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Go Back   SailNet Community > On Board > Boat Review and Purchase Forum > Where to document/title/register?
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Thread: Where to document/title/register? Reply to Thread
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Topic Review (Newest First)
01-21-2010 08:50 AM
ToddLochner
More on the Offshore flag

You are correct that you must take the vessel to a foreign port and make entry in that foreign port before coming back to the US where you make entry again. Only then can your cruising permit be renewed.

Everyone has a different situation. A month or two ago I helped a client who bought a 60 foot fishing vessel. The client has a captain and was pleased to save the tens of thousands in tax. I have another client who has a yacht in the 100-125 foot range, which has a full crew of four. They have placed the vessel in the Charter industry and outsourced the management and charter of the vessel to a third party. Yet another client who has a fifty foot boat for private use only. I also have plenty of clients I steer away from the offshore flag because it is no right for them.

People for whom the foreign flag is often appropriate include: those placing the vessel into charter in order to defray ownership costs, and those who wish to use their vessel in Maine, Massachusetts, Florida, or anywhere else near a foreign port. One group that I see an offshore flag being good for are the folks who are seasonal and move the boat north or south based upon the season. They will take the boat somewhere and fly in to use it. We get quite of few of these types of people who transit the Chesapeake Bay yearly. (Sometimes it is just the captain moving the boat and sometimes it is the owner.) The mid Atlantic owners can make a run to Bermuda which is not that far away.

Every offshore flagged vessel or person who develops an annual crusing plan to legally avoid unnessecary taxation should continue thier relationship with thier attorney and have a planning contact at least once per year. If that part of the service is not offered then look for a new counsel.

Todd Lochner
Proctor in Admiralty
Lochner Law Firm, P.C.
30 C West Street Phone: (443) 716-4400
Annapolis, Maryland 21401 Fax: (443) 716-4405
01-18-2010 06:00 PM
TakeFive
Quote:
Originally Posted by hellosailor View Post
Key words on that web page:
"Others purchasers, however,... perhaps have a higher threshold for risk."
Just to make sure you have not misunderstood the purpose of this thread, I am not looking to avoid paying all sales tax. I want to select the correct state to pay my sales tax, and hopefully preserve my right to move to another state in the future without paying sales/use/excise tax a second time via reciprocity. At this point I have some limited flexibility to select that state, and I will use the resulting tax consequences (along with the quality of sailing) to help make my selection.

Like you, I take a very dim view of those who go to great lengths to avoid paying their fair share of taxes. It costs money to maintain our waterways, and everyone should pay his fair share. But if people insist on avoiding all taxes, there are attorneys who are willing (for a fee) to help them find legal loopholes. While I dislike that, it's not illegal. I support states' just efforts to close those loopholes - though I would prefer that closing the loopholes does not cause tax-paying boaters to have to pay duplicate taxes to multiple states.

Quote:
Originally Posted by hellosailor View Post
Last year a fellow posted a message (perhaps in this forum, perhaps elsewhere) about the use tax on his boat. He'd been a NY resident paying his income taxes as a resident for many years, but purchased his boat and took posession of it and registered it in another state. After 20 years (literally) he brought it back to register and keep in NY. At which time the NYS authorities demanded use tax INCLUDING 20 YEARS OF PENALTIES AND INTEREST for failure to pay the use tax at the time of purchase.
Somehow I get the feeling you may not be telling the whole story. Did this guy pay sales taxes to another state? Or did he select a tax-free haven for the sole purpose of avoiding the tax? Did he actually use the boat for 20 years in the waters that he was registered, or did he use it somewhere else? Was the state one which had reciprocity with NY? Did NY send him a warning letter 19 years earlier which he ignored? Depending on your answer to these questions, I would either have great sympathy for him, or I would think he got what he deserved.
01-18-2010 03:58 PM
hellosailor Key words on that web page:
"Others purchasers, however,... perhaps have a higher threshold for risk."

Last year a fellow posted a message (perhaps in this forum, perhaps elsewhere) about the use tax on his boat. He'd been a NY resident paying his income taxes as a resident for many years, but purchased his boat and took posession of it and registered it in another state. After 20 years (literally) he brought it back to register and keep in NY. At which time the NYS authorities demanded use tax INCLUDING 20 YEARS OF PENALTIES AND INTEREST for failure to pay the use tax at the time of purchase.

