State Tax /

[Gary M]

A friend of mine has put an offer in on a boat in Annapolis. The broker has informed him that if he does not have it trucked out of MD by a professional trucking company that he will have to pay state taxes. They amount to about the same as the trucking fee that the broker has found for him.

Does this seems reasonable? We want to sail the boat up to Lake Huron which is way more fun than having it trucked up, not to mention a lot cheaper. Can he not buy it, launch in the spring and get out of Maryland ASAP?

Thanks
Gary

[scottyt]

In all honesty yes he could get away with a short stay in maryland. Just purchase and register in the state of choice ( ie where the boat will live or they live ). now buying it here and trying to keep it here would get him caught, but 6 months should not be a problem. another option is to register it with the coast guard which means no state marking, but maryland does require stickers for CC registered boats.

as you said buy it do the paper work in the other state then sail away in the spring

[eryka]

Actually, cost-wise it may be the same either way. You've got two issues - sales tax on the purchase, and registration. The sales tax is the big one. If you pay the sales tax to Michigan, all you will have to do for Maryland is show that you already paid in another state. I'm pretty sure the same is true for Michigan. Bottom line is they get you one way or the other. For registration, Maryland will ask you to register your boat in Maryland if you use the boat more time there during a given year than any other state. If you're going to document with the Coast Guard (might be nice anyway if you'll be going back and forth to Canada from Lake Huron) the fee to register it in MD is $10.

[eryka]

Oops, just looked again at the original post. You'll pay the sales tax anyway, either to MD or MI, regardless of whether you truck. Verify that Michigan will accept the Maryland sales tax rather than making you pay twice (I don't know any state that does, but then, its not my $$ at risk). Then keep the boat in Annapolis if you want, and enjoy the sail in the spring!

[sck5]

Will the boat be on the hard over the winter? If so, you probably dont have too much to worry about. I bought a boat and had it trucked to MD, which said I had 30 days to pay the tax. I didnt even figure that out until two months later and when I went to pay the tax they were perfectly fine with the wait. You might not want to wait too long after splashing it in the spring before moving out of state though since technically you owe the tax 30 days after you own the boat if you keep it in MD.

But as somebody above said, the real question is whether Michigan has the same arrangement most other states do - a credit for taxes paid to another state - I considered moving the boat to NY and if/when I ever do, I will only owe the difference between MD and NY tax. This is why there is a fundamental rule of boat ownership:

Dont EVER throw away ANY piece of paper you get from the authorities. It might be worth literally thousands of dollars in the future.

[meteuz]

I don't know about the sales tax either. Many years ago I bought a boat in Connecticut and had it shipped to Rhode Island (the boat needed some work). RI has no sales tax on boats so I did not need to pay. I am pretty sure I would have been able to avoid the tax even if I sailed the boat over. I thought it was just a matter of where the boat was going to be registered/stored.

[ilikerust]

Which tax are you talking about? Sales tax on the purchase, or a property tax on the value of the boat? There are different state taxes.

I practiced state and local tax law for several years.

I can't give you legal advice and I'm not going to research the details of Maryland's tax laws, but most states' sales taxes work very similarly.

If you're talking about the sales tax, first, many states have a separate sales tax for boats that applies in lieu of, or in addition to, the general retail sales and use tax.

The sales tax applies to any "sale" occurring in that state. If the transfer of title or possession takes place within the state, then the sale has been made in that state and that state's sales tax applies. You cannot simply choose to pay Michigan's sales tax instead, because Michigan has no connection to that sale.

What your broker is getting at is the notion under the Uniform Commercial Code (UCC) of when the transfer of title or possession takes place. If it is a "delivery" contract, which specifically calls for the seller to deliver the item at a specific location, and the seller retains the risk of loss during transportation, then title and possession do not transfer until delivery. In your case, if that is the arrangement, and delivery does not occur until you receive the boat in good condition in Michigan, then that is where the "sale" takes place and you pay Michigan sales tax, not Maryland.

If you buy the boat in Maryland and use it there, I have no doubt it will be subject to Maryland's sales and use tax. It also very likely would be subject to local property taxation, to the extent that Maryland imposes such taxes on pleasure boats (which I don't know - but Virginia does).

[ilikerust]

P.S. - where the boat is registered or stored is a different question than where the "sale" takes place.

All of this depends on the particulars of the specific state's tax laws and regulations. If it is a significant amount and you're concerned about it, you might consider talking to a local, knowledgeable tax attorney familiar with the state tax laws. It might be worth several hundred dollars in paying a lawyer if it will save you a couple thousand in sales tax on the boat.

Either that or spend some time carefully researching the state tax laws, regulations and department of revenue rulings - every state publishes them on the web.

[PorFin]

If you register in MI, they're gonna demand a 6% sales tax in addition to the registration fee. They will give you credit for tax paid in another state up to the equal 6% -- if you pay 4% somehwere else, they'll ask for the remaining 2%; if you pay 7% they're not gonna give you back the difference. MI vessel registration is valid for three years.

[Gary M]

Hey thanks everyone, very good feedback. I should have been clear the boat will be moved to Ontario on the other side of Lake Huron where my friend will have to pay 13% sales tax.

We need to check into it more, him and I both in the past have purchased boats in Mass. and had not issues so hopefully we can work this out.
If not he will probably truck it home and I will miss out on a nice trip in May.

Thanks
Gary