How does US boat tax work?

[goeasy123]

We're thinking about buying a boat in Florida to do the loop. How do we flag and manage our travels to avoid unnecessary taxes. We could flag it UK (where we're resident), but it might then be harder to sell in a year or two when we're done. We could keep it US flagged, but we're not clear how taxes are applied or avoided as we move around the US and Canada. We may have to leave the boat on occassion to reset the immigration clock.



Any insight will be much appreciated?? ...and any links to qualified resouces.

[Jammer]

There is no boat tax in the USA at the national level. Each of the states has its own tax rules, making the question complex. Most states collect sales tax when a boat is purchased within state borders. Most states collect a "use" tax when a boat not purchased there stays within the state for an extended period of time, typically 90 days, or when various other criteria apply (such as a transfer of ownership or if the boat lists a state as its home port). Ordinarily any sales and use taxes paid to another state apply as a credit towards the use tax so in effect the boat owner pays the highest rate that applies rather than the sum of the rates.

The "use" tax can apply even when the boat is foreign flagged although this varies from state to state. A cruising permit may be necessary, and is only issued by customs when a boat is brought into U.S. waters from elsewhere.

In Florida the sales and use tax is 6% of the boat's purchase price or value. There is a $18,000 maximum and there are exceptions for boats that are immediately taken out of the state.

A boat must be owned by a U.S. citizen to be federally documented in the USA. Many boats on the Great Loop are state registered rather than documented. In practice there are no special difficulties taking state registered boats across the border to and from Canada.

So, as one example, if the boat is in Florida when you purchase it, you could register it in Florida and pay the 6% tax, and you would then be unlikely to be liable for any significant additional taxes while doing the loop -- none of the states on the loop have sales taxes above 7%, so the most they could collect is an extra 1% of the value of the boat and then only if the boat were to stay in a higher-tax jurisdiction for over 90 days.

That's a general overview. You would want to consult an attorney or tax accountant for advice specific to your situation.

[Jammer]

Here's an article on the rules in Florida which might help:


https://floridarevenue.com/forms_lib...t/gt800005.pdf

[goeasy123]

Very useful. Thanks.

[Statistical]

A boat constantly on the move kinda falls in the cracks for US registration and taxes.

First of all there is no national tax in the US. There is national (USCG) documentation but that is limited to US citizens so that wouldn't apply to you.

Boats which are not USCG documented are to be registered with one state. Now the weird thing is that usually this is the state of principal use not necessarily the state where the vessel is purchased. However if you are constantly on the move with no homeport what state is the state of principal use?

You are unlikely to find clear information on that because it is an extreme edge case. I would not recommend trying to wordsmith it and say "well no state is the principal use because I will never be in any state more than 90 days" because while you might be right it would be an edge case nobody can handle. If you are in VA and get asked for registration nobody will blink an eye if you have FL or TX or any state registration. However saying I have no registration because I keep moving it likely to raise some eyebrows and even if technically allowed nobody knows how to handle that.

So the simplest thing would be to just register it in whatever state you buy it. All states recognize the registration of other states so there is no issue with moving a Florida registered state to any of the other 50 states. Now if you settle down in Virginia and remained there for five years they might have something to say about it not being registered in Virginia because that doesn't seem to apply to you.

If you want to save a couple buck you might be able to not pay taxes when you purchase and just move the boat to a cheaper state and register it there. Not sure about FL specifically but most (all?) states have provisions for not paying taxes in that state if it is your intention to move the vessel to another state after purchase within some period of time (usually 30 to 90 days). Again as long as it is registered somewhere nobody in any state is going to care or care why you registered it in Texas and not Florida.

Having the boat registered in any of the 50 states would make selling the boat a non-issue in the future. The new owner will either get it USCG documented or register it in the state they intend to be the state of principal use (home port). Pretty sure there is no advantage to registering it in the UK beyond being able to fly the UK ensign.

[PippaB]

I think the others have mostly covered it, but here's an article that can be a starting point for the east coast: https://boattax.com/avoid-boat-taxes/ (check everything it says as these things are subject to change). Please note that it introduces the other wrinkle - personal property taxes. These are paid annually. Some states have them, some states don't, but if you state register the boat based on principal use in a state that has personal property taxes on boats then you will have to deal with that each year (and it could happen even if you are the owner for less than a year depending on how the tax is structured and the 'lien date' each year when taxes become due).

One caveat on avoiding the Florida sales tax by removing the boat from the state, this can only be done on purchases from/through a broker who can register the waiver with the state - private sales without a broker are taxable immediately with no relief.

[goeasy123]

What if I buy the boat as a UK citizen, flag it UK and take it out for the State of purchase within the alloted time?.... and keep it moving. I understand that there would be no tax implication, but a cruising permit would have to be purchased.


And what's involved in getting it back on a US flag before we sell it? Why would a potential US buyer be concerned?

