# Boat Sales Tax - To Pay or Not to Pay?



## LyleRussell (May 3, 2006)

Yes I know this has been discussed ad nauseum but this is one of those questions that we have to be sure about. I want to do this legally but not pay any unecessary taxes. Especially as I get nothing for my $5-6000.

I am buying a 40' boat in Rhode Island so I can legitimaly register her there and avoid sales tax. I live in Pennsylvania but the boat will never be in PA so the 6% there can be avoided. She will summer at Onset Beach in Mass, perhaps 2 months a year. Winter storage will be in Maryland, probably at Rock Hall. I could store her in RI if it would save taxes but that is not ideal for me.

Should I pay the tax? Which state? 

Again I want to emphasize, I want to do this legally.


----------



## NOLAsailing (Sep 10, 2006)

Register the boat in the state where it will primarily be berthed. You pay taxes only to the state that you register the boat with.

How old is the boat? Some states do not require taxes to be paid on boats that are a specific age or older. For example, if the boat is 10 years old, no sales tax is due in Louisiana.


----------



## labatt (Jul 31, 2006)

My guess is you will owe Maryland sales tax if you store the boat there. I'm fairly sure that, if you live outside the state, your boat would have to be in Mass. for over 90 days before you would owe sales tax. Maryland, I believe, has the same requirement. MD does have a slight difference - if you buy the boat in Maryland and keep it on the hard for a period of time, you can sign a statement to that effect and you don't have to pay sales tax until 90 days after its first launch (or something along those lines), if the boat is still in MD. If RI doesn't charge sales tax, I'd store it there over the winter. The two "gotchas" for New York I found in my research on the subject were:

1) If you live in NY and bring it into the state (period) you will owe sales tax.

2) If you keep it in another state, most states I looked at have a 90 day policy - if it's in the state for longer than 90 days, you owe that state sales tax (or proof you paid tax in an equal or greater amount in another state). So if you leave it in the state for the winter, you'll owe tax.

By the way, if the boat is documented, the USCG will send the bill of sale to your state's tax department and they will find you. That's how I found out about #1 above.


----------



## eherlihy (Jan 2, 2007)

In Boston Harbor, I believe that the Tax Man may come after you if you stay for more than 4 weeks...

I would suggest that you pay the tax to which ever state has the lowest rate (MA or MD). Then, if you are assessed, by the other state, and can prove that you paid, you will likely only have to pay the difference. MA has a 5% sales tax by the way.

Ed


----------



## k1vsk (Jul 16, 2001)

Why do you think that a boat bought but never used in RI, just potentially stored there, can be "legitimitely" registered there? 
This is not as straight-forward as you might think and it makes much more sense to ask (what various state tax regulations would apply) the respective state(s).


----------



## hellosailor (Apr 11, 2006)

You would have to check the laws in Mass and Maryland. In *some* states, registration is not required and sales tax is not an issue, if the boat is not stored IN the navigable waters of the state. If Maryland follows similar terms, you could haul the boat there and legally avoid registration and tax requirements. (IF). Otherwise, most states require registration and sales tax for any motor vehicle in-state for 30+ days. 30/60/90, again it varies with the state, so you'd need to check Mass. rules. Once you sign a marina or mooring contract "for the season" with out-of-state registration, that may also go directly to state tax authorities, who will then demand you register the boat in state--and pay taxes on it--unless you can demonstrate a reason not to.

Rhode Island sounds like plain tax evasion--and that's illegal, since neither you nor the boat will ever "reside" there.


----------



## TrueBlue (Oct 11, 2004)

AFAIK, similarly to automobile State property taxes, a boat's *annual *tax status depends upon where it is registered and stored/used for most of the year.

Any boat purchased in RI is exempt from State sales tax. Unlike autos, boats are also exempt from annual property, or luxury taxes as well.


----------



## k1vsk (Jul 16, 2001)

TrueBlue said:


> AFAIK, similarly to automobile State property taxes, a boat's *annual *tax status depends upon where it is registered and stored/used for most of the year.
> 
> Any boat purchased in RI is exempt from State sales tax. Unlike autos, boats are also exempt from annual property, or luxury taxes as well.


The above is true BUT only if the boat stays there. Again, there is too much misinformation around so if, as you said, you want to do it legally, the only reliable information can be ontained from the respective state tax counsel.


