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post #31 of 95 Old 01-31-2020
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Re: Best Eastern Seaboard State for Sales Tax

USCG documentation does not require proof of sales tax paid. If a boat is not "permanently" in one location... why pay continually change registration?

What about someone who sells half the boat to a partner? Does the partner pay tax on 1/2 the boat at what value?

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post #32 of 95 Old 01-31-2020
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Re: Best Eastern Seaboard State for Sales Tax

Sander, Many States ( mine is one) require you to annually register a documented vessel. Sales tax is checked when you 1st register.

If you move around, each state will have it's limitations on how long you can stay in their waters before they either require you to register with them, or extract a use tax from you. This takes some rather good research.

If you sell a share of your vessel to a private individual and the title and registration remains in your name then who's to know?
However, if the individual wants to be named on the title and the registration, or if you place it under an LLC, that will likely generate some fees and perhaps a tax on that portion of the sale.

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post #33 of 95 Old 01-31-2020
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Re: Best Eastern Seaboard State for Sales Tax

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Originally Posted by SanderO View Post
It seems as if every time a boat is sold sales tax is collected and paid.



That sounds like a lot of tax collection possibly.
That is also true for all property types especially cars, at a much higher volume.

In theory every time anything of value is resold, but it's the need for title / registration that allows transactions involving boats and cars to more easily be enforced.
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Re: Best Eastern Seaboard State for Sales Tax

This all sounds like a scheme to collect taxes. A fee to register a vessel or a vehicle seems reasonable. By the repeated tax collecting feels creepy for re sales.

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Re: Best Eastern Seaboard State for Sales Tax

Nobody likes taxes.

I agree that sales tax is definitely more regressive than income and property types of taxation, much less of a burden on the wealthy than on ordinary people.
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Re: Best Eastern Seaboard State for Sales Tax

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Originally Posted by sandero View Post
this all sounds like a scheme to collect taxes. A fee to register a vessel or a vehicle seems reasonable. By the repeated tax collecting feels creepy for re sales.
bingo!

I have been a full time tax collector for the state for 30 years. I collect t it and place it in bulk in a dedicated account from which the state electronically vacuums it up. If it's not there, a usurious fine is imposed and accrues daily.

In other words, I'm in the restaurant business.
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post #37 of 95 Old 02-01-2020
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Re: Best Eastern Seaboard State for Sales Tax

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Originally Posted by SanderO View Post
Thanks Minni..

So for clarification. The boat's owner is responsible for paying tax on a boat in their waters. So what is the tax?
In States that have these taxes, you'll owe a sales tax, if the sale took place there and you didn't remove it from that State quickly, or a use tax, if you bring the boat to the State and use it there for more than a defined period of time. 90 days is typical.

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Let's say the NEW boat was $100k and the state where the transaction took place had a 5% tax... but the owner moved the boat to a where there was a 10% tax. If I understand you Owner had to pay $10K to the state where the boat is moored.
If an owner paid one state 5% as sales tax and moves the boat to another much later, this is a matter of reciprocity. The second State is now trying to collect use tax, as the asset is being used there, the sale did not take place there. Most States have a reciprocal policy whereby they will credit use tax owed, by whatever was paid in Sales tax elsewhere.

Use Tax is typically owed on the value of the asset, while it is being used in the next State. Not on the sale or the sale value. Sometimes they'd have a rule that said the value is presumed the same as the sales price, if it was less than say 6 months ago. However, if you relocate a boat 10 years later and it's worth half what you paid, you are taxed on it's current value.

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But how is this actually enforced? I suppose to register you need to show proof you paid sales tax.
The attempts are varied, but many high taxed North Eastern States, who are coincidentally in deficit fiscal situations, are getting more aggressive with this. I understand that Mass marinas are actually required to report any vessel that is transient for more than 2 or 3 weeks.

Taxing authorities will also make assumptions, based on the mailing address one uses on State registration forms or USCG documentation. Note that the rules requiring registration or documentation are not the same as taxing. They get confused by some states collecting them together. Registration is a use permit, not a use tax, if that helps clarify. Nevertheless, the States will see a mailing address in their boarders and try to assume the boat is there. One needs to keep all documentation to prove otherwise.

