boat purchase, taxes, residence -- help for NW sailer?
My take on the initial question in this thread is that you may or may not be contemplating a change of residence, but definitely are looking for a state where you may buy and or register a boat with minimal tax consequences.
My understanding is that some states (perhaps most) require registration, whether or not you are CG documented. I do know that at least a few states do not require registration IF you are CG documented. So, if you document your new boat and base it in one of those states, it would seem to me that you ought to be able to avoid state registration.
If you can skip state registration, the next question is whether you still owe that state sales tax on the purchase. If you buy a boat and immediately remove it to a state with no sales tax or individual registration requirement, I think you''d be okay. In comparison to state registration fees (and especially sales taxes), CG documentation fees are quite reasonable.
The hitch is that if you later move your boat to another state which requires registration, you may have issues. Even if your boat is registered or documented in another state, in many states, if you base the boat there for more than a specified time (the ones I know about consider 60 days evidence of intent to reside), you are required to register your boat in that state. Indiana requires such registration, even if you are CG documented.
Although more expensive than CG documentation, typically, state registration is not too expensive. But if you come to Indiana with a boat which somehow escaped sales tax, upon registration, Indiana MAY demand the "use" tax, if you cannot demonstrate that you paid sales tax when you bought the boat, even if the purchase was years previous to the move. I do know that in the past, they have charged such tax for airplanes brought into Indiana. For example, in one case a plane was purchased in an east coast state by a resident of that state. The particular state required neither sales tax nor registration, having established the position that the FAA regs pre-empted the field and state taxing and regulation would improperly intrude into federal power. At the time of purchase, the buyer had no intention of ever becoming a Hoosier. His purchase was in all ways fully lawful, his only registration requirement being with the FAA. Things change, however, and the buyer moved into Indiana years later and brought his aircraft with him. Indiana picked up on the existence of the aircraft, noted no record of sales tax having been collected, and sued the owner to enjoin the use of the craft until they collected "use" tax. (Incidentally, when a certain low-level tax official was confronted with the question as to whether a fellow may move into Indiana with his car or boat without having to go back decades to prove sales tax paid, this aircraft-moving individual was told that the "policy" is to not enforce this against cars and boats. I don''t get too much comfort from such a statement, though.)
Personally, I see this as an abuse of the law. In any given state the sales tax is legally charged against a resident for purchases made in his state (if the point of purchase was within his state). If he buys something from out of state with the intention it is to be delivered into his home state, then the "use" tax attaches. They call it a "use" tax in this case, because the state has no legal involvement in the sale/purchase--it is made via interstate commerce, and the state may not regulate or burden such purchase. So, when the item is purchased from another state with the intention to bring it into the state, it is hit not with a sales tax, but a use tax (although the distinction isn''t always noted).
But if an Indiana resident buys a boat in Alaska with the intention of leaving the boat in Alaska, and he leaves that boat in Alaska, he ought to owe neither Indiana sales tax, nor Indiana Use tax, as the boat is never within Indiana''s jurisdiction. IF he moves the boat to Indiana a decade later, Indiana ought to have entitlement to neither sales nor use tax at that time, as Indiana had nothing to do with the prior purchase or use. Annual Indiana registration is required subsequent to the move, yes. But sales tax or use tax, no.
Getting bureaucracies to understand these distinctions is difficult, however, and the injustice is aggravated because the burden of decyphering the mess when assessed typically is not cost-effective for the buyer, as he will be attempting to reason with a multi-headed, disconnected, slow-thinking mule, which will fight his position with obstinence, or with confused, unfocused, biased legalese, all with money extracted from him and his neighbors. Most folks roll over and, thus, the tax policy becomes entrenched.
In a nutshell, though, I''d think you legitimately may buy a boat without sales tax, if it is to be registered/based in a state which does not impose a sales tax--no matter where you otherwise reside. If it does not require registration if documented, that''s another plus. I would caution that you may have issues later, though, if you move the boat into another less open-minded state for longer than that latter state will allow without registration.
If your boat is based in a state without sales tax and/or registration, I don''t think your own personal residence comes into play. For example, I might be a Hoosier, yet legally own a boat legitimately based in Alaska, without paying Indiana sales or use tax. If a decade from now I were to sail into Indiana waters for more than sixty days, I believe I would be exempt from sales tax and use tax, yet I''d have to register the boat in Indiana. I''d be quite nervous, though, as it can be real difficult to reason with over-reaching tax collectors, even when you are in the right.
I think it would be interesting if we were to take a poll. How about a listing of the states which have (1) no sales tax; (2) sales tax imposed--with rate; (3) no registration requirement if CG documented; and (4) state registration required, even if documented? It would be nice to have such a database, with actual experiences listed.
I''ll start (question marks indicate what I have been told, but have no personal knowledge--please affirm if you know):
1. No sales tax:
2. Sales tax imposed:
3. No registration if CG Documented:
4. Registration required even if CG documented: