State of residency for a full time live-aboard

[kthoennes]

...BTW, their "invitation" was because they were reading my blog and from that concluded we were in WA longer than allowed. But we had not, so they went away....

If you don't mind my asking, how do you know they were reading your blog? There are really state tax revenue agents sitting in cubicles somewhere reading boating blogs? What kind of crazy Orwellian stuff is that?

 

[Hippocampus]

We’ve used receipts as I mentioned above. Given you pay for everything electronically now a days keep a separate folder of receipts . Either printed out or original paper. Given we usually anchor out try to get a fuel or yard bill. Don’t want them saying you may have been in a different state but what proof do you have the boat was. Obviously slip fees are easier proof.

 

[Alaskan Sea-Duction]

If you don't mind my asking, how do you know they were reading your blog? There are really state tax revenue agents sitting in cubicles somewhere reading boating blogs? What kind of crazy Orwellian stuff is that?

That's how they got me. They found my blog, facebook and yes, TF posts.

I am still a non-resident. But I had to pay thier "user fee' which equals state sales tax.

 

[BandB]

And please no one get 60 days confused with 2 months. You laugh, but I've known it to cost people. Also it includes the first and last day so don't overlook that. 60 days starting on July 10 ends on September 7.

 

[BandB]

That's how they got me. They found my blog, facebook and yes, TF posts.

I am still a non-resident. But I had to pay thier "user fee' which equals state sales tax.

That's why I've cautioned in the past those ever discussing anything illegal or tax dodges here. Law enforcement of all types is very active online now. They also use it as part of their investigative approach. Can also save you by proving what you're trying to assert.

 

[twistedtree]

If you don't mind my asking, how do you know they were reading your blog? There are really state tax revenue agents sitting in cubicles somewhere reading boating blogs? What kind of crazy Orwellian stuff is that?

They told me. They said they were looking at “habitual users of repair affidavits”. I suspect that when my boat came up, they started googling to see what they could find.

 

[twistedtree]

As twisted said, keep very detailed records you can prove. With one boat we were in Washington 49 days, gone for 31, back in for 2, gone for 17, in for 50, gone for 15, in for 8, gone. So 109 total days but never longer than 50.

Those 109 days must have been spread over more than 365 calendar days, right? My understanding is that the 60 days allowed is within 365 days of your first entry, and renews on each arrival anniversary. Is your understanding different? That would be yet another twists on rules interpretation, and in this case one that favors visitors

 

[kthoennes]

They told me. They said they were looking at “habitual users of repair affidavits”. I suspect that when my boat came up, they started googling to see what they could find.

No intention of wandering off into a political debate here (really) but boy that seems like a silly thing to do -- just a poor rate of return I mean. You spend what, $50,000, $60,000 (or more?) in salary and fringe for a state tax revenue agent to surf the 'net, to chase how much in unpaid boat fees and taxes, that may or may not be ultimately assessed and paid? I can think of a ton more sensible and likely more productive revenue recovery and collection activities. But okay, I know, boaters, we're all rich and lighting our cigars with $100 bills and evading our financial obligations.

 

[psneeld]

No intention of wandering off into a political debate here (really) but boy that seems like a silly thing to do -- just a poor rate of return I mean. You spend what, $50,000, $60,000 (or more?) in salary and fringe for a state tax revenue agent to surf the 'net, to chase how much in unpaid boat fees and taxes, that may or may not be ultimately assessed and paid? I can think of a ton more sensible and likely more productive revenue recovery and collection activities. But okay, I know, boaters, we're all rich and lighting our cigars with $100 bills and evading our financial obligations.

To a point it works...after a certain amount it doesnt.... one or several busts a year pay for itself. The point is if you don't ever enforce the law, the slippery slope evades more and more.

The smartest quote I have ever heard about something similar was that getting 90% of offenders was about as good as can efficiently be expected by a government....beyond that it would take a police state which we all know never works out in the long run. But you still have to try or total disregard ensues.

 

[Porgy]

State revenue agents use internet to investigate potential tax evasion by rich yacht owners. How’s that even an issue.

If an owner of a documented boat didn’t pay the tax and penalties, can’t the state put a lien on it that would prevent its sale until it’s paid? A CG Document lien can get one’s attention. I happened to have been looking at a Florida revenue site that quoted 200% penalties. A couple good hits could pay for a lot of coffee drinking, internet surfing, cubicle dwelling, state bureaucrats.

 

[twistedtree]

The key with all of this is to know the rules and remain compliant, which includes paying any taxes that are due.

 

[BandB]

Those 109 days must have been spread over more than 365 calendar days, right? My understanding is that the 60 days allowed is within 365 days of your first entry, and renews on each arrival anniversary. Is your understanding different? That would be yet another twists on rules interpretation, and in this case one that favors visitors

My understanding is that 60 days is per entry to the state and that would be consistent with every other state I've visited.

Additional twist: You can renew the 60 days by getting a permit for 60 days. Then that permit can be renewed for another 60, so you can get up to 180 days.

Another twist: This is a sales tax one. (We didn't do this one) but if you purchase a boat in Washington and are a non-resident, you can purchase a use permit. It's good for one year, but after that year, you can't return. If you ever return in that boat, then you're subject to the original sales tax.

 

[Hippocampus]

Good thread. Learned a few twists I wasn’t aware of. Thanks all.

 

[BandB]

Good thread. Learned a few twists I wasn’t aware of. Thanks all.