No question of risk, because he'd been sure there was no risk 20 years ago. So, if you're relying on legal advice for tax matters, make sure the contract says that the advisor will be responsible for any penalties you may get hit with if they were wrong. They've usually got insurance to cover that. And if you're being clever on your own--remember, Ceasar tends to get upset about folks who think they don't have to render unto Caeser. No matter who the local Caeser is.
01-18-2010 01:08 PM
TakeFive
Quote:
Originally Posted by xort View Post
send an inquiry to the 'boating law' people. They might give you the answer pro bono.
I did send an inquiry, and Todd Lochner responded by providing some useful insights both privately and publicly here. I know that he is being careful not to violate the forum's self-promotion rule, but I do want to publicly thank him for his contributions here. His website has been linked several places, and is worthy of one additional link because of the wealth of useful legal information that it provides. However do realize that laws change over time, so his information should be used for general background and not used as legal advice for any specific case:
Boating Law - Boat Tax - 2008

This above page provides a general update as of 2008. There is a pull-down list that shows a couple dozen other topics of interest, including the offshoring option that has been mentioned in this thread.
01-18-2010 12:19 PM
hellosailor "So MD ramps up their enforcement against everyone,"
Well, many folks look askance at "Mary Land". Which made the news this year by enacting three school zones in areas where there are no children or schools, simply because that allows them to add speeding fines in the school zones. Kinda like the reputation it has for being the best enforced 55mph zone on I95, rather than the surrounding 65s.

Todd? Doesn't foreign flagging also encur some other problems, like taking the boat outside the US for at least 15 days at least once per year?
"Normally valid for one year, a cruising license has no bearing on the dutiability of a pleasure boat. Under Customs policy, when a foreign flag vessel's cruising license expires, that vessel may not be issued another license until the following three conditions have been met: (1) the vessel leaves the US for a foreign port or place, and (2) it returns from that foreign port or place, and (3) at least 15 days have elapsed since the previous license expired. (Customs Directive 3100-06, November 7, 1988.)"

Kinda forces you to spend a three week vacation someplace, doesn't it?
01-18-2010 11:38 AM
ToddLochner
MD and PA vessel tax

Typically, MD and PA have a reciprocal relationship. The reality is that reciprocity is done on a "state by state basis" and although the answer rarely "officially" changes the practical ease of taking the exemption can vary based upon the relationship between the vessel tax enforcement administrators. I have heard of one state bureaucrat giving a different state's bureaucrat a hard time over reciprocity and an individual taxpayer has been caught in the middle. Remember that it is all about money and which state keeps the tax dollar. Budgets are tight all over. There is an organization which tries to smooth over some of these common issues and you may find their site useful. It is the National Association of State Boating Law Administrators.

As for PA and MD in particular, they have always had a good relationship. This can be a real blessing on one hand but on the other it is a huge problem for the vessel owner. When the vessel tax officials are "too chummy" they have one another on speed dial. If you escape tax in one state they call their compatriot who often goes for penalty and interest.

You should also consider whether your vessel may be a good candidate for offshore flagging. It is not as expensive as people think. Depending upon a number of circumstances, the break point for cost savings is usually with a purchase price in the $150,000 to $200,000 range. There is info available on a site that I am not allowed to post due to forum rules.

Since you have two threads I will post the answer in both.

Todd Lochner
Proctor in Admiralty
Lochner Law Firm, P.C.
30 C West Street Phone: (443) 716-4400
Annapolis, Maryland 21401 Fax: (443) 716-4405
01-17-2010 06:42 PM
TakeFive I have created a new thread to continue this discussion. (Click here)
01-15-2010 11:25 PM
TakeFive
Quote:
Originally Posted by hellosailor View Post
Its a funny thing, but most states have a "department of motor vehicles" and a "tax department" and whatever they are called, they usually can be found on the web. They also usually post FAQs that tell you what is subject to registration and tax, and usually treat a boat as a "motor vehicle" as long as there is a primary or auxiliary engine permanently installed on it...
I've lived in several states and registered boats in two, so I'm somewhat familiar. NJ does boats through DMV. PA has a separate Fish & Boat Commission. MD seems to use DNR. (Some of my terminology may not be exactly correct.)

Ideally it should be as simple as you say it is. But PA has a bad reputation of refusing reciprocity with many surrounding states, and this is a reason why it is so muddy. Like someone else mentioned, Maryland law seems to offer reciprocity to states that offer reciprocity to them. That may seem to be a "finger in the eye" of Pennsylvania residents. And Maryland also seems to be a bit hostile because Delaware is such a magnet for big ticket items because they have no sales tax. So MD ramps up their enforcement against everyone, but mainly because they want to pick up people who use DL as a shelter but actually use their boats in MD.
01-15-2010 11:12 PM
hellosailor Its a funny thing, but most states have a "department of motor vehicles" and a "tax department" and whatever they are called, they usually can be found on the web. They also usually post FAQs that tell you what is subject to registration and tax, and usually treat a boat as a "motor vehicle" as long as there is a primary or auxiliary engine permanently installed on it.

Most states require local registration after some period ranging from 90-180 days, and if you sign a marina contract for a period longer than that, you can bet the local tax authorities will take that as proof that you need to register the boat there.

Do your homework, check the states where you think you might keep the boat.

And don't even think about offshore titling for it. That would make the boat a "foreigner" and you'd have to get a US Cruising Permit for it--and take the boat out of the US at least once per year. That's just where the fun would begin.
01-15-2010 10:56 PM
xort send an inquiry to the 'boating law' people. They might give you the answer pro bono.
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