Another Sales Tax and State Registration Scenario

[Caggie]

I know this issue has been discussed adnauseam, but I’ll throw out a scenario I am considering and see what the more clever minds on this forum think. For context, we are looking at a potential purchase of a trawler currently located in Florida around the $400K price point. Our short term plan (the next 18 months) is to bring the boat back to Texas (where we currently live) and get the boat ready for our long term plans. Long term plans start in early 2022 when we will commence with our great loop adventure (1 year) followed by either extended Bahamas cruising and/or another turn around the loop in a more relaxed manner.

What I am thinking is to register the boat in Florida upon purchase, as this is where the boat will eventually spend most of its time once we are finished in Texas. In addition, Florida has a sales tax cap of $16,000 whereas Texas is uncapped and at a slightly higher rate (6.25% vs. 6.00%). I don’t envision a scenario where the boat would ever return to Texas under our ownership. In addition, the boat will be documented. Does this plan sound reasonable or am I missing something? Thanks!

 

[ranger58sb]

Ask Texas about potential tax liability after purchasing elsewhere and bringing into the state for a couple years.

Some states recognize sales tax previously paid to other states... and some states don't charge sales tax on incoming boats that have been owned for X time period. Just ask.

-Chris

 

[O C Diver]

Yes, I think it sounds viable if the boat won't return to Texas. I would contact your lawyer and make certain you aren't violating a Texas law as you are a resident of that state.

The other considerations is the cost of going back and forth between Texas and Florida before leaving on your trip. If you plan to spend a bunch of time (trips to Florida) on the boat, traveling costs start to add up as opposed to keeping it local to your home.

Ted

 

[Pau Hana]

You’ll save on the sales tax, but your insurance rates will be significantly higher and n Florida - you may want to consider keeping her in the northeast or central Atlantic seaboard.

 

[Chrisjs]

No sales tax at all if you buy in Florida and move to Rhode Island within (2??) months.
Keep it in RI until ready to go cruising - still no sales tax in Fl if just cruising through, vs keeping it there. Our friends keep their boats in GA during the hurricane season for lower insurance, better protection.

 

[JLD]

Are you sure that sales taxes are uncapped in Texas?

This link seems to suggest there is now a cap. It notes, "*Sales tax for vessels and outboard motors purchased in Texas on or after September 1, 2019 is capped at $18,750.00."

One more thing to add. If it was me, I would gladly pay a little bit more money to have my boat so close to me. I can't image living only an hour from Galveston Bay and not enjoying the boat!

Jim

 

[Caggie]

Once we get the boat back to Texas, we are planning on living aboard, so taking it to RI (or any other jurisdiction) is a no go. I checked this link comptroller.texas.gov/taxes/boat and the cap of $18,750 was introduced effective Sept 1, 2019. Nice catch!

The issue remains of keeping the boat in Florida (long term plans) for extended periods of time without running afoul of Florida’s regulation on extended stays.

Originally, I was all for trying to find ways of not paying any tax, but wiser heads advised that eventually you will run afoul of some jurisdiction.

 

[Choices]

Once registered in Texas you only pay for annual registration. Many people move the boat out of state every six months and don't even pay that. Kind of a gray area. We only do that on the dinghy.

 

[Caggie]

Another twist I was thinking about was paying the sales tax for the boat in Florida, but registering the dinghy in Texas so at least I would have a Texas registration decal.

 

[Woodland Hills]

How old is your potential purchase? In Florida any boat 30 years or older is only $40 a year to register. Our 14’ tender costs more to register than our 63’ motor yacht!

 

[Shrew]

Another twist I was thinking about was paying the sales tax for the boat in Florida, but registering the dinghy in Texas so at least I would have a Texas registration decal.

The registration decal would be for the Dinghy. You can't register Boat A, then affix Boat A's sticker on Boat B. That applies to all of the states. In some states a tender (dinghy) can operate under the 'motherships' registration, but typically with some limitations.

Taxes for a vessel are paid in the state where the vessel resides. You're residency has no bearing on this. CG Documentation has no direct bearing on State Registration. That has to do with Titling and paperwork to travel internationally. It is not uncommon to have to register in multiple states if the vessel is operated in that state for greater time period than that state allows.

Typically, Sales Taxes are paid to only one state. However some states impose a Use Tax.

 

[Caggie]

The boat is 12 years old, so no-go on that sweet deal in Florida.

 

[Baker]

I think you’re overthinking this a bit. Pay the sales tax in Texas and enjoy. I will say Florida does have laws that you have to vacate the state within 90 days or you get hit with an amount equal to their sales tax.

 

[Woodland Hills]

You can stay in Florida up to 6 months with an extension.

 

[BandB]

I think you’re overthinking this a bit. Pay the sales tax in Texas and enjoy. I will say Florida does have laws that you have to vacate the state within 90 days or you get hit with an amount equal to their sales tax.

If you pay sales tax in another state and later bring it to FL for over 90 days, you don't have to pay sales tax there, just have to register it there.

 

[Caggie]

Would that still be the situation if I registered the boat in a non-sales state like Delaware?