----------



## Sapperwhite (Oct 21, 2006)

I would stay out of Maryland. There have been quite a few suits lost to the DNR regarding the Maryland Excise Tax. If you buy a boat, bring it here with the intention of being "out of dodge" before the timeframe to be taxed, but then something happens and you have to prolong your visit to or wonderful state...you pay. It doesn't matter if the boat is in the water or out, if the boats in Maryland wet or dry, the boats in Maryland.

The tax must be paid within 30 days of entry into Maryland, with 1.5% penalty for every late month. So, you come and stay for 6 months because of an unexpected illness or major repair. That'll be 5% initially, then 7.5% more for penalties on your extended visit. So thats 12.5% of fair market value on your $100,000 boat.....that'll be $12,500 , thanks for visiting Maryland, "Y'all come back now, ya hear"!

http://www.boatinglaw.com/document.cfm/maryland
http://findarticles.com/p/articles/mi_qn4183/is_20050316/ai_n13257785

And here's your tax form......you'll need it
http://www.dnr.state.md.us/download/DNRB-240.pdf


----------



## sailingdog (Mar 19, 2006)

LOL... well said... I bought my boat in MD...but got the heck out of dodge before the clock started ticking.


Sapperwhite said:


> I would stay out of Maryland. There have been quite a few suits lost to the DNR regarding the Maryland Excise Tax. If you buy a boat, bring it here with the intention of being "out of dodge" before the timeframe to be taxed, but then something happens and you have to prolong your visit to or wonderful state...you pay. It doesn't matter if the boat is in the water or out, if the boats in Maryland wet or dry, the boats in Maryland.
> 
> The tax must be paid within 30 days of entry into Maryland, with 1.5% penalty for every late month. So, you come and stay for 6 months because of an unexpected illness or major repair. That'll be 5% initially, then 7.5% more for penalties on your extended visit. So thats 12.5% of fair market value on your $100,000 boat.....that'll be $12,500 , thanks for visiting Maryland, "Y'all come back now, ya hear"!
> 
> ...


----------



## Sapperwhite (Oct 21, 2006)

sailingdog said:


> LOL... well said... I bought my boat in MD...but got the heck out of dodge before the clock started ticking.


It is funny, but it's really no joke. The DNR actively patrols the marinas and yards looking for people to tax. It really is a two edged sword, yeah they get some tax money, but they also get some bad press that scare people away from the area.


----------



## sailingfool (Apr 17, 2000)

In most states the tax in question is properly termed a sales/use tax. It applies equally to boats sold in the state or used in the state.

See http://www.mass.gov/dfwele/dle/boatregfaq.htm for Mass. specifics. Mass. will want the use tax if the boat is in the state 60 days or more. If your boat is documented, the State will not actually require you to register it, just to go through the part of the registration process that involves collecting the 5% tax. If you have the boat in Mass., don't assume you can duck the tax or talk your way out of it. If the State determines you have been there, say from a mooring permit or a fee paid to a marina, they will bill you for the tax. If you cannot PROVE you were there less than sixty days, the State will legally chase you or your bank account or your house, until you pay the tax and penalty and interest.

If you pay a use tax in Maryland you may only have to pay and balance up to 5% in Mass, see a lawyer.


----------



## LyleRussell (May 3, 2006)

OK it sounds like I need to pay the Maryland 5% tax up front. That is painful but doable. Can I keep my receipt and show it to the Mass DNR as proof that I paid the 5% tax. I will be in Mass perhaps 3 months in summer on a long term contract mooring. 

The boat is 17 years old.


----------



## k1vsk (Jul 16, 2001)

LyleRussell said:


> OK it sounds like I need to pay the Maryland 5% tax up front. That is painful but doable. Can I keep my receipt and show it to the Mass DNR as proof that I paid the 5% tax. I will be in Mass perhaps 3 months in summer on a long term contract mooring.
> 
> The boat is 17 years old.


This could be a great reality Tv story. Just record the conversation when the MA DOR (Dept of Revenue) wants to collect tax from you and particularly the part when you expalin how you don't owe it all because someone on Sailnet.net told you so...


----------



## Sapperwhite (Oct 21, 2006)

If you pay sales/use/or excise tax in any state, the other states honor up to the amount that was previously taxed. The main idea is to decide where the boat will most be used and pay taxes there, or pay sales tax in the state you buy it in, that way you won't ever run into an issue.

On the north bay, people from Delaware try to claim Delaware all the time because there is no tax in Del. They usually get caught and end up paying because they have no documentation of ever paying tax on the boat. Sometimes you pay tax where you buy the boat, and if that is 6% in mass., but you don't plan on ever returning to mass. there are a few papers to sign, and thats it. 

