Buying a St. Martin Flagged Vessel as a US Resident.

[joshrosenthal1]

Please help. I have found a vessel that my wife and I love. it is located in Grenada and flagged St. Martin (France).

We have no idea about the tax implications, and or the flagging differences however I am a US resident and my wife a US citizen. The seller says the vessel was once flagged in the USA.

What are the implications of taking the vessel back to the USA, flagging her back in the USA? Or is it better to keep her flagged in St. Martin? Does that have any other benefits and access to the EU, or tax implications that we might also consider.

This area is a minefield and looking for some guidance.

Cheers

[Palarran]

Hi Josh,
You might want to do a Cruisers Forum search for other threads as this has had a lot of attention before. If you haven't done one, use the second search box.

I bought Palarran in St. Maarten. She was flagged in the Marshall Islands at the time and I changed her to BVI's. I don't plan on going to the USA for long periods so avoiding import and sales tax made sense. But it really depends on how long you will own the boat and how expensive it is. I saved about $45k in tax but have spent about $15,000 so far in document fees and having corporate doc's taken care of. If the boat's value is less than $200k, it may be worth just paying to have it documented in the US. Also, if you plan on sailing in the States, you will probably want to also.

[MarkJ]

Ring Tony Brewer, a broker in St Martin and ask him.
I think it will be easy to de-flag.
If it was previously USA flagged then tax should have been paid.

[Island Time O25]

Originally Posted by MarkJ

Ring Tony Brewer, a broker in St Martin and ask him.
I think it will be easy to de-flag.
If it was previously USA flagged then tax should have been paid.

What tax do you mean? State taxes are paid at each point of sale. Then if the owner moves to another state, or registers the boat at another state, the new state will apply the already paid tax toward it's tax and if the new state's tax is greater they'll want the difference. If the new state's tax is smaller or it's a no sales tax state such as NH or RI (for boats only) then your all set but no one will return the difference to you AFAIK.

I don't know the customs rules if the boat was originally imported to US then taken out then re-imported. Do you mean the import tax?

Awhile back I was told by the old salts (some of whom were attorneys) that prior to the 80s-90s it used to be that a US documented boat was truly exempt from state interference as far as taxes, state registration hassles, etc. Than something happened and the states got into the "hassle the owner" game and started to disregard the "exempt from state laws status" of the documented vessels. I recall reading something to that effect on USCG's own site where they said to the effect "although you should be exempt but if the states force you to register or pay the tax we have no control over it". Which I took to mean "if you have tons of $$ to litigate and can go all the way to the Supreme Court with this issue you'd probably win but otherwise just suck it up".

[joshrosenthal1]

So the boat was manufactured in the USA / taken out then flagged I. st MRtin.

I assume that buying it outside the U.S. then bringing her home will mean that the state I take her back to in the USA will want sales tax?

[joshrosenthal1]

Thanks - great idea.

[Island Time O25]

Originally Posted by joshrosenthal1

So the boat was manufactured in the USA / taken out then flagged I. st MRtin.

I assume that buying it outside the U.S. then bringing her home will mean that the state I take her back to in the USA will want sales tax?

Yes. Most states will charge the sales tax either at the point of registration (if sold by private party) or at the dealer/broker who is authorized to collect it and pass it on to the state coffers. Few states have either no sales tax like NH or exempt boats from their sales tax, like RI.

The problem arises when you register in a non tax state but then have the boat spend more than 30, 60 or 90 days in a calendar year in a taxable state (different states have different timetables for this). They'll want their cut. I've been told that some states are more aggressive than others, CA for example, going as far as perusing USCG documentation database for home ports and then sending tax demands to the owners. Never mind that designating a home port has nothing to do with the boat's actual port as the CG itself says so. And the owner is put in a position to defend a negative, often years after finding out about these demands which by then have accrued penalties and interest so that an original few hundred dollars bill is thousands of dollars and the boat is subject to a state tax seizure. Lovely.

We had in MA a broohaha few years back when Senator Kerry was deemed to be a tax cheat even though he did everything by the book. He is a resident of MA but kept his $7mil s/v Scaramouche docked in RI, which exempts boats from sales taxes. But he was running for President so he sucked it up and paid up to placate the rabble so to speak rather than stand up for all boaters and defend himself since he did nothing wrong or illegal in this regard (not a fan of his so the last part of the previous sentence pains me). It was like being forced to pay taxes in MA on a vacation RV which a MA resident buys, registers and keeps on his land in NH.

[Palarran]

Something you really should consider is not buying the boat but buying the company that owns the boat. Almost all boats that fly a flag of convenience are owned by a company that only has that one asset so if you buy the company you buy the boat. Easier and cheaper.

[sailingforfun]

I am an American with a BVI flagged boat. If you register in the US you will pay an import tax and a local state tax where you register it. I have no plans to sail in US waters, but if I did, foreign flagged vessels can get one year cruising permits to enter US territorial waters. There is US agency that publishes a list of countries that qualify for cruising permits. All red ensign flag countries qualify. I'm sure St Martin does too.

