Paying Boat Purchase Tax again

[RogerLloyd]

In the UK if I take my boat out of the country for more than 3 years, I have to pay VAT (Value Added Tax) [like purchase tax] again when I return to the UK. If I sail away for more than 3 years again, I get charged another lot of VAT.

(The EU has this sort of system, but then the waters of the EU are a bit more extensive than the comfortable sailing waters of the UK. So this multiple VAT situation is less onerous for EU residents.)

Does America have the same sort of system for paying multiple VATs ?

[C420sailor]

That’s insane.

If you come to the US with a sailboat, you pay a 1.5% import tax to the federal govt. When you register it with the state, you may owe the state sales tax. Where I live, that’s 2% of the current market value of the boat. If you move to another state where the tax is higher, they may ask you to pay the difference. So you may have to ‘plus up’ the tax to the higher amount if you move to a more expensive state, but they never make you pay a tax you already paid. That’s ridiculous.

That’s it. Once you pay both of those, you never pay again as long as you own it.

[RogerLloyd]

I forgot to say the VAT is charged at 20% of value in the UK (and similar in EU). I do not know if the USA has this sort of purchase tax. (Of course, UK has a National Health Service to support, which I like.) I do not mind paying 20% at time of purchase, but I object to being charged VAT twice.

The question is: If I was an American and if I purchased a boat in America that was made in America, if I sailed that boat out of America for 3 years and then returned, would I be charged tax on the current value of the boat ?

[Creedence]

20% is unimaginable (to say nothing about the idea of paying that TWICE after a 3-year trip) the thought of it makes me want to go dump some tea in Boston Harbor.

Buy a boat here (varies to a small degree between states)- it doesn’t matter where it was made, you’ll pay sales tax (here in Florida it’s about 6% up to a maximum of $18,000). Then there’s a registration fee of a couple hundred dollars. Get it documented with the Federal government for something like $80- free to renew thereafter.

You can take it anywhere you like as long as you like, you’ll owe nothing upon your return. Just keep paying your annual registration if necessary.

[S/V Illusion]

Originally Posted by RogerLloyd

The question is: If I was an American and if I purchased a boat in America that was made in America, if I sailed that boat out of America for 3 years and then returned, would I be charged tax on the current value of the boat ?

No. It’s a one time charge in the U.S.

[Dsanduril]

Having had several boats, US built and foreign built, all US flagged, in the US and then out of the US for more than three years (sometimes significantly more), the most I’ve ever paid on returning is about US$30 for the US Customs service decal that is required in the fee-for-service portion of the government world.

The US doesn’t have VAT but just a final sales tax that is paid at the point a product is purchased by an end user. Sales tax is a local thing (state, city, county) not a federal thing and the rate varies from zero to about 10%. If you purchase something (such as a boat) in one state to avoid taxes (or for other reasons) and then bring it into another state you may owe “use tax” in lieu of sales tax, but generally only once and generally only if the tax you paid in the other state was less than you would have paid in the second state. As with VAT, it does pay to keep your tax receipts for this reason, but other than moving to a new “state of principle use” you only ever pay the tax once at the time of purchase.

[Windpilot]

While not sales tax, I pay over1% property tax every year on my boat in California, even if I take the boat out of here.
I think there are very few things in life you can own free and clear.

[Joh.Ghurt]

Originally Posted by RogerLloyd

(The EU has this sort of system, but then the waters of the EU are a bit more extensive than the comfortable sailing waters of the UK. So this multiple VAT situation is less onerous for EU residents.)

Yes, it's an unfortunate consequence of a general rule on boats. The reasoning goes like this: If you remove an item from the EU or UK for more than 3 years, it's considered not being used as part of EU economic life any more. When you reimport it, it's just as if it never was here and you need to pay the VAT on the current value (not the original value).

For most items, this isn't really a problem, as they either don't move, don't last that long or don't come back. For boats it sucks when you want to cruise around the world.

To make matters worse, if you sail to Turkey to double the value of your boat by having a new engine and teak deck fitted, on return you'll have to pay the VAT for the increase of value (or repairs), even if you left just for 2 months. This is to prevent tax fraud via upgrading: Buy a crappy 27'for 5000€ with tax, put engine and rig on a nice 60', upgrade engine and rig to match the hull, return with new VAT-paid 60'.

In some countries you can ask for an exemption before leaving, but in general you really have to piss off some official or brag on how clever you are that these rules are made to apply to you. In most cases, it's too much hassles to prove that you never have been in EU-VAT-Zone waters for 3 years. On your side, when asked, you just prove you paid the VAT and this is good enough in nearly all cases.

Just don't be stupid and keep mum.

[peterincalgary]

The 20% VAT is I understand with purchases that are exported does not apply.

However if you return its probally "welcome to our world" with the border officials

[Brewgyver]

Originally Posted by Joh.Ghurt

To make matters worse, if you sail to Turkey to double the value of your boat by having a new engine and teak deck fitted, on return you'll have to pay the VAT for the increase of value (or repairs), even if you left just for 2 months. This is to prevent tax fraud via upgrading: Buy a crappy 27'for 5000€ with tax, put engine and rig on a nice 60', upgrade engine and rig to match the hull, return with new VAT-paid 60'.

