Boat State Registration

A conversation among Whalers
NKB246
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Joined: Thu Nov 30, 2017 3:08 pm

Boat State Registration

Postby NKB246 » Thu Nov 30, 2017 3:31 pm

After years of lake boating, we just bought our first Whaler, a SUPER SPORT 17 with a 90-HP engine, which I will have to wait months to drive.

The lake where we will be keeping the boat is [a] private [lake], and, as result, boats do not need to be registered. I have asked numerous people about this, and I am confident this is true. So, we bought the boat out of state and have not paid the sales tax. I think that we could avoid doing so BUT I am not willing to take the risk.

Can I register my boat in a state where I own a home that is not my main residence? In this case I have a house in Pennsylvania and live in New York--the boat is kept in New York. Doing so would save a fair amount on the sale tax.

Now to further nuance the question: does anyone know if there is an additional tax for NYC?

I bought a car recently out of state but do not remember how this was handled. I was just speaking with my lawyer about setting up a new corp, and he suggested doing it to the upstate address (where the boat is located) to save a couple thousand dollars.


On an aside, we bought the boat from Whalertown in MD and had a great experience. If anyone has any questions about using them feel free to ask.

I promise my next post will be on a more fun topic!

NKB

jimh
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Re: Boat State Registration

Postby jimh » Thu Nov 30, 2017 7:20 pm

I think the aspect of your out-of-state purchase being a boat is NOT particularly important in the question of sales tax. I don't know the precise laws of Pennsylvania and New York, but I suspect that they are probably similar to my state, Michigan. If you make any purchase out of state, and bring that item back to Michigan, you are supposed to pay the sales tax in Michigan. Laws like this about sales tax have been on the books for decades. If following the letter of the law, if I bought a baseball cap while I was visiting North Carolina, let's say, and the sales tax in NC was lower than in Michigan--I don't know what the rates really are but let's assume it is lower--then if I bring that baseball cap back with me to Michigan I am supposed to pay the additional sales tax to Michigan. Has anyone ever done that? Probably not. But that is the law. There is a provision if the purchased item remains out of the state for one year, then you don't have to pay the taxes.

Your case is more complicated, since you apparently have a second residence in Pennsylvania. Do you get to pick which state to pay the sales tax? I don't know the answer. But if the boat really is not being imported to Pennsylvania, it seems questionable to pay the sales tax on its purchase there.

Also, you'd typically pay the owed sales tax on your state income tax return. If you don't file an income tax return in the state that you import the boat into, maybe you'd have to get a special form to pay the tax in that state. Now, once you own the boat and you've paid the sales tax (to someplace) for its purchase, you should not have to pay another sales tax if you then import it to a different state.

By the way, you probably shouldn't be discussing this on a public forum. Things people say on the internet have a way of getting stored forever and used against people five years later.

Jefecinco
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Re: Boat State Registration

Postby Jefecinco » Fri Dec 01, 2017 8:23 am

I believe you are legally obligated to pay taxes on and register a boat in the state where it spends more than half the year. At the time of registration any state sales taxes due are usually collected. If you have a document to prove the sales taxes were collected in another state the state where you are registering may credit the amount already paid against the amount due. There may be a penalty if the boat is not registered in a specific number of days. I would look at the requirements of both states, probably available on-line.

Alabama is atypical of some states, but when we bought a used Sport 13 from a private party we were not charged sales tax when we registered the boat. We were able to register the boat on the basis of a Bill of Sale I typed before meeting with the seller. I found examples on a web site. Alabama does not require formal titles for boats and does not register boat trailers. It is not uncommon for Bills of Sale to indicate the price paid for property was $5.00 and other considerations. There is little incentive to collect sales tax on $5.00.
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dtmackey
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Re: Boat State Registration

Postby dtmackey » Fri Dec 01, 2017 10:14 am

Registering out of state is common in the New England states with NH and RI having no sales tax. Anyone can register in NH and then use the boat elsewhere. Where you run into problems, if used outside NH, most states require you to register in the state of use after 30 days. For trailer boats that are usually a launch and retrieve on short use intervals you'd probably never have a problem, but boats kept at marinas or moored in harbors are now getting caught as MA is asking yacht clubs, marinas and town mooring departments to provide customer or membership documentation and chasing down the people skirting sales tax.

