# Minimizing Taxes; Hailing Port



## kc_cmc (Feb 23, 2002)

Just about to buy a boat, and interested in advice on minimizing tax liability ...

The boat has been kept and is currently in a boatyard shed in RI. The owner lives in NJ and the USCG doucmentation and boat markings show a hailing port in NJ.

I live in MA, and plan to use the boat in RI, MA, NH, and ME. I have family and an available mooring in RI, but would like to moor the boat in MA during the peak summer months.

RI has no sales or use tax on boats, so it is attractive and practical to have the sale take place there, where the boat is located anyway. MA does have a 5% sales/use tax, which some might assert is due if the boat comes to be used in MA, especially since I live in MA. Obviously, I would prefer to find a way to avoid this cost.

Designation of hailing port on the boat and documentation is supposed to be arbitrary and of no legal significance, but it is easy to imagine how people could see meaning in it.

So, as the boat documentation and markings are changed, in which state should I designate the hailing port? What other experience and advice can you share about the "best" arrangement for me?

Thanks, and my e-mail address is [email protected] if you would rather reply directly.


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## Jeff_H (Feb 26, 2000)

Your hailing port will have little to do with the taxes that you will pay on your boat. Most states that have taxes have gone to a user fee rather than the old system sales tax and registration fees. What that means is if you keep a boat in a State longer than the prescribed amount of time (it varies from 30 to 90 days depending on the state) you have to pay a user fee to that state. If you have paid sales tax on the boat in the state of its origin, equal to or in excess of that state''s tax rate, there is usually reciprocity which means that you do not have to pay sales tax again to register for a user fee in the new state. 

Of course is you register the boat in one state and use it in another there is always the chance to get caught. In Maryland they walk down the docks and record registration numbers and if you are still there after the prescribed time you can get charged not only the user fee plus a pretty hefty fine. 

Jeff


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## sailingfool (Apr 17, 2000)

If you want the freedom to use the boat in Mass, even for a few weeks a summer,
PAY THE USE TAX.
MA harbormasters diligently check marinas and mooring areas for permits and registrations. The moment the state learns you are a resident with a boat in the state, you will PAY THE USE TAX, plus penalties and interest (which doubles the tax due in 3-4 years). The DOR staff collecting use taxes have no senses of humor, and you are guilty unless you can absolutely prove you haven''t kept the boat in state...
If you can afford a boat you can aford to pay the taxes to enjoy it in peace...
(When living in MN in 1994 I finally paid the use tax on a R19 I had purchased in ME in 1990 while a MA resident. MA discovered the sale after I had moved out of state, and was all but eady to send a Statie out to MN get me for thier $400. Since I expected to move back some day, I finally settled when MS dropped the penalties).
IMHO, PAY THE USE TAX.


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## slipacre (May 16, 2002)

I bought my boat in NC (No tax)and had to pay tax in NY. Had I left it in NC there would have been property tax - Seems like they will get you one way or another sooner or later. You could always become a tax exempt foundation or claim that you are from another planet and therefore exempt. Not sure it is worth the effort though it is a bite my wallet still remembers. Or you could take it out of the country and have to deal with it somewhere else.
Good luck.

Todd V


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## jack_patricia (May 20, 2001)

KC, I offer you two add''l thoughts:

First, these questions frequently pop up on BB''s like this one and the inquirer implies (as you seem to) that they have not discussed the specifics of their issue with their local tax authority. There''s no way asking questions is going to make you liable for tax, and I think you''ll find they won''t even ask your name. Were I you, I would present my circumstances in full to the taxing authority in each of the States you mentioned (altho'' it would seem RI and MA are your two most likely candidates for hailing ports). Their views are at least as compelling as any advice we can give you here.

Second, Jeff''s clear summary omits a reference to an annual registration & renewal process, which IME most states have now instituted for documented vessels and which they use to deal with just the multi-state use issue you describe. The decal/sticker/registration process is to enable a given state to ID the nature of the use tax applied to the individual vessel (which otherwise they may have no knowledge of, given the USCG documentation process stands outside state tax data bases). The absence of a sticker/decal is how a 2nd state (e.g. Mass) can know to challenge your presence in their waters re: tax liability. When applying for the sticker/decal, questions are asked about taxes paid and it''s at that point that any use tax is assessed that was not paid to the level required by the 2nd state (e.g. MA) but not collected by the state where the boat was purchased (e.g. RI).

Given the above, my questions in your situation to each taxing authority would be:
"I''m buying and keeping my boat in another State:
1. If visiting your state during boating season, how long may I be in your waters before incurring use tax liability?
2. Is this period cummulative or does your grace period start over should I exit and then re-enter your state waters? (e.g. if transiting to ME and returning later the same season, as verified by dockage receipts, fuel purchases, etc.)
3. If in your waters in excess of that period, what use tax is due? (This will require you to presume where the sale will be consummated, e.g. RI).
4. Do you use a decal/sticker system for documented vessels if the boat is predominantly kept in your waters? If so, how does it work & what is the annual fee?