??? And how would that possibly work? Ever hear of a Hull ID number?

[Wilyum]

Originally Posted by Creedence

Buy a boat here (varies to a small degree between states)- it doesn’t matter where it was made, you’ll pay sales tax (here in Florida it’s about 6% up to a maximum of $18,000).

I thought foreigners didnt pay tax as long as you left the state within a certain time frame, (3 months)? Then of coarse you pay tax when you return to your home country.

[Nicholson58]

Originally Posted by Windpilot

While not sales tax, I pay over1% property tax every year on my boat in California, even if I take the boat out of here.
I think there are very few things in life you can own free and clear.

https://www.youtube.com/watch?v=ZAWugfIKyWA

Please do not take this as a personally. OK after six years to continue paying tax on your boat in perpetuity? Based on what number? I suppose there is also annual registration and water use tax. The rest of the country wonders how long Californians will willingly be held hostage. Does the state take a 1% annual on your home, car etc? What if the boat is your only home? Unfairly levied taxes enacted by a righteous bunch on a group whose voting power is too small to fight back ultimately result on those items, practices disappearing. Such a system was in place to raise money from the obviously too wealthy in Michigan. The targets were boats over 20 feet, private planes, cars over $50000. The result was a crash in boating. 4 of the 5 venerated old builders failed, 1/4 of the marinas and FBOs disappeared. That, of course took all of the related trades along with it. The righteous eventually threw the bums out (waiting for this step in California). The laws were repealed but not before the various business and cottage industries were destroyed. Marinas were turned into condos, never to be replaced. The expected tax windfall never happened. People dumped their ‘luxury’ items or moved them out of state. The total tax income when adjusted for the lost businesses and personal income was a huge negative.

Michigan still maintains a regressive water use tax, annual or three year sticker. On our 58 foot ketch, this is around $500 for a three year sticker plus annual registration. For my Jon boat, beach cat and Sunfish, $15. Consider the huge number of such small boats in Michigan. Leveling the fee to $20 for all boats would massively increase the state’s take and would hardly be noticed except for the political screaming. As noted, the big boat owners represent too small a voting block to worry about angering. We keep our small boats at our daughter’s home. We sailed the yacht to the car in 2016. It’s never returning. BTW all state operated launch and marina facilities are pay for use so the tax is not being returned to marine infrastructure.

[jen1722terry]

Gees, I never thought of this issue.

I wonder if it applies to Canada?

We're Yanks from NH who brought our boat to our other home in Nova Scotia in '14 and returned it to the US in '16. While in Canada, we paid the import tax and kept the records. Our understanding was that we are now free to take the boat back and forth to Canada whenever we choose.

Now, with covid and all, it's been nearly 5 years since the boat was in Canada.
If we're allowed to sail to Canada this year, do we have to pay the tax again?

I better get on the phone to Canadian customs.

17 days to dump.

Cheers

[Dsanduril]

Originally Posted by Nicholson58

...

Please do not take this as a personally. OK after six years to continue paying tax on your boat in perpetuity? Based on what number? I suppose there is also annual registration and water use tax. The rest of the country wonders how long Californians will willingly be held hostage. Does the state take a 1% annual on your home, car etc? ...

Short answer, yes. California has a nominal property tax rate of 1% on both real and personal property. In real life local additions and supplements raise that to about 1.5% on real property. Your house, your car, your boat - all pay property tax.

For your primary residence you can get a homestead exemption on the first $7000 of value (not tax). Value is as assessed by the county tax collectors, there's a very large manual on property assessment. For real property Proposition 13 limits the ability of the assessor to raise the value of real more than 2% per year. In effect, your house is valued at the price you paid plus 2% for every year you own it (with a few special cases for economic downturns where values dropped). This can result in neighbors paying wildly different tax rates, own your home for 40 years and your assessed value is way below that of the next door house that was bought, and re-assessed last year.

And yet people keep coming...

[sepharad]

This is something I wrote in a note to the NY Times. Americans have NO CLUE what an intrusive, bureaucratic and irrational government is. They all (myself included) complain about state and Federal government interference in our daily lives. Now that I live in Europe, I laugh when my friends at home complain.


In the United States we have no such nonsense as Value Added Tax. Some states have no sales tax AT ALL. Registration with my former state was $25. If you want to buy a boat you walk in, put down cash and walk out. Smart sailors take some water safety courses. A regressive water tax is NOTHING here. Try paying 21% of the value of your boat.



As Europeans know, each country has it's own gauntlet to run that is unique.

In Portugal you must have a different license if you have a motor or not, then a different license for coastal, further coastal, blue water etc. You have your license cancelled at certain ages and must re-up your license. You must have your boat hauled and inspected. on and on and on....Then you go to Sweden and you don't even have to register.



Now that the UK has Brexited, every European coast guard will be gunning for them when they are in EU waters. You need to have proof of location and VAT paid at all times.



BUT they all want VAT. Each charges a different amount, Portugal charges 21%


If you are an American and leave your boat in the EU. After a certain period they can come after YOU for VAT. Many Americans must move their vessel assiduously OUT of EU waters on a schedule to avoid the tax tyrants.


So when you are feeling "oppressed" by the state fish and game charging $25 for your annual boat tags, remember how lucky you have it.