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Old 27-12-2016, 10:52   #1
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Cruising Boat and US State Taxes

I've done some searching and haven't quite found details related to our circumstances.

While I completely understand paying taxes in a location once we settle down, I am not sure it makes sense to pay state taxes at or shortly after the time of purchase, if we are going to be leaving shortly after.

Us Details:
  • We live in California and will be employed through January
  • We do not plan to return to California, so we plan to move our state residence, perhaps to Texas? (no income tax and we have family there)
  • Plan to start cruising about 60 days from the close of the boat

Details of boat we are purchasing(haven't closed yet):
  • Lagoon 380, US taxes paid
  • Currently in Texas and registered there
  • We plan to have USCG registration

Questions:
  • Since we plan to leave about 60 days from the purchase, will we need to pay taxes in Texas?
  • How to relinquish the Texas registration?
  • Wife wants to make the hailing port "San Jose, CA", is this just asking California to tax us?
  • Does address of documentation matter?
  • Any other recommendations?


Thanks in advance to the help with our newbie questions!
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Old 27-12-2016, 10:55   #2
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Re: Cruising Boat and US State Taxes

You say you are registered in Texas, so that may require you to pay taxes there. What you could have done is USCG Documented, then taken the boat cruising without registering in Texas.
After cruising, Most states don't tax you if you take a boat there to have it for sale when you return.


Calif is famous for trying to tax you, I would stay well away from that entirely including addresses and names of cities.


I suppose you could relinquish the Texas registration .. not sure how you do that though without establishing in another state.
I my case I bought in one state, moved the boat out before 90 days, never registered in any state and went cruising. Returned and sold the boat in Florida.
I once tried to register a boat in my home state.... but the boat wasn't ever there. They would not do it. I suppose you could do that if you didn't volunteer that the boat isn't there.... and found a state that doesn't tax boats.
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Old 27-12-2016, 11:18   #3
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Re: Cruising Boat and US State Taxes

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You say you are registered in Texas, so that may require you to pay taxes there. What you could have done is USCG Documented, then taken the boat cruising without registering in Texas.
Thanks for the tips Cheechako, we have not yet closed on the boat, so we can definitely can still use this method.

At the moment, the closing company is asking hailing port and documentation address. We have addresses in California, Texas, and Florida we could use, if needed.
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Old 27-12-2016, 11:25   #4
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Re: Cruising Boat and US State Taxes

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Originally Posted by BrettB View Post
Thanks for the tips Cheechako, we have not yet closed on the boat, so we can definitely can still use this method.

At the moment, the closing company is asking hailing port and documentation address. We have addresses in California, Texas, and Florida we could use, if needed.
you can pick anywhere with a zip code, don't have to have an address there
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Old 27-12-2016, 11:27   #5
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Re: Cruising Boat and US State Taxes

USCG documented vessel requirements do not require you To have any real connection to the hailing port, it's more for avoiding confusion in identity because boat names don't have to be unique.

Since you're working with a broker, why not ask them how to take the sale offshore? You don't have any nexus with Texas.
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Old 27-12-2016, 11:28   #6
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Re: Cruising Boat and US State Taxes

Document with the address in FL, don't state register if you can avoid it....? Never take the boat to Fl except to sell maybe? Hailing port for Doc can be most anywhere. I used a hailing port for an old town that no longer exists on my last boat. The only problem without a registration sticker is you may get stopped by local watercops. I would just tell them you are passing through. If stopped in Texas and Fl hailing port, they shouldn't have a problem with that...? Every place is different. Some places are all over you to have a sticker on your dingy.
I had two different boats in the Caribe and paid no state tax on either, I just got out of the each state before the time was up and moved on to the Caribe. Sold in FL as an out of state boat.
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Old 27-12-2016, 11:49   #7
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Re: Cruising Boat and US State Taxes

The USCG will eventually notify the state you chose for your hailing port. If it is California, they will send you a notice of use tax due, unless you can prove that you did not intend to bring the boat into Calif. If you provide them proof that you have actively used the boat in another location for 12 months, you should be exempt from the use tax. For a documented boat, proof means receipts for marinas, repairs, supplies, etc. from outside California.

If you are a Texas resident, you may be liable for a 6.25% Texas sales tax on the used boat. If you are not a resident, you may still be liable if you hang around Texas. Best ask a Texas broker how to avoid that.
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Old 27-12-2016, 12:33   #8
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Re: Cruising Boat and US State Taxes

Some states, including but by no means limited to, California, have sales/use taxes and will try to collect them. If you document a boat with a CA hailing port they will notify you that you owe the tax on the boat in "your town here." Just send a letter back with proof that the boat isn't there (zarpe's, slip contracts, out of state registration, etc). Under federal law you aren't required to register a boat in any state where you spend less than 60 days/yr. Over that and it's up to the state law. PLEASE do not confuse registration with titling. Boats are EITHER Titled (state) or Documented (federal). Documented boats must be registered in many cases. If you want a CA hailing port go for it, just be prepared to prove you aren't keeping the boat there. I went through this with a friend; the person in the tax office needed to check a box that the boat was never in CA; we sent a slip contract, photo, and letter from the dockmaster. Problem solved. Enjoy!
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Old 27-12-2016, 13:13   #9
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Re: Cruising Boat and US State Taxes

First off, I think you need to be clear on all of the different kinds of taxes you might owe. There is, of course, sales tax. That would seem to be what you are mainly talking about, but I'm not certain. Many states will not charge sales tax if you remove the boat from the state within a certain amount of time (typically 2-3 months).