Depending on your actual use, I can imagine you being able to keep the boat in RI and never be liable for tax when transiting thru other states'' waters for short periods EXCEPT when you use MA waters. I think you''ll ultimately be liable whenever you are in those waters because you are a MA resident and liable for other state taxes in MA. How well MA enforces might be a practical matter for you, but is likely to be more successfully enforced if they use a sticker/decal system.

BUT that''s just my take on it; you''d be far better off hearing what the folks who administer the tax system have to say.

Jack


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## mcagney (Jan 9, 2004)

I am in a somewhat similiar situation. I have just purchased a boat in CT but I live in NJ. I have a vacation house in NH and plan on documenting the boat and then registering it in NH (no sales tax). I want to use the boat in CT (but will not use it in NJ waters)

I contacted CT and asked about using the boat in CT waters for more then 60 days (their limit). Here is their rule:

"Documented vessels and vessels numbered by another state,which are moored, docked or operated more than 60 days in Connecticut in any calendar year, must obtain a Connecticut certificate of decal and will display a current Connecticut validation decal (but not a Connecticut vessel number) on both sides of the bow. In addition, the owner must acquire a Connecticut Safe Boating Certificate in order to operate the vessel on Connecticut waters"

The cert of decal will cost $225 (38ft boat). Therefore it seems I can avoid paying CT sales/use tax and still legally use the boat in CT waters - am I missing something?

Mike


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## mcagney (Jan 9, 2004)

I am in a somewhat similiar situation. I have just purchased a boat in CT but I live in NJ. I have a vacation house in NH and plan on documenting the boat and then registering it in NH (no sales tax). I want to use the boat in CT (but will not use it in NJ waters)

I contacted CT and asked about using the boat in CT waters for more then 60 days (their limit). Here is their rule:

"Documented vessels and vessels numbered by another state,which are moored, docked or operated more than 60 days in Connecticut in any calendar year, must obtain a Connecticut certificate of decal and will display a current Connecticut validation decal (but not a Connecticut vessel number) on both sides of the bow. In addition, the owner must acquire a Connecticut Safe Boating Certificate in order to operate the vessel on Connecticut waters"

The cert of decal will cost $225 (38ft boat). Therefore it seems I can avoid paying CT sales/use tax and still legally use the boat in CT waters - am I missing something?

Mike


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## obiec (Sep 26, 2001)

I live in Oregon, A non sails tax state. I have a 38 foot Ingrid, and am going to be moving and using it up in Washington waters. If it is more than 90 days than I will owe a user fee of around 8.5 %. This would be a little over 5,000. For the privilege of spending money in there state, and spending money at Washington Marinas. This is a sore spot for me, I pay very high property taxes and Income taxes in Oregon instead of a sales tax. Why should I be paying them also. I will be leaving my boat mostly in Canada instead. I will keep it in Washington but only a couple months at a time.


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## TSOJOURNER (Dec 16, 1999)

Obiec---I agree with you 100+% Don''t like the idea of paying the taxes to Washington however you mentioned paying very high property taxes in Oregon you better never move . You are spoiled I think over all Oregon rates about half in tax rates comparing other states in this country and even the lowest are paying toooooooooo much. Of course they are all mostly temporary taxes . oh yeah!


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## obiec (Sep 26, 2001)

I sold my last home for $180,000. and I was paying over 3k per year in property taxes on it. If that is spoiled then I better find a box under a freeway.


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## TSOJOURNER (Dec 16, 1999)

"Sails tax": I get it!


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## Sailormon6 (May 9, 2002)

I studied state taxation over 30 years ago, and will explain it as best I remember it.

You pay a sales tax when you make a purchase of personal property and use the property in the same state. If you buy the property in one state, but sign an affidavit swearing that you will remove it from the state where you purchased it within X number of days, then you don’t have to pay the sales tax. However, when you take the property into another state, and use it there for more than X number of days, you have to pay a use tax. In other words, when you buy a boat, you either have to pay a sales tax where you buy it, or a use tax where you use it. The authorities usually catch you when you register the boat, because they’ll ask you to show proof that you paid sales tax at the time of purchase. If you don’t have a receipt showing that you paid sales tax, then you have to pay the use tax. 

The hailing port has nothing to do with sales or use taxes. It is one factor, however, in determining the state in which you must register the boat, and some states only charge small annual registration fees, while others charge annual registration fees, and they also assess hefty annual personal property taxes on boats, motor vehicles and RVs. Generally you must register the vehicle in the state where you will use it. If you live near a state line, and there is a significant difference between the annual taxes assessed by your state and by the neighboring state, you might decide to moor your boat in the state with the lower taxes.


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## obiec (Sep 26, 2001)

The problem for me in Oregon, is we pay higher taxes in other areas in stead of a sales tax. So we still are paying our taxes. But that dose not mater to Washington. They will still wont there user fee. And if I am not mistaken, they will wont a user fee form any out of state boat, regardless if they have paid sales tax on the boat or not.


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## hamiam (Dec 15, 2000)

Hunh? If you paid a sales tax in another state equal to or great than the user fee in Washington state, then you will pay nothing to Washington state. And its WANT not WONT.


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## TSOJOURNER (Dec 16, 1999)

Is there a list somewhere that shows what states charge for sales/usage, property taxes and registration fees? It would go a long way to deciding what state to register a boat.....


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