Yacht purchase in California

[BCW1]

Hi all

My Dad is in the market for a yacht to sail back to Australia (from California).

My Dad is a New Zealand citizen, and Australian resident.
I am an Australian citizen, and a US permanent resident (currently living in California).

We have a few questions re purchasing a yacht.... I hope you can help us out.

1. When my Dad (a New Zealand citizen, Australian resident) buys a used (not new) yacht in California, will he need to pay Sales Tax on top of the listing price?

2. What other Govt fees are incurred when buying or registering the used yacht?

3. Can the yacht be registered in my Dad's (NZ citizen) name? Or is it smarter to register the yacht in my name (I am a US permanent resident)?
If registered in my name, will I have to pay Sales Tax?

4. If the yacht is to be registered in my Dad's name, how long can he keep the yacht in the US?

5. If the best option is to register the yacht in my name (a US resident), what fees and process do we need to follow to then transfer registration to my Dad before he sails back to Australia?

6. Does the money spent on the yacht from the purchase date to the export date (such as repairs, new sails, etc) qualify as Sales Tax free? Can the Sales Tax money be reimbursed upon export? If yes, how is this done?


Thanks in advance!!

[sailingdog]

Originally Posted by BCW1

Hi all

My Dad is in the market for a yacht to sail back to Australia (from California).

My Dad is a New Zealand citizen, and Australian resident.
I am an Australian citizen, and a US permanent resident (currently living in California).

We have a few questions re purchasing a yacht.... I hope you can help us out.

1. When my Dad (a New Zealand citizen, Australian resident) buys a used (not new) yacht in California, will he need to pay Sales Tax on top of the listing price?

It depends on how long he stays in California with it.

2. What other Govt fees are incurred when buying or registering the used yacht?

It depends on where he is registering the yacht.

3. Can the yacht be registered in my Dad's (NZ citizen) name? Or is it smarter to register the yacht in my name (I am a US permanent resident)?
If registered in my name, will I have to pay Sales Tax?

Yes, you SHOULD register the yacht in your dad's name IN NEW ZEALAND or OZ. As a foreign citizen, you or your father can only state register the boat in the USA, which is not recognized in international waters. You need to be a US Citizen to USCG Document the boat, which is the only form of US boat titling that is recognized internationally. If you register the boat in California, you will probably need to pay sales tax on it.

4. If the yacht is to be registered in my Dad's name, how long can he keep the yacht in the US?

It depends. He'll need to get a cruising permit for it...and again, if he leaves the boat in California long enough, he may have to pay taxes on it.

5. If the best option is to register the yacht in my name (a US resident), what fees and process do we need to follow to then transfer registration to my Dad before he sails back to Australia?

What fees do you need to pay to register the boat in Australia??? AFAIK, the state of California and the US Government do not charge fees to transfer the registration. However, it is probably wiser and simpler to register it in Australia to begin with.

6. Does the money spent on the yacht from the purchase date to the export date (such as repairs, new sails, etc) qualify as Sales Tax free? Can the Sales Tax money be reimbursed upon export? If yes, how is this done?

I doubt it... since you're having the work done in California.

YMMV and you'll probably want to talk to an attorney that specializes in marine law both here and in Oz to get the details and paperwork done properly.

[BCW1]

Sailingdog, thanks for the info. Every little bit helps.

[sailingfool]

This link covers the use tax obligation, yikes the tax runs 8-10%!

FAQ - Use Tax on Purchases of Vehicles, Vessels, Aircraft - Board of Equalization

You will need to pay that tax to register the boat, see here for those rules:
Information about vessels boats and watercraft

There may be some delay room in those rules, if you get out of the state in 120 days, if you register in NZ and don't sail in CA, maybe...If the 10% amounts to a lot of money, and you need more than 120 days, it may pay to look at the neighboring states to see if they are less onerous. If on paper you "take delivery" in another state you would legally not owe anything to CA.

[olson34]

I have met a Calif. boater that purchased a mid size power boat here (Portland, OR) and was keeping it here for six months minimum for some California tax-avoiding reason.
FWIW, Oregon is one of the few states without a sales tax.

[dohenyboy]

best to take delivery and close more than 3 miles offshore to avoid sales tax,

[sailingdog]

Originally Posted by dohenyboy

best to take delivery and close more than 3 miles offshore to avoid sales tax,

If you're going to give that advice, you might want to consider actually learning the facts. Since, if you're going to do that, you'd need to BE MORE THAN TWELVE MILES OFFSHORE, not THREE. The internationally recognized territorial limit is not three-miles, but TWELVE...if you're only THREE MILES from land, you're still in the US technically, and if they catch you... you're going to get nailed for taxes.

Of course, going 12 miles offshore to avoid the tax is likely to come back and bite you if you're keeping the boat in California any period of time.

[Minnewaska]

As SD points out, you have little choice but to register/title it in your country of citizenship. To that end, I would use an NZ address for all contracts and wire or write a check from an NZ bank. You can use an escrow agent domestically, as long as your Dad's money comes from overseas.

CA needs the money desperately. Don't give them any reason to think you "used" it in their state, which triggers use tax (typically same rate as sales tax). Each state defines how quickly you must leave to avoid the use trigger.

[SJ34]

If your dad registers the boat in CA he'll have to pay state use tax; used to be called resale tax but that kinda pointed out how much "We the people" were getting screwed. He has up to 60 days to pay if the vessel is undocumented up to a year to pay if documented.

He can keep the vessel in the state indefinitely as long as he pays the annual registration fee and of course the unsecured property tax for the county it is in.

The only refund you will get on Ca state sales tax is any overpayment. It's an appeal process that can take up to a year (regardless of what they tell you up front). No credits, no deductions.

It is better for your dad to register the boat in his name. If you register the boat in your name then transfer to your dad in the state, he will have to pay the estimated value of the boat as use tax, even if no money trades hands.

I'm not sure but there may be an advantage to registering the boat to your dad's address in Australia if he plans to take it out of the country immediately anyway.

Here's a secret to saving a big chunk of cash on use tax. See if the selling broker is willing to accept his fees from you in a separate transaction to keep the brokerage fees out of the purchase price. Doesn't make much sense to pay tax on the brokers commission but people do it all the time.

[imagine2frolic]

You can lon ger take delivery any distance offshore. You can buy in foreign waters, and stay out of Ca. for 6 months, and you are tax exempt, but not from import tax. Unless you are US Documented.

Even this may have changed since I bought Imagine out of Ca. It's best to get in touch with the DMV, and they will open the book for you to see what's current.........................i2f