I bought my boat in NJ (6% sales tax), signed one paper and produced a receipt for Maryland Excise Tax (5%) and NJ honored it. I also keep my end of the deal by not cruising NJ primarily.....I'm safe from NJ. Check the laws thoroughly for the state you buy the boat from, and the states you plan to cruise and store the boat in.

Unless you buy it, store it, and primarily cruise it in one of the few states that don't tax it, you will have to pay someone.


----------



## hellosailor (Apr 11, 2006)

AFAIK "use tax" applies to residents of a state--and residents only. 

It might pay to make two calls from a pay phone under a fake name, and ask each state authority what they would consider sufficient and necessary. Sometimes they get in a pissing contest and you don't want to be in the middle of that: Mass could say "Well, 90 days and of course you have to register it here" while Maryland could say "Well, nine months is more than half of the year, of course you have to register it here". (Unless of course, you are looking at storage out of the water and they exempt that.)

Uh-uh, I'd want to get the rules clear in writing from both sides before messing with that one.


----------



## Jotun (May 4, 2006)

Sapperwhite said:


> On the north bay, people from Delaware try to claim Delaware all the time because there is no tax in Del. They usually get caught and end up paying because they have no documentation of ever paying tax on the boat.


As a person who lives in Delaware (no sales tax) but keeps his boat just a few miles inside Maryland, it was very tempting to skip out on the tax. But the penalty for not paying scared me, so I did the right thing and paid up. However, there are people at my marina who have a slip in MD but the boat is clearly registered in DE.

Sapper, do you know if there is a cap on the penalty fine?


----------



## labatt (Jul 31, 2006)

sailingdog said:


> LOL... well said... I bought my boat in MD...but got the heck out of dodge before the clock started ticking.


I signed some official MD government form when I bought my boat there that allowed me to keep my boat there for the season (as long as I didn't launch it) and not pay sales tax on it. I barely remember what I had for breakfast today, so don't ask me exactly what it said. Apparently, MD lost a couple of court cases relative to boat sales taxes and this is what resulted. I'll have to send an e-mail to my broker to ask him exactly what it was...


----------



## Sapperwhite (Oct 21, 2006)

Jotun said:


> As a person who lives in Delaware (no sales tax) but keeps his boat just a few miles inside Maryland, it was very tempting to skip out on the tax. But the penalty for not paying scared me, so I did the right thing and paid up. However, there are people at my marina who have a slip in MD but the boat is clearly registered in DE.
> 
> Sapper, do you know if there is a cap on the penalty fine?


I can't remember off the top of my head. I do know that within a year you can be penalized 18%fair market value, but if it extends past a year I forget.


----------



## sailingdog (Mar 19, 2006)

The form was probably an affadavit swearing that the boat's state of primary use would not be Maryland, and that you were taking the boat out of state within a certain period of time. I signed one for when I bought my boat and more recently with the state of Connecticut for when I bought a dinghy there.


labatt said:


> I signed some official MD government form when I bought my boat there that allowed me to keep my boat there for the season (as long as I didn't launch it) and not pay sales tax on it. I barely remember what I had for breakfast today, so don't ask me exactly what it said. Apparently, MD lost a couple of court cases relative to boat sales taxes and this is what resulted. I'll have to send an e-mail to my broker to ask him exactly what it was...


----------



## sailingfool (Apr 17, 2000)

hellosailor said:


> AFAIK "use tax" applies to residents of a state--and residents only.
> 
> .....


Absolutely not true for the state of Massachusetts and I suspect not true in many or any other states with use taxes. They want their tax if you use th eboat in the state, they don't care where you live.

See the link in my earlkier post http://www.mass.gov/dfwele/dle/boatregfaq.htm#Require 
read the first bullet, it doesn't say anything about residents or residence.


----------



## hellosailor (Apr 11, 2006)

Not that I doubt you--but 
"See the link in my earlkier post http://www.mass.gov/dfwele/dle/boatregfaq.htm#Require 
read the first bullet," there's no mention of use tax in that link, just registration issues.

I was reading your remarks with the view of use tax in the state where you reside--versus that you are keeping the boat someplace else where you don't reside. Of course if you summer there...that's enough to establish residency and tax liability too, I'd guess.