The mailing address on my USCG documentation is not RI (I have more than one mailing address), even though the boat has always been moored in RI. I received a silly use tax bill, for maybe double what it would have been, if I had really owed it. I had to show all my marina slip bills, from the date of purchase to prove it was never in my mailing address' state. Once I sent them, they called to thank me and say the file was closed.

Quote:
How is all this practically enforced?
In general terms, just like all taxes are enforced. There is a bit of random auditing and few systems to try to trip you up. Not everyone is caught cheating, however, if one was caught, the penalties and interest are painful.

No problem legitimately avoiding owing taxes, but that means not being in place where they are due. Otherwise, one should pay their tab. Cruisers can be tripped up by staying too long in States that enforce use taxes. Not hard to do, if you lay up for a season, for example.

RI doesn't charge sales tax for a reason. It draws in 15,000 boaters who are there spending money in their state, paying sales tax on all sorts of other purchases and keeping their residents employed, in marine businesses, so they can pay income taxes.


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Re: Best Eastern Seaboard State for Sales Tax

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Originally Posted by RobGallagher View Post
I believe (as a couple of others have stated) the answer to your question is RI. Many States defer sales tax until registration. You must register the boat in RI and keep it registered there for a period of time. After a period of time you may re-register it in another State or just use USCG documentation if you plan to keep moving. Think of it like buying a used car, if you never register it, you might never pay sales tax.

People do this all the time. Is it right? Up to you.

As a person who generally knows a little about a lot of things and is often wrong, I would suggest you contact a pro.
This is mis-leading at best. Registration has nothing to do with where one owes sales or use tax. Only where the boat is moored. The above is a good description of tax evasion, not tax avoidance. The former is illegal.

Failure to pay, is fined. Intentionally deceiving authorites, by pretending your boat is elsewhere, is criminal.

You can not just register your boat in RI and avoid owing another State's taxes, unless it's actually in RI.

If you move it later, the new State will impose a Use Tax, if they have one. Most do.


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Re: Best Eastern Seaboard State for Sales Tax

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Originally Posted by SanderO View Post
This all sounds like a scheme to collect taxes. A fee to register a vessel or a vehicle seems reasonable. By the repeated tax collecting feels creepy for re sales.
I think you're getting it now. Isn't it ironic that the State's with the highest tax rates also seem to have the biggest budget deficits. That's a rant we probably shouldn't start.........


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Re: Best Eastern Seaboard State for Sales Tax

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Originally Posted by Minnewaska View Post
I think you're getting it now. Isn't it ironic that the State's with the highest tax rates also seem to have the biggest budget deficits. That's a rant we probably shouldn't start.........
Occurs to me that there are some difference with car and boats, taxes and registrations.

You literally can't drive a car off a lot without it being registered and that requires proof of sales tax payment. I suppose a car an be towed.

A boat is sold and the new owner turns the keys and takes off to wherever. The registration... and actually payment of the taxes due falls to the buyer... so dealer says with a smile.. register the boat when you figure out where.... Oh and pay the applicable taxes.

Buyer says... I'm not sticking around in the States I am going to be a boat bum in Grenada... But I may document it. AH you need a US mailing address for that. Cool... I got one for a while. So off he putt putts... documents his boat and decides to ignore the registration and use the tax money to fit the boat out for the passage.

If the deal has not reported the sale... or the private seller... the state has no one to "go after" for their taxes... the one where the boat was sold... and why would the new owner's state have any knowledge that one of its residents bought an expensive boat? They wouldn't unless the seller reported to the buyer's state... and they likely wouldn't. Or why would they?

20 Years later boat bum sails back to the States and may run into the tax collector.. or maybe not. A marina may ask for a reg. # or maybe accept a doc # or maybe neither. Depends on how much the tax people are auditing them. I suspect these audits exist because for some reason boats are sold and taxes are not being paid because if states give "credit" to taxes paid... whatever that means... boats are being sold and taxes are not being collected at time of sail.... or something.

But why would a marina become a reporting service for their state's tax department? Is there a law mandating this somehow? Clearly you don't have to have a boat registered to use it... or am I misunderstanding something?

++++

I am not opposed to taxes and fees if they are fair and sensible. I am surprised at how crazy the "system" in place is. I can see why there could be confusion and resentment.

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