Join Date: Feb 2012
Location: New Orleans Louisiana
Thanked 126 Times in 120 Posts
Rep Power: 6
Re: State Registration of Documented Vessels
You are correct... But not quite.
Let me go through an example of a boat I just cleaned up the paperwork on...
1) Owner 1 (01) buys a boat in Louisiana
2) O1 tells Louisiana the boat will be registered in Wisconsin. So no sales tax is owed to Louisiana
3) 01 never tells Wisconsin he bought a boat so Wisconsin doesn't know they are due sales tax
4) 01 documents the vessel, thus allowing him to get a boat mortgage, and insurance. With the boat located in Louisiana, but titled in Wisconsin.
5) 01 sells the boat to owner 2 (02)
6) 02 want the boat to be legal, so he calls up Louisiana to see what he needs to do.
7) Louisiana says well if it's here more than 90 days you need to register it in Louisiana. To do so you need proof of sales tax being paid, or will have to pay it
8) since 01 never paid sales tax, 02 is stuck with a tax bill he never expected to pay
9) 02 calls me, we sue 01.
10) 01 settles for amount taxes owed
11) 02 registers the boat legally
Yes you are correct that 01 was supposed to pay the taxes, but he didn't. And with no revenue department looking for him, he was fine. Had he been caught he likely would have been subject to tax evasion charges, but he was never caught.
In reality a huge percentage of boats did this, because it was a very safe way to avoid a large tax bill. And since there was no way to check if sales tax had been paid until the boat was stopped, and you can't search a boat without probable cause... The states didn't have much to go on.
Enter our current situation.
Some states have begun to require registration even if a boat is documented. So if you don't have a sticker on your boat the officer has probable cause to investigate you for operating without registration. Since all states to my knowledge require proof of sales tax being paid to register a boat, there is now an enforcement mechanism that works. I expect more and more states (particularly costal states) to adopt this policy.