Sales tax - is this right??

labatt · #1 (**permalink**) 10-15-2006

I put an offer in on a new (to me) sailboat on Friday and it was accepted. As a result, if it is registered in NYS, where I live, I'll owe over $11k in sales tax. So here's the question...

I'll be sailing the boat on Lake Champlain. The lake is half in New York and half in Vermont. NY has criteria set forth as to registration requirements. One of the criteria says that you have to register the boat if it is not documented and is operated on NY waterways for more than 90 contiguous days.

I'm wondering - if I get the boat documented by the USCG, and I make sure it goes into Vermont waters (perhaps proven by getting a receipt from a marina at each stay) every 80 days or so (in all likelihood, we'll be going every other weekend), wouldn't one think there is no requirement for registration in New York State? The boat will be stored on the hard for the rest of the year, so it won't be "operated". The boat will be delivered to me in Maryland, and I can only find info stating that NYS sales tax has to be paid on boats delivered within NYS. It would appear as if the payment of sales tax and the registration of the boat are not necessary - just documentation.

I don't want to do anything illegal. I'll consult a tax attorney for final say, but I'm just curious as to people's thoughts here..

Thanks!

sailingfool · #2 (**permalink**) 10-15-2006

Quote:

Originally Posted by labatt

I put an offer in on a new (to me) sailboat on Friday and it was accepted. As a result, if it is registered in NYS, where I live, I'll owe over $11k in sales tax. So here's the question
...

I'll be sailing the boat on Lake Champlain. The lake is half in New York and half in Vermont. NY has criteria set forth as to registration requirements. One of the criteria says that you have to register the boat if it is not documented and is operated on NY waterways for more than 90 contiguous days.
..

Thanks!

If you document the boat you will not need to register it with NY, so registration is irrelevant. But you will need to moor or dock it somewhere, and they will find it where you do.

If you keep the boat on the NY side of the Lake, you will end up paying the use (sales) tax. See http://www.tax.state.ny.us/pdf/publi...pub774_206.pdf
for info about who needs to pay the use tax. If you don't pay the tax when you first bring the boat into the state, NY will add on charges for penalties and interest when they catch you. From my personal experience in another state, in four years the penalties and interst will equal 50% of the original use tax. Ouch.

States have no sense of humor about their use tax, and assume a boat owner owes the use tax unless the owner can conclusively demonstrate he/she do not. Moving the boat back and forth for a few weeks here and there probably won't even get a smile...In MA the local towns wont issue a boater a mooring permit unless you prove you have paid the use tax. Various agents including the harbormasters walk the marinas looking for new boats and whether they can find a record of a use tax.

Pay it when you bring the boat to town, or you'll pay the tax plus more later....

camaraderie · #3 (**permalink**) 10-15-2006

SF is wrong... Documented boats are required to be registered by most states including NY. The only thing you get by documenting is the ability NOT to be required to put your registration #'s from NYS on the hull. Your question has nothing to do with registration really. It is a matter of WHERE you will pay sales tax. You will pay it either in VT. or in NY if you keep it on Champlain. I don't know what VT sales tax is today but say 5%. If NY is 8% and you move the boat back to NYS then NY is owed the 3% differential according to their reciprocal tax agreement.
Since it sounds like the Vermont thing is just to keep the taxman at bay and you will be bringing the boat back into NYS and docking her permanently there...you might as well just pay up cause they WILL get the 8% out of you.
Don't ya wish ya lived in Delaware?

labatt · #4 (**permalink**) 10-15-2006

I'm not trying to illegally bypass anything, but I guess the question would be... how long does the boat have to be "in-state" for it to be considered taxable? Is it the second it arrives? Is it as soon as I buy it, even though it will be in Annapolis for a few months (I did notice that if you leave it out of state for 6 months you can pay tax on market value as opposed to purchase price)? What if I leave it in Annapolis until April, then sail it up to NY for only 6 months and then I bring it to Massachussets? That's actually our plan. It will be in Mass. for a year after that and then we're selling it. What if I'm a NY resident but never bring it to NY? I guess what I'm asking is when do I have to pay sales tax on the boat, and where? The NYS T&F document doesn't really answer this question - it just states that you have to pay tax. What if the boat is only in NYS for 10 days and is then moved? Inquiring minds want to know

I think I'll drop a letter to the tax department and ask for an "opinion".

cardiacpaul · #5 (**permalink**) 10-15-2006

what state do you reside in?

labatt · #6 (**permalink**) 10-15-2006

We reside in NY, which would make me assume that if we owe sales tax (which I'm sure we do, but I don't want to pay it unless we have to - NY is already the most heavily taxed state in the nation!). None of the documentation I've read from NYS Tax and Finance or the DMV is absolutely clear. It's clear on what happens when you have the boat delivered to you in NY. It's not clear on what happens when you take delivery elsewhere. Does the person who is cruising through New York State over the period of several weeks have to pay sales tax? Is it because I'm a resident (which is what I'm assuming)?

pmoyer · #7 (**permalink**) 10-16-2006

Quote:

Originally Posted by camaraderie

Don't ya wish ya lived in Delaware?

Hey, I *do* live in Delaware. This brings up an interesting question. When I buy my first boat (April), I plan to buy her from a broker in Maryland, and moor her on the Sassafrass River in Maryland, but I live in Delaware. I won't owe any taxes in Delaware, but it seems likely that I'll have to pay sales tax in Maryland. Is there a difference between sales tax and use tax?

Cheers,
Phil

TrueBlue · #8 (**permalink**) 10-16-2006

Rhode Island is one of the few states which do not charge either sales tax or use (luxury) tax. Eliminating tax on boats has been a huge boost for the area's marine economy.

camaraderie · #9 (**permalink**) 10-16-2006

I am no lawyer so the following is based on my own experience and numerous discussions over the year and is meant as general guidance.
Labatt...if you buy the boat outside of NY then bring her in for less than 90 days you owe nothing to NYS. Same with VT so long as you remove her from there in the same period. You can also leave her in Annapolis but the taxman there will be after you if you leave her for 90 days too. And of course Mass will get you if you leave it there for a year. Once you have paid state sale/use tax in some state and registered it and have a sticker on your mast it is UNLIKELY that another state will hit you for sales tax differential when you move it there provided that you've owned the boat for more than six months...but they always have the right to do so even though you can then claim a depreciated tax value. If you keep the boat on the move from state to state you can avoid sales tax entirely but this is impractical for most people.

Phil: A new law passed recently in MD. addresses your specific situation and says you will have to pay a 5% tax. See the SB316 section in the following link.
http://www.dnr.state.md.us/dnrnews/2...slation/db.pdf

pmoyer · #10 (**permalink**) 10-16-2006

Excellent! Thanks for that link!

Cheers,
Phil