[jtsailjt]

I know nothing about the St Martin issue and think Mark has probably pointed you in the right direction on that score, but one misleading thing that has been mentioned several times is the necessity of paying state sales or use tax where you register it. That's pretty easily avoided since the boat isn't even IN any state right now and presumably won't be for awhile. For example, Maine law requires that sales or use tax be paid for any boat used for more than 30 days during the first year or ownership, or if used at all in Maine by a Maine resident during that first year. I had heard this was true so called and asked them point blank what the law was (after reading it for myself), and after doing a little checking, they confirmed my understanding. They also added that the boat must be "used" in other locations, not just put on a shelf somewhere to beat the tax laws and I should be prepared to prove that I had actually been using the boat in other locations by showing them marina and fuel, etc. receipts. So, we bought our boat in Annapolis, immediately took it to Delaware (no tax state) for a winter haulout, then USED the boat between Delaware and Maine for 18 months before finally "importing" it to Maine. Sure enough, about two months ago I got a letter from the Maine tax people telling me that I owed 5.5% of the purchase price of our boat, so I sent them a letter explaining where/when the boat had been along with copies of storage and yard bill and marina and mooring rental and fuel receipts and about a month ago I got a letter back from them confirming that I owed no sales tax since I had not brought the boat into Maine during our first year of ownership. As has been pointed out earlier, Massachusetts has a similar law but their time period is only 6 months. If you're a resident of a state and buy a boat in the state where you plan to keep it, you're out of luck but since the boat is already not in any state, I think you should find that you can easily and legally, avoid paying any state sales tax.

In Maine, we do still have to pay a yearly excise tax (even though it's documented) but that only amounts to about $175 a year.

[Island Time O25]

jtsailjt, please elucidate. After purchasing the vessel but before actually coming to ME where was it registered? Does ME allow for registration without concurrently paying the sales tax?

As far as MA is concerned I know for a fact, having went with them through several different variations on this issue for each of my 4 boats in 10 years, that a sales tax is paid at the point of registration no matter where the boat is. You want/need a MA reg. sticker - you have to pay the sales tax. Period. End of story. Now if you actually registered the boat in DE or where ever that's another issue. But that's not the situation I'm describing.

As far as documented boats are concerned (regardless of its hailing port), since no reg/sticker is required for them in MA, the tax kicks in once you're in the state for 60 days I believe, less of course any state sales tax paid elsewhere. So then it is an issue of self-reporting. The problem there is that the state can only find out about you being in the state waters if the harbor master for your in water location notifies the local city/town assessors' office that you are there, which by law they have to do for all boats within their jurisdiction as of August 1 and the city/town forwards this info to the DOR (apparently they picked that date because a lot of people launch on July 4th weekend and a lot of others haul out on Labor day weekend so the middle of the 2 dates catches the majority of active boaters in the state).

So theoretically, if you are in and out of MA in a documented boat and depart before August 1 roll call and none of the local authorities clock you as having stayed in their jurisdiction for 60 days, you may not show up on the MA DOR's radar. But I would not recommend it as their power to make one's life miserable and their willingness to use it are well known.

BTW the rule concerning the excise tax in MA is somewhat confusing as it says "where the boat is customary kept" without differentiating between winter storage location (which is usually a bit longer) and summer location. Most owners I presume use their summer location for the excise tax purposes unless its winter location is the same.

[jtsailjt]

Originally Posted by Island Time O25

jtsailjt, please elucidate. After purchasing the vessel but before actually coming to ME where was it registered? Does ME allow for registration without concurrently paying the sales tax?

As far as MA is concerned I know for a fact, having went with them through several different variations on this issue for each of my 4 boats in 10 years, that a sales tax is paid at the point of registration no matter where the boat is. You want/need a MA reg. sticker - you have to pay the sales tax. Period. End of story. Now if you actually registered the boat in DE or where ever that's another issue. But that's not the situation I'm describing.

As far as documented boats are concerned (regardless of its hailing port), since no reg/sticker is required for them in MA, the tax kicks in once you're in the state for 60 days I believe, less of course any state sales tax paid elsewhere. So then it is an issue of self-reporting. The problem there is that the state can only find out about you being in the state waters if the harbor master for your in water location notifies the local city/town assessors' office that you are there, which by law they have to do for all boats within their jurisdiction as of August 1 and the city/town forwards this info to the DOR (apparently they picked that date because a lot of people launch on July 4th weekend and a lot of others haul out on Labor day weekend so the middle of the 2 dates catches the majority of active boaters in the state).

So theoretically, if you are in and out of MA in a documented boat and depart before August 1 roll call and none of the local authorities clock you as having stayed in their jurisdiction for 60 days, you may not show up on the MA DOR's radar. But I would not recommend it as their power to make one's life miserable and their willingness to use it are well known.

BTW the rule concerning the excise tax in MA is somewhat confusing as it says "where the boat is customary kept" without differentiating between winter storage location (which is usually a bit longer) and summer location. Most owners I presume use their summer location for the excise tax purposes unless its winter location is the same.

