid use tax.

There is also something about registering it out of CA. Presumably in the case of a documented boat, that means changing the registered address to the USVI.

[Benz]

Make sure you check all the necessary squares--CA is the Devil when it comes to squeezing taxes, and they'll send out spurious bills hoping you are sucker enough not to contest them. It may be wise to hire a lawyer (not surprisingly, there's a need for them) to make sure everything is done correctly and you are assured that you owe no taxes.
Good luck

[markpierce]

It's not about your residency. It's a matter of the boat's location.

[prof_mariner]

Back when I worked in San Diego people would take delivery offshore and then do their repair / fitting work at Baja Naval in Ensenada. I've not been back in a long while so don't know if they're still doing that, but as others have said, even then the California tax man was just plain evil.

[MarkSF]

Originally Posted by prof_mariner

Back when I worked in San Diego people would take delivery offshore and then do their repair / fitting work at Baja Naval in Ensenada. I've not been back in a long while so don't know if they're still doing that, but as others have said, even then the California tax man was just plain evil.

Funny, as I just spoke to someone over the phone about my boat's property tax bill, and they were nice, helpful, and fixed my problem right away.

[MarkSF]

Originally Posted by Benz

and they'll send out spurious bills hoping you are sucker enough not to contest them. It may be wise to hire a lawyer (not surprisingly, there's a need for them) to make sure everything is done correctly and you are assured that you owe no taxes.
Good luck

Utter rubbish. They'll send a use tax bill to the new registered owner. Should they have telepathic powers as to where the new registered owner is going to keep the boat?

[prof_mariner]

Originally Posted by MarkSF

Funny, as I just spoke to someone over the phone about my boat's property tax bill, and they were nice, helpful, and fixed my problem right away.

Sounds like a change for the better, then. Back when I was in San Diego the tax man would walk up and down the docks writing down info for all the out of state boats that were assembling for the Baja Ha Ha and then send them all invoices for use tax. As a delivery captain the tax situation got me a bunch of jobs doing offshore deliveries and driving boats down to Baja Naval. But that was San Diego and over 12 years ago. No doubt things have changed by now.

[Benz]

Dear Marksf:
You should rejoice that your experience with them was good. But you should not scorn others who have experienced depredations at the BOE's hand just because you did not. My experience with them has been that they are shamelessly deceitful and evil beyond imagination. Polite? always! But it is a poor veil for their unrighteousness.
I hope your relations with them in future will always be amicable.
Ben

[JayCall]

This issue just keeps popping up. In CA, if you buy from a dealer, you will pay sales tax, the fact that you are removing the boat from CA wil not affect that. The dealer will collect the sales tax and remit to CA. In CA, the sales tax is a tax on the retailer whether he collects from the customer or not.

If you buy privately or through a broker, Use tax is due (generally at the same rate as sales tax). Unlike the sales tax, use tax is a tax for the use of the property in CA. That is the key issue-use of the property in CA. If you are removing the boat from CA, no use tax will be due, although you may have to prove that you removed it. This all assumes that you have no intention of registering the boat in CA. Note that the broker is not obligated under CA law to collect the use tax as he is not a "retailer". If a broker shows you closing docs with the use tax included, have them remove it. If you intend to to document the vessel, I assume it will be in your home of USVI. If that is the case, you will probably be in the clear as CA gets its information from the USCG database. Your boat will not even show up as it will not be documented with a CA homeport.

In short, buy the boat, do not pay use tax, move it out of CA, document it in USVI, sail alot!

[prof_mariner]

@ OP - Don't take any of our words for it. Go to the link that MarkSF posted in reply #3 and read it. If you have any questions call the state tax office and ask. Be sure to get the law in writing and keep a copy just in case it comes up later. The tax office in California may be polite but they certainly are ruthless when it comes to collecting tax. Back when I was in California I called the tax office in San Diego and asked how long a boat could be in California before use tax would be charged and I was told 24 hours! According to the link above, that seems to have changed, but be sure to investigate this thoroughly otherwise break out your check book and be prepared to pay.

[Celestialsailor]

I'm kind of going through this right now. I purchased a boat in 2009 from which was at a brokerage in New York. At the time I lived in Hawaii. so actually the transaction had nothing to do with Ca. But the boat was trucked and dry-docked in Ca., 2009. I sold it in early 2011. I recently got a use tax bill for it. I stated the facts to them through a letter that I have mentioned here. I don't do well on the phone with these people. I'm keeping my fingers crossed that they go away.

[prof_mariner]

@Celestialsailor - I know it's too late for your situation now, but in retrospect you probably would have been better off dry docking the boat in OR or WA instead. I don't know how much things have changed but 12 years ago it seemed like things became more lax the further north you traveled. San Diego was probably the worst and the worst time of year was late Summer when all the snow birds rallied for the Baja Ha Ha.

[Celestialsailor]

Originally Posted by prof_mariner

@Celestialsailor - I know it's too late for your situation now, but in retrospect you probably would have been better off dry docking the boat in OR or WA instead. I don't know how much things have changed but 12 years ago it seemed like things became more lax the further north you traveled. San Diego was probably the worst and the worst time of year was late Summer when all the snow birds rallied for the Baja Ha Ha.

I've heard this many times about SD. Along with the Harbor "police" banging on your cabin 2am. to check permits and such. On my way south, I will most likely check in to the docks only to clear out of the U.S.
It's a shame when your own country is this unfriendly