[gonesail]

Originally Posted by PippaB

One caveat on avoiding the Florida sales tax by removing the boat from the state, this can only be done on purchases from/through a broker who can register the waiver with the state - private sales without a broker are taxable immediately with no relief.

interesting .. i did not know this. To me .. trying to evade state taxes is a losing battle .. but possible.

[Jammer]

Originally Posted by goeasy123

What if I buy the boat as a UK citizen, flag it UK and take it out for the State of purchase within the alloted time?.... and keep it moving. I understand that there would be no tax implication, but a cruising permit would have to be purchased.

I think you'll find that you would have to take it out of the USA and bring it back to be eligible for a cruising permit. Sometimes people who buy boats in Florida begin with a journey to the Bahamas for that reason, for example. Keep in mind that cruising permits are only valid for a year and that you must take the boat out of the USA for 15 days to renew one.

You would also need a B1/B2 visa. Keep in mind that cruising permit issuance is discretionary and not automatic.


Another fact to consider is that some states require state registration of foreign boats that have stayed in the same state for more than 90 days, which triggers use tax. Laws vary.

And what's involved in getting it back on a US flag before we sell it? Why would a potential US buyer be concerned?

The main reason a buyer might be concerned is if there is a possibility that there is a lien or prior sale recorded in the UK or elsewhere. Some buyers might insist on a title search in the UK.

[Jammer]

Originally Posted by Statistical

A
You are unlikely to find clear information on that because it is an extreme edge case. I would not recommend trying to wordsmith it and say "well no state is the principal use because I will never be in any state more than 90 days" because while you might be right it would be an edge case nobody can handle. If you are in VA and get asked for registration nobody will blink an eye if you have FL or TX or any state registration. However saying I have no registration because I keep moving it likely to raise some eyebrows and even if technically allowed nobody knows how to handle that.

The way the 90 day exemptions are worded in most states, they only apply if the boat is registered in another state or another country.

[PippaB]

Without quibbling about the details of principal use, I think for a one or two year ownership you would find it much easier to leave the boat registered in whatever state you start in. If you elect to flag outside the US then it depends on the details of the flag registration - does the UK SSR prove ownership? and register liens? If it does then transferring back to US documentation (if that is the way a buyer wants to go) is relatively easy. But if the flag registration does not prove ownership then it starts to become difficult.

Which than leads to another topic, if you purchase a boat that is state registered, how do both seller and buyer prove ownership? Some states are 'title' states where the state issues both a title (proof of ownership) and a registration (proof of taxes and fees paid) while other states are registration-only. Florida is a title state, Delaware is not.

[goeasy123]

Jammer, you're a mine of information!! Thanks



A trip to the Bahama's at some point in time is on the cards anyway. Maybe that turns out to be a useful option if we go the cruising permit route.



We have a B1/B2. We'll have to check out the implications of a permit issue being discretionary. The loop oriented plan, a Canada leg and immigtation rules will mean the one year limit and 15 days out/in should not be a problem.



Re foreign registration, we'll probably not be in any one state for more that 90 days. Although I understand not all states are 90 days and as you say 'rules vary'.



Given our 'at a distance' buying constraint we'll probably be buying through a broker. Although, notionally it's either paying the tax on a private sale Vs paying the brokers fee.


I'll check the floridarevenue document, but I don't think Florida requires the boat to be registered in another state or country. And it's highly likely that we'll buy in Florida.

[goeasy123]

Originally Posted by PippaB

Without quibbling about the details of principal use, I think for a one or two year ownership you would find it much easier to leave the boat registered in whatever state you start in. If you elect to flag outside the US then it depends on the details of the flag registration - does the UK SSR prove ownership? and register liens? If it does then transferring back to US documentation (if that is the way a buyer wants to go) is relatively easy. But if the flag registration does not prove ownership then it starts to become difficult.

Which than leads to another topic, if you purchase a boat that is state registered, how do both seller and buyer prove ownership? Some states are 'title' states where the state issues both a title (proof of ownership) and a registration (proof of taxes and fees paid) while other states are registration-only. Florida is a title state, Delaware is not.

Good points. We'll probably end up buying a Florida boat.


But for information... The SSR (Part 3) isn't strictly speaking the right registration for a boat used in foreign waters and it does not prove ownership. Part 1 is and that details the title of the vessel. To get Part 1 the boat must be 'measured' by a registered surveyor, which comes at a cost.

[S/V Illusion]

On behalf of all Americans, please pay your tax. We are $35 trillion in debt and need the money

[psk125]

Originally Posted by S/V Illusion

On behalf of all Americans, please pay your tax. We are $35 trillion in debt and need the money

Isn't the $35 trillion due on Federal debt? Paying tax to a state should not have any impact the Federal budget.
If boat prices in Europe (OP's point of origin) are generally 10% (or more) higher than they are in the US, doing paperwork gymnastics to avoid state taxes seems like an overreach.