 

[Leatherneck]

That extra 90 day extension in Florida costs $420. Don't ask me how I know.

 

[warfdog]

In California the FTB can come after you for up to 8-years in arrears, even if you do not own the boat any longer. In my case, having purchased and used a boat outside of the state for about a year (when the exclusion was 90-days) I felt pretty safe. But nonetheless, I did file an FTB use tax return to document my out of state use justifications. Event so, I was aware that up to that 8-year date, I could have been assessed 25K+ in tax with little or no recourse.

So your results WILL vary by state, jurisdiction, etc. I have found that hiring a use-tax agency is helpful for vessels/aircraft if you are trying to preserve out-of-venue status, but give the high-demand for more revenue by the state/counties you should not count on playing gamesmanship with the tax authorities as being to your advantage...

 

[Lepke]

I home port in Oregon, a no sales tax state.
Usually you have to show residence in the no sales tax state, otherwise when you move it or re-register it in a sales tax state, they come after the tax.
Sometimes there's a ownership time requirement to negate the tax.


In the good old days, a documented vessel didn't have any state taxes to pay. That was one of the big reasons to document.

 

[tiltrider1]

Oregon is a no sales tax state. However, if an Oregonian buys a California registered boat he/she is liable for the sales tax to California. Even if the sale is completed and registered in Oregon. I do not know if any other state is this extreme but it’s best to consult a professional.

 

[DDW]

^^ in this situation, provided the boat was delivered in Oregon and kept out of California for 180 of the first 360 days, you are exempt from CA sales and use tax. You do have to file for the exemption, and they are likely to come after you if you don't. But properly documented you will be granted the exemption. The exemption is permanent, even if you later bring the boat to California - that provision is nearly unique to California, for example Wa will tax any boat that comes in for more that 60 days.

 

[denverd0n]

If you pay sales tax in another state and later bring it to FL for over 90 days, you don't have to pay sales tax there, just have to register it there.

So long as you own and use the boat in another state for at least six months before bringing it to Florida. And, actually, it doesn't matter if you pay sales tax in the other state, as long as it was registered in that state.


So, buy a boat in a no-sales-tax state, then register it there, keep it there, use it there for at least six months. Bring it to Florida after the six months are up, and all you have to do is register it here if you stay for more than 90 days. No sales tax will be due.

 

[Comodave]

There are so many little quirks in the state laws and almost all of the states are different. Good advice to check with a specialist.

 

[Newtrawlerowner]

I know this issue has been discussed adnauseam, but I’ll throw out a scenario I am considering and see what the more clever minds on this forum think. For context, we are looking at a potential purchase of a trawler currently located in Florida around the $400K price point. Our short term plan (the next 18 months) is to bring the boat back to Texas (where we currently live) and get the boat ready for our long term plans. Long term plans start in early 2022 when we will commence with our great loop adventure (1 year) followed by either extended Bahamas cruising and/or another turn around the loop in a more relaxed manner.

What I am thinking is to register the boat in Florida upon purchase, as this is where the boat will eventually spend most of its time once we are finished in Texas. In addition, Florida has a sales tax cap of $16,000 whereas Texas is uncapped and at a slightly higher rate (6.25% vs. 6.00%). I don’t envision a scenario where the boat would ever return to Texas under our ownership. In addition, the boat will be documented. Does this plan sound reasonable or am I missing something? Thanks!

Its not just sales tax but also use tax.
Be aware of the tax consequence regardless of where you buy. Almost every state requires a boat owner to pay sales and/or use tax if the boat is in their waters longer than a certain period of time. In Florida its 90 days for an out of state boat. So if you buy in Florida and move it to Texas, you might be required to pay a tax in Texas and then again in Florida.

I also responded at length to a similar post on this forum about this exact issue.


Here is a post from 2011 written by a boat tax attorney that explains the cost and different scenarios.
Florida Boat Tax - Major July 1, 2010 Change - Answers in Boat Tax Law

If you buy a boat in Florida and plan on taking it out of state, the tax authority will require (through the selling broker or dealer) that you complete and sign a statement that says you will leave the state within 10 days (or 20 days if you are having it repaired).
https://www.floridasalestax.com/documents/Florida-DOR-Tax-Guide-Boat-Dealers-and-Brokers.pdf

USCG Documentation
Documentation means nothing regarding tax. Its more about visiting another country. When operating your boat outside of U.S. waters, the Certificate of Documentation is proof that the vessel is of American nationality. Also documented vessels are entitled to aid from a U.S. Consulate when outside of domestic waters, which is not the case with state-registered vessels.

Florida Registration
If you do decide to register your boat in Florida, there is a resident cost and a non-resident cost (higher of course). There is also a discount if you have a registered EPIRB of PLB.
Vessel Titling and Registrations

The real question is who enforces this rule? In the many posts I've read about boats and state tax laws there's no one knocking on doors asking if you made your tax payment. I even doubt that if you were boarded by a local sheriff or police they would ask about sales tax payment proof. The Florida Fish and Wildlife officers enforce this and I've never seen their boats on the water. I know for a fact the USCG doesn't ask. They are more interested in safety. You will need to pay or provide proof of payment if you register the boat.