Then there is use tax, which some states will charge if you have not already paid a sales tax elsewhere, or if the sales tax you have paid is less than the sales tax they would charge. Many states exempt you from use tax after owning the boat for a certain amount of time (Florida, for instance, does not charge any use tax if you have owned and used the boat in another state for more than six months).

Next we have property (or personal property) tax. This is an annual tax (not one-time, like sales/use tax). Some states have no property tax for boats, other stop charging after the boat reaches a certain age.

Finally there are registration fees (technically not a tax, but that's nit-picking). Most states will charge some sort of registration fee if you keep the boat in their state for more than a set amount of time. In Florida that is 90 days, which is pretty typical. Registration fees are usually pretty reasonable (in Florida it will be less than $200/yr -- possibly a LOT less -- unless you own a monster-yacht).

As you can see, quite a number of different taxes. And the rules for each state are a little different than any other state. So the best advice is to start doing deep research on specific states, taking into account all the different taxes.

Good luck.
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Old 27-12-2016, 13:31   #10
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Re: Cruising Boat and US State Taxes

This is an interesting subject and I hope that I am not hijacking this thread but which states are most boat purchase friendly? I am currently living in Indiana but I am from NC and will most likely have NC as my home port when the wife and I get cruising. Good place to start and come home to. But I can live anywhere or call that "home". NC doesn't seem that bad of a place to keep and register the boat but maybe I am missing something.

NC Sales of new or used boats are subject to a 3% State sales or use tax with a maximum tax of $1,500.00 per boat. (Local sales and use taxes are not imposed on the sale of a boat.)

If a vessel registered in another state is brought into North Carolina for over 90 consecutive days, the registration must be transferred to North Carolina.

NC Registration fees.
US Coast Guard Documented Vessels 26 FT or Greater
1 Year New/Transfer Registration - $55
3 Year New/Transfer Registration - $155

So I could buy and register in another state, come to NC and just jump out to SC or VA for a day or two and come back.
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Old 27-12-2016, 14:19   #11
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Re: Cruising Boat and US State Taxes

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Originally Posted by BrettB View Post
I've done some searching and haven't quite found details related to our circumstances.
......................
......................
  • Wife wants to make the hailing port "San Jose, CA", is this just asking California to tax us?
Bad, bad, bad idea. There was a post here a few years ago from a skipper who bought a boat with a hailing port in CA, and then left the state. Took him years to get them off his back. Why would your wife even think that?


I left CA last August. I saved all my receipts coming up the coast and when visiting CA in November, stopped in the tax office with the receipts and a nice letter saying:"I ain't livin' here no more." They haven't bothered me.


Where you are is immaterial, it's where the boat is.
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Old 27-12-2016, 15:11   #12
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Re: Cruising Boat and US State Taxes

Thanks for all the feedback so far!

Here is what I am thinking, based on the feedback I have received.
  • USCG document(no state registration) @ Florida mail forwarding service
  • Hailing port @ Florida mail forwarding service
  • Drivers license, vehicle & voter registration @ family member's house in Florida
  • Don't stay in Texas or or stop in Florida for more than 90 days

Anything else I might be missing?
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Old 27-12-2016, 15:26   #13
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Re: Cruising Boat and US State Taxes

Hoosiersailor, if you can live anywhere, then NH hands down. No sales tax, no use tax, no income tax on any of your retirement income. Portsmouth, New Castle and Rye all have great seafaring history's. There is also a mail forwarding service, "Parcelroom" that will open your mail, throw out the junk and scan The important stuff to Dropbox for a very reasonable price. As a bonus, Portsmouth is a really cool old town with a great vibe and more restaurant seats than people.
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Old 27-12-2016, 15:28   #14
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Re: Cruising Boat and US State Taxes

Oh yes, it's also just 50 minutes from Boston so you can be an unapologetic Patriots fan.
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Old 27-12-2016, 15:42   #15
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Re: Cruising Boat and US State Taxes

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[/LIST]Bad, bad, bad idea. There was a post here a few years ago from a skipper who bought a boat with a hailing port in CA, and then left the state. Took him years to get them off his back. Why would your wife even think that?


I left CA last August. I saved all my receipts coming up the coast and when visiting CA in November, stopped in the tax office with the receipts and a nice letter saying:"I ain't livin' here no more." They haven't bothered me.


Where you are is immaterial, it's where the boat is.
I would enjoy a discussion with CA about taxes I don't owe. Their threatening letters are entertaining. If you don't owe them why let them intimidate you? If I wanted to use a CA hailing port, I certainly wouldn't let some unjust bureaucratic BS stop me!
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