Californians: Ever heard of the Consumer Use Tax?

[rbrasi]

I just found out about it in a letter from the state board of Equalization (sounds like something from a Terry Gilliam movie). Since I bought the boat from a private party, the transaction is subject to state 'sales' or 'use' tax. WT F-ing F? I'm supposed to pay the state almost $700? Does anyone know of an exemption I can claim? This throws my budget all out of whack...... My kingdom for a loophole!!!!!!!

[hellosailor]

Most if not all states that have a sales tax, also have a "use tax". If you buy something over a certain dollar amount OUT of state, you pay use tax instead of sales tax, because sales tax can only be levied on sales within the state's jurisdiction (borders) and the states don't want to lose that because you crossed over to the next state.

Exemption? Probably not, unless the boat never came in-state and wasn't registrered in-state. With taxmen, the best advice is generally to pay up, immediately, in order to avoid penalties and fines, and then argue the point afterwards--IF you can. You'll find all the laws and exemptions online. There are usually very few if any.

And the penalties and fines can include seizure of all your assets, including the boat.

[Minnewaska]

Sorry, as stated, use tax is common to State's that have a sales tax. It applies to transactions where the product is "used" in a given State and the seller is not required to collect sales tax (private or Internet or out of state sale). The State's don't track much down, except high dollar items that are worth paying to find, ie boats. If CA has a registration, it would have been easy form them to cross reference.

Occasionally, the State's try to assess use tax, when the boat was purchased out of state and never came to your home state. They sometimes find your address on a USCG documentation database and just assume you snuck it home. Generally, if you can prove it was never in the state, you do not owe use tax.

[hellosailor]

I've heard that Cali is one of the foolish, egh, generous, states where there is no sales/use tax due if you boat the boat out of state and don't bring it back IN state until a short few years later. But even that is not common, in some states it doesn't matter when you bring the boat home, IF you ever bring it back in state they'll ask for sales/use tax and fines and penalties going all the way back to the date of purchase. Nasty.

And all the more reason, folks really need to know their state laws.

[WDS123]

don't ever try to mess with these guys - they are the Don Corleone of Tax Collectors.

About 15-20 years ago we had someone come to our California factory to pick up their new boat. They were visiting relatives in SoCal over a holiday, so they decided to drive from Texas, visit the relatives, swing by factory, pick up boat, and drive home.

They did this because they would save the cost of commercial trucking and it would be part of the celebration of buying a new boat.

Sales Taxes were dutifully collected for the Texas county where the boat was going to be registered. Couple was stopped at California - Az border and required to pay sales tax based on where they bought (aka picked up) boat.

If we had delivered boat to CA-AZ line and the couple then took possession of Boat - no CA sales tax would need to be paid. If a commercial trucker had picked up boat from our plant and delivered to their boatyard, no CA sales tax required.

We have one go-to person at the company who knows the ins and out of Sales Tax rules. Makes IRS rules seem clear and easy and forgiving.

We pay Sales Tax on Sandpaper consumed in plant and nothing else. Why ?

[windward54]

Get ready for sticker shock. There are a couple of other taxes in California that you should know about. Once you get over the sales tax, there is the personal property tax. The owner of any vessel on January 1st will receive a personal property tax bill from the county where you keep your boat. The tax bill will come from the County Tax Assessor, the same people that send you your property tax bill. Depending on the county, the tax can be as much as 1% of book value plus any voted extra taxes.

The second tax bill is a possessory tax bill. If you rent a slip from a public entity like a city, you will get a possessory tax from the State of California. The tax is for using public property for private use. If you pay your slip fee to a private marina operator. the marina operator gets to pay the bill, and they pass the cost monthly in your slip fee.

Welcome to keeping a boat in California. Good news is at least we have almost year round sailing. At least we do in Southern California.

[Fstbttms]

Originally Posted by WDSchock

don't ever try to mess with these guys - they are the Don Corleone of Tax Collectors.

They will come hunt you down at home and you don't have to owe them much for it to happen. I don't have to tell you how I know this, do I?

[Minnewaska]

Originally Posted by hellosailor

.....IF you ever bring it back in state they'll ask for sales/use tax and fines and penalties going all the way back to the date of purchase. Nasty.........

hs, I've read the story of your friend that had this happen. I am not familiar with a State that has a use tax that triggers on the date of purchase. I don't know them all, for sure, but have needed to learn several over the years.

You are generally guilty until proven innocent. When you come forward in your home state, even years later, many will require the original bill of sale. When they see that date, you will have the burden of proof that it hasn't been there all along. How many keep marina contracts for years? That had to be the problem.

Some states will grandfather goods purchase in the past, and not charge use tax. While CA is not a state I'm familiar with, from another post, it appears they have an annual personal property tax. Makes sense for a state like that to grandfather goods that you purchased and used out of state, to incent you to bring them home and pay a lifetime of pp tax. After a period of time, you clearly have the option to keep and use the goods elsewhere.

Nevertheless, this is probably all moot for the OP. It seems that they live, purchased and used the boat in CA. There is likely no way out. I fully agree with the mafia reference. Sales tax collectors are always more aggressive than income tax collectors, by far! They are typically going after merchants that fail to turn over the taxes they collected. That is equivalent to stealing, as it wasn't their money in the first place. Makes them very jaded.

[rbrasi]

Ahhh, but I live in NEVADA, you see. I guess my first mistake was, when I registered with the USCG, I put Marina Del Rey as hailing port. Should I have said Lake Mead marina? Can I change it to that? I've seen boats with Las Vegas written on the transom in MDR and wondered 'why would they do that'?
So, If I change my USCG Hailing Port to Las Vegas, NV, they otherwise have no reason to think I am actually using the boat in California, correct? Unless they ask for proof that I rent a slip at Lake Mead.

[Fstbttms]

I think you can claim anyplace as the hailing port. It may not be nautically or technically correct, but if the number of boaters who do it are anything to go by, it must be acceptable.

That being said, regardless of where you claim the homeport is, if you rent a slip in California, the taxman will find you.