Paint it Navy Gray, put big white numbers on the side, hide it in plain sight.<G>


----------



## sailingfool (Apr 17, 2000)

hellosailor said:


> Not that I doubt you--but
> "See the link in my earlkier post http://www.mass.gov/dfwele/dle/boatregfaq.htm#Require
> read the first bullet," there's no mention of use tax in that link, just registration issues.
> 
> ...


Here's a link that addresses the sales and use tax, in so few words http://www.mass.gov/Ador/docs/dor/Publ/PDFS/sales_use_07.pdf
again residency has no relevancy.


----------



## TrueBlue (Oct 11, 2004)

Some RI boat sales tax issues answered in this link:

RI DEM Boating FAQ


----------



## Joesaila (May 19, 2007)

*Sales Tax?*



sailingfool said:


> Here's a link that addresses the sales and use tax, in so few words http://www.mass.gov/Ador/docs/dor/Publ/PDFS/sales_use_07.pdf
> again residency has no relevancy.


Thanks for trying to be helpful...but those Mass. Gov't Sites are...like Mass. Gov't. I guess I'll wait till I get the bill...


----------



## eherlihy (Jan 2, 2007)

To conclude:


> I could store her in RI if it would save taxes but that is not ideal for me.


 Keep her in RI if you want to avoid MA 5% or MD 6% tax.

Ed


----------



## Sapperwhite (Oct 21, 2006)

eherlihy said:


> To conclude: Keep her in RI if you want to avoid MA 5% or MD 6% tax.
> 
> Ed


Md isn't 6%. They don't charge a "sales", or "use" tax. They charge an excise tax of 5% fair market value.


----------



## LyleRussell (May 3, 2006)

Both Mass and Maryland are 5%. 

She will be documented so as I read the link above (#Require) she does not need MA registration.

I will call the Mass DOR and see if they will accept a MD tax receipt. Yes I will record the name of the person answering my questions. 

As far as the flame about a reality show. That's exactly how I feel. I call MD DNR they say oh yes you owe. I call MA DOR yeah I owe. Yet my Rhode Island broker keeps saying that buying from him means I don't owe. That's probably true if I keep it at his marina in RI and never sail out of state. There are thousands of out-of state boats tied up around Annapolis as we speak. What are they doing? 

Perhaps the real question is "Can anybody recommend a good tax lawyer".


----------



## HerbDB (Sep 30, 2000)

Sapperwhite said:


> If you pay sales/use/or excise tax in any state, the other states honor up to the amount that was previously taxed. The main idea is to decide where the boat will most be used and pay taxes there, or pay sales tax in the state you buy it in, that way you won't ever run into an issue.


This is not always true. NJ and MD have agreements recognizing the taxes paid to the other. PA on the other hand has a "use fee" that does not recognize amounts paid to other states. PA scours the federal documentation records for boats belonging to PA residents, then sends them a bill. I have had this happen to me twice. I had to supply copies of my marina contracts to prove the boat was kept out of PA. They dropped the claim, but warned me that if I moved the boat to PA, I would owe them the money.


----------



## Sapperwhite (Oct 21, 2006)

LyleRussell said:


> There are thousands of out-of state boats tied up around Annapolis as we speak. What are they doing?


Just because the hailing port isn't from Md. doesn't mean that they didn't pay their respective state, or some state along the way...... some may have not, but I can bet most did and they carry the paperwork to prove it.


----------



## Sapperwhite (Oct 21, 2006)

HerbDB said:


> This is not always true. NJ and MD have agreements recognizing the taxes paid to the other. PA on the other hand has a "use fee" that does not recognize amounts paid to other states. PA scours the federal documentation records for boats belonging to PA residents, then sends them a bill. I have had this happen to me twice. I had to supply copies of my marina contracts to prove the boad was kept out of PA. They dropped the claim, but warned me that if I moved the boat to PA, I would owe them the money.


I forgot about Pa. but now remember some stories like yours when I was researching who got the taxes and why. But again, as long as you have the paperwork to prove your side you're in the clear. If I were you I'd drop a line to my reps. explaining that this sort of issue is why you will never keep your boat in Philly or Tullytown (even if you never plan to). Say hey thanks for making me spend my money in other states because of your idiotic legislation. I can bet that this is a bigger issue for Lake Erie sailors who live in Pa. but sail out of Buffalo.


----------



## sailingfool (Apr 17, 2000)

*Dumb move*



Joesaila said:


> Thanks for trying to be helpful...but those Mass. Gov't Sites are...like Mass. Gov't. I guess I'll wait till I get the bill...