Since the boat was hauled out in Delaware, I sent in the registration form during that winter to get it registered there ( I think it was about $10 so I figured I might as well) but never put the numbers on the hull, and since I was in the process of getting it documented at that time, it probably wasn't necessary. Since the dinghy required a registration, and I was filling out that form, I figured that I might as well send in the same form for the "mothership" but never actually used it.

I didn't look into MA law as much as Maine law but I did read where MA law has a 6 month period, after which you, as an out of stater just passing through, are not liable for paying use tax and I made sure I complied with that. Since we bought the boat in November, the timing just happened to work out perfectly because we didn't arrive in MA waters until after May of the next year. I think the law is different for MA residents but I'm a Maine resident so didn't look into that. But even if you are a resident of MA and buy a boat in another country, how can MA justify charging you a use tax when you are not USING it in their state? I don't know the MA law on that but the ME law says that once a year has passed without bringing it into the state, then you are not liable for sales or use tax. I heard from an accountant, boat owning acquaintance that Maine law once required Maine residents to pay the use tax whenever they eventually brought their boat that they had purchased elsewhere into the state. But that was successfully challenged because boat owning out of staters who moved to Maine and brought their boats with them were not required to pay use tax and it would be impractical for the state to research the history of everyone who moved here and had a boat they'd owned for many years, so to be consistent they drew an arbitrary line at one year and said that everyone sailing in Maine waters(resident or non-residents alike) is liable for use tax during the first year of ownership except that out of staters in their first year of ownership are allowed to use their boats in Maine waters for up to 30 days without paying the tax. Also, out of staters who buy a boat in Maine have their sales tax reduced to 2% but a Maine resident who buys that same boat in Maine must pay the full 5.5% sales or use tax. Politicians did that as a favor to the Maine boat building industry, but apparently weren't thinking about the effect it might have on Maine residents looking to buy a boat.

What you say about the MA excise tax sounds right but since that tax doesn't amount to much (compared with sales tax), why go out of your way to avoid it, even if what you do is entirely legal?

[PappysSailing]

I have been working on similar situation w Canadian flagged vessel in the Caribbean being bought and brought back to U.S. by U.S citizen. I can share some of the answers / solutions I've come up with but first need to know if 1)
Do you plan to bring the boat to U.S. ? If yes, how long after purchase ?
You'll need about a month to get it de flagged and documented thru Natl Vessel Documentation Center, longer if they won't expedite process. Right now they are four months behind on regular applications. I would call them and ask about time frame, papers required, and also discuss issue of you not being an American citizen. Lots of info on their web-site.
2) Was the vessel manufactured in the U.S. ? If so, no import duties, if not, around 1 1/2% of purchase price will be due on entry.
KEEP IN MIND: You are not required to document the vessel, although sometimes your banker, if mortgaged, might call for that. But usually only applies if you will be sailing in and out of foreign waters. If you plan to bring the boat here and sail locally, it seems to me that unless other issues exist, the documentation process is just another layer of paperwork and expense. I had my doc'd when it made some economic sense, i.e., before my Dept of Parks and Wildlife decided that Uscg docs were no longer barriers to them collecting a bi-annual fee... not for registration, but for "Certificate of Number."
Then, yes, when you register in U.S. state (exceptions above noted) you'll get a tax bill from most states. In TX, if you pay taxes more than 30 days after purchase,, they may ask for an additional fees unless you can show that delay was justified due to distance travelled to get here, and no guarantees there.
I have more information to share, but will wait until you answer Q #1. Cheers, Pappy

[Island Time O25]

jtsailjt, I think we're talking about somewhat different situations. My understanding of MA sales tax rules is that they don't care where you use or store it. If you register the boat in MA you pay the sales tax or if you keep the boat in MA, regardless if you're a MA resident or not.

If a MA resident buys and documents a boat and keeps her entirely out of MA that does not kick in the sales tax UNLESS he brings her to MA for over X days per calendar year. Not just X consecutive but X total I believe.

From a non resident passing through but for longer than X days per year total, the MA DOR will probably want a piece of that sales tax but it will be offset by sales tax paid in another state. Basically the law says "if you're in the state longer than X days per year that is the evidence that you are not 'just passing through' and thus must register and pay the tax".

I recall a big stink in the media about 20-25 years ago when the DOR was clamping down on multitude of cars registered in tax free NH but perennially parked in MA driveways and lots (another incentive for these NH registrations was the fact that NH did not have compulsory auto insurance and MA's rates skyrocketed at the time). So they would check the registration against the owner's driver license or tax filing address and would send a tax bill to that MA address. Very few of these owners were consistent in their documentation, i.e. car registered in NH but the owner's drivers license and/or taxes were from MA. I would guess that the same process is used for vessels. It's just more difficult for the DOR to actually prove that the boat is physically in MA for the required period.

And then there are real NH residents who drive to work in MA every work day. Theoretically then, they may be subject to MA sales tax on that vehicle. But I haven't heard of anyone being hassled in that situation. May be because by returning to NH every night they are "not keeping their car in MA".

[alansmith]

Whew! I think I am getting a migraine