USCG documentation is optional, and only is available to US-citizen owned boats with a net displacement of 5 tons or more. Most sailboats over 27 feet qualify for this. USCG documentation has some serious benefits, especially if you plan on sailing in foreign waters, like Mexico, the Caribbean and Canada.
Many states do not require state registration if a boat is USCG documented. Also, USCG documentation is a one-time fee, so if you're planning on keeping the boat a long time, then USCG documentation can be a bit less expensive in the long run.
Some states do require that you get a state registration number, but may have a different fee schedule for USCG documented boats. You really need to check with the state regarding this.
Many foreign countries do not recognize state registered boats, as they have no international status, whereas USCG documented boats are flagged vessels of the United States and are internationally recognized.
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You know what the first rule of sailing is? ...Love. You can learn all the math in the 'verse, but you take
a boat to the sea you don't love, she'll shake you off just as sure as the turning of the worlds. Love keeps
her going when she oughta fall down, tells you she's hurting 'fore she keens. Makes her a home.
—Cpt. Mal Reynolds, Serenity (edited)
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Still—DON'T READ THAT POST AGAIN.