D-

msirof2001
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Re: Boat State Registration

Postby msirof2001 » Fri Dec 01, 2017 11:50 am

I'm a CPA but know little about Sales & Use tax, State and Local tax but I do know enough to advise you not to assume or guess about anything related to this. Find a local tax person that you trust, use that advice, don't play with matches with taxing authorities.
Current: 2017 Everglades 295cc, Previous1: 1995 Boston Whaler Outrage 21, Previous2: 1974 Sevylor Caravelle 3-man liferaft.

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Dutchman
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Re: Boat State Registration

Postby Dutchman » Fri Dec 01, 2017 1:01 pm

I'm sorry to say but you must and will pay taxes one way or another.

I assume you bought the boat new from a dealer. I doubt they will give you a lower [sales price] sales agreement like a private party might give you to circumvent paying higher taxes.

As Jeffco said is done quite often, [a false bill of sale with a lower price] is advantageous to seller as well as buyer because seller doesn't get that income and buyer would pay less taxes.

The problem with sales taxes is that when I buy a brand new boat or car, say here in Michigan, I must pay 6-percent sales tax, the problem lies in:

--I [buy a boat for] $30,000 and pay $1,800 to keep the State happy, so taxes will have been paid on this sale;

--now, say after a season or five season's use, I sell the boat, and, being a Boston Whaler it keeps its value, the buyer then again has to pay sales taxes which in principle already have been collected on my buy.

--also I saved for a long time, from money I already paid income taxes on, to make the original purchase of $30,000. I now, as seller, must in principle declare that I had $25,000 more income because I sold the boat and again pay income tax on that.

This is all double dipping by local, State and IRS. Something is not fair here. No matter how you look at it, you will pay. Sorry
EJO
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jimh
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Re: Boat State Registration

Postby jimh » Fri Dec 01, 2017 3:41 pm

I have never heard that a taxation authority categorizes the proceeds from the sale of a used car or a used boat as earned income and subject to taxing. My personal taxes have been prepared by a CPA for decades, and this has never come up. If you were in a business of buying and selling boats, you might have some exposure if you made a profit from selling, but I don't think you have taxable income from the proceeds of a sale of a boat. If anything, you'd be declaring a loss on the sale of the boat, not a gain. The only exception would be if you could manage to find a buyer that would pay more for your item than you paid. If you find a great deal on an old MONTAUK and pay $300 to a widow to get it out of her garage, then sell it for $10,300 to another boater, you'd report a $10,000 income, but minus any costs related to the sold item. For example, if you had to rent a garage to keep the boat for six months and paid $600 for the rent, that would be a deductible cost of the sale--I think.

But if you buy a new MONTAUK 170 for $31,000 and sell it five years later for $22,000, you do not report that $22,000 as an income for tax purposes.

NKB246
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Re: Boat State Registration

Postby NKB246 » Sat Dec 02, 2017 1:34 pm

All--thank you very much for your input. Interesting stuff. Just to clarify, I do not want to skirt paying the taxes altogether but if I can pay a lower rate in PA and keep it kosher that would be admirable. Regardless, I am just going to register it in NY (the difference is about $700 - NOT insignificant). The next boat will spend 51% of its time in New Hampshire!

Now I just have to sit back and wait until next summer to drive the thing.

All the best,

Neil

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Dutchman
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Re: Boat State Registration

Postby Dutchman » Tue Dec 05, 2017 10:59 am

jimh wrote:I have never heard that a taxation authority categorizes the proceeds from the sale of a used car or a used boat as earned income and subject to taxing. My personal taxes have been prepared by a CPA for decades, and this has never come up. If you were in a business of buying and selling boats, you might have some exposure if you made a profit from selling, but I don't think you have taxable income from the proceeds of a sale of a boat. If anything, you'd be declaring a loss on the sale of the boat, not a gain. The only exception would be if you could manage to find a buyer that would pay more for your item than you paid. If you find a great deal on an old MONTAUK and pay $300 to a widow to get it out of her garage, then sell it for $10,300 to another boater, you'd report a $10,000 income, but minus any costs related to the sold item. For example, if you had to rent a garage to keep the boat for six months and paid $600 for the rent, that would be a deductible cost of the sale--I think.

But if you buy a new MONTAUK 170 for $31,000 and sell it five years later for $22,000, you do not report that $22,000 as an income for tax purposes.


You are right but the government knows your assets and if these increase suddenly by $10K cash or more they will wonder and try to tax you, that's why there are off-shore banks.(--I laugh aloud--)
You are right about the new boat but your used boat increase value example tells it all.
EJO
"Clumsy Cleat"look up what it means
50th edition 2008 Montauk 150, w/60HP Mercury Bigfoot