If you might owe a MA use tax, that would be a dumb move. When the bill arrives, it will include a penalty amount and interest probably beginning from when the earliest that the Commonwealth guesses you might have owned the boat. From my personal experience, the use tax demand presented four years following the purchase of a boat in Maine by a MA resident (me) doubled the original use tax amount. Even though I was then living in Minnesota, I eventually paid the use tax and interest so that some day I could return to MA.


----------



## LyleRussell (May 3, 2006)

To summarize this and several other threads. 

1. I am going to buy the boat in RI and pay no tax. Also USCG document it ($500)

2. I am going to pay the 5% Maryland tax. (Approx $5000)

3. Get a storage and slip contract in MD. Even though I will not immediately use it. 

4. Fight off the PA use tax (6%) using the fact that she will never be in PA and I have long term mooring and storage contracts in MD and MA. 

5. Take the boat to MA for the remainder of the season and fight off their DOR using the logic, this year, that I havn't been there 90 days and ,next year, that I have already paid the 5% in Maryland. 

Do you think that will work? Is there a simpler way?


----------



## LyleRussell (May 3, 2006)

Yes I will call Mass DOR and confirm that they will accept a Maryland tax receipt as payment. 

Does this sound workable?


----------



## hellosailor (Apr 11, 2006)

Sounds good. Remember to keep a bound log, and incidental receipts (fuel, dinner) to document where the vessel has been.

$500 documentation?! Did the USCG decide to make money, or is that from an agent?


----------



## LyleRussell (May 3, 2006)

$500 to document is what several lenders are charging. Includes title search and guarantee etc. 

Is there a cheaper way?


----------



## hellosailor (Apr 11, 2006)

Ah, title search & guarantee are something else. Simple documentation with the USCG is, indeed, a lot cheaper but that's all it is--documentation. No title guarantee (which I assume means "insurance") and no search involved when you have a normal sale, i.e. which includes title papers form the previous owner.


----------



## Thaumaturge (Sep 5, 2007)

Just to throw a spanner in the works guys, what is the forum feeling on tax liability for me, a Brit, buying in Florida and immediately registering the yacht on the UK Small Ships Register, thus flying the red ensign.

Although keeping my purchased vessel in Florida for a couple of months or so to update the inventory and generally prepare for ocean sailing, my intention is to leave for Europe via the Caribbean.

I feel that I will probably be exempt from Florida sales or excise taxes, is this correct?

Many thanks in anticipation of any help provided.

Vince


----------



## sailingdog (Mar 19, 2006)

Thaumaturge said:


> Just to throw a spanner in the works guys, what is the forum feeling on tax liability for me, a Brit, buying in Florida and immediately registering the yacht on the UK Small Ships Register, thus flying the red ensign.
> 
> Although keeping my purchased vessel in Florida for a couple of months or so to update the inventory and generally prepare for ocean sailing, my intention is to leave for Europe via the Caribbean.
> 
> ...


You will need to contact the local authorities to determine whether you're exempt or not. They have a maximum time you can stay in the state without paying the sales/excise taxes... you're probably okay, especially being foreign flagged...but YMMV.


----------



## hellosailor (Apr 11, 2006)

"Although keeping my purchased vessel in Florida for a couple of months or so "
Might not be possible, Vince. In order to put the UK flag on, you might have to remove the vessel from the US in order to get the cruising permit to re-enter the US. (I don't know, you'd have to check at the source on the cruising permit.) And, IIRC the Florida sales tax regulations that are posted on their web site, they don't care who or what you are, you have 90 days to get it out of Florida, or else you pay sales tax. Unlike the EU's VAT, there's no exemption for foreigners.
Check with both authorities to be sure.


----------



## Thaumaturge (Sep 5, 2007)

Thanks for the help guys...


----------



## speciald (Mar 27, 2007)

The rule in Florida allows state tax exemption in two situations: 1) They allow the boat to remain in Florida waters for commisioning for 90 days(I think) without having to pay sales tax. 2) If the boat was purchased more than 6 months earlier, no tax is due when the boat is moved to Florida.So buy the boat, sail the Caribbean for 6 months this Winter, then go to Florida, tax free. If the boat has a documentation with Florida hailing port, you will get a letter asking why you havn't paid taxes; tell them the boat is not in Florida and they will leave you alone. The tax collecter was the one who told me about the exemption rule.


----------