One of the big things to learn is that every state is different and they all have twists that may or may not impact you. We read the warnings of having a boat docked in California on January 1 leading to property taxes. Now the actual regulations are state of primary use but they do inventory all docked boats in most jurisdictions. With that knowledge, we met with the tax office before January 1 and got agreement we were just passing through and would be leaving in early January. We also left a copy with the marina and on the boat. Collector does see the boat but we don't get charged property tax. Others battled such for years.

One state will start the clock over if you just take a trip to another state and buy fuel while another state requires you to be gone for an entire day. That's not law, just what a wildlife warden follows.

You've got states like Virginia with widely varying property tax rules and rates by county.

What is required to be considered a resident differs greatly, but before changing, you need to be well aware of your current state's rules. There are states that will fight you if you continue to own any residential property, even if you never lived in it.

When moving, we spent money on accountants and lawyers, but avoided problems. One wrong move and NC would have tried their best to tax Florida income. We then had NC income in 2018 and they wanted to know why we didn't file for 2014-17. I explained, they accepted.

It's really knowing and taking the right steps in advance.

 

[Hippocampus]

Learned long ago”you don’t know what you don’t know”. Even fully retired and now with no properties other than dirt dwelling still have my circle of advisors. All income from investments. Still find you need to review local boating and tax laws as you travel. Then call your professionals to confirm your understanding is congruent to the reality.

 

[Alaskan Sea-Duction]

No intention of wandering off into a political debate here (really) but boy that seems like a silly thing to do -- just a poor rate of return I mean. You spend what, $50,000, $60,000 (or more?) in salary and fringe for a state tax revenue agent to surf the 'net, to chase how much in unpaid boat fees and taxes, that may or may not be ultimately assessed and paid? I can think of a ton more sensible and likely more productive revenue recovery and collection activities. But okay, I know, boaters, we're all rich and lighting our cigars with $100 bills and evading our financial obligations.

Don't forget the 18 year scotch!

 

[slowgoesit]

My understanding is that 60 days is per entry to the state and that would be consistent with every other state I've visited.

Additional twist: You can renew the 60 days by getting a permit for 60 days. Then that permit can be renewed for another 60, so you can get up to 180 days.

Another twist: This is a sales tax one. (We didn't do this one) but if you purchase a boat in Washington and are a non-resident, you can purchase a use permit. It's good for one year, but after that year, you can't return. If you ever return in that boat, then you're subject to the original sales tax.

Two corrections, if you are commenting on Washington State. The permit is for 90 days, not 60 days in WA State, and you can purchase one additional permit for 90 day, for a total of 180 days. On the Cruising Permit, it is indeed good for 12 months, but then the boat has to be out of the state for TWO YEARS or you will be responsible for paying sales or use tax immediately upon the boat's re-entry into WA State . . . . And that even applies if you are just clearing customs into US in WA waters, or even if just passing through, say from Alaska, through BC, and then you enter into WA waters on your way down the West Coast. After the two years out of the state, it all starts over . . . We just went through that here in WA State. We had intended on being out of the state before 12 months from date of purchase, but Covid, and other stuff put us here beyond 12 months . . . . so we bit the bullet and went ahead and registered the boat in WA State, and paid Sales Tax. We will retain the proof of sales tax paid for future if/when we end up registering in another state.

 

[slowgoesit]

I need to comment on something that has come up time and time again. People are often deriding other people for "Tax Avoidance", comparing "Tax Avoidance" with "cheating on taxes", or "Tax Evasion".

Choosing which state you wish to declare residency in while you full time cruise likely falls under "Tax Avoidance".

There is a big difference, both legal and moral between "Tax Avoidance" and "Tax Evasion". One is legal, as well as moral, and is just smart business. The other is illegal, immoral, and can get you into hot water quickly. It pays to know the difference.

I don't like paying any more taxes than I legally have to, but if it is legally required, I just grimace and write the check.

Below is an interesting article from the IRS on the difference between Tax Avoidance and Tax evasion.

https://apps.irs.gov/app/understandingTaxes/whys/thm01/les03/media/ws_ans_thm01_les03.pdf

 

[BandB]

Two corrections, if you are commenting on Washington State. The permit is for 90 days, not 60 days in WA State, and you can purchase one additional permit for 90 day, for a total of 180 days. On the Cruising Permit, it is indeed good for 12 months, but then the boat has to be out of the state for TWO YEARS or you will be responsible for paying sales or use tax immediately upon the boat's re-entry into WA State . . . . And that even applies if you are just clearing customs into US in WA waters, or even if just passing through, say from Alaska, through BC, and then you enter into WA waters on your way down the West Coast. After the two years out of the state, it all starts over . . . We just went through that here in WA State. We had intended on being out of the state before 12 months from date of purchase, but Covid, and other stuff put us here beyond 12 months . . . . so we bit the bullet and went ahead and registered the boat in WA State, and paid Sales Tax. We will retain the proof of sales tax paid for future if/when we end up registering in another state.

Ok, I am commenting on Washington State. Here is the link to the law. Not dock talk, not rumor, not what one heard. The law.

https://app.leg.wa.gov/RCW/default.aspx?cite=88.02.570

Section 5 covers the basic rule of limiting visits to 60 days.

(5) A vessel that is currently registered or numbered under the laws of the state of principal operation or that has been issued a valid number under federal law. However, either vessel must be registered in Washington state if the state of principal operation changes to Washington state by the sixty-first day after the vessel arrives in Washington state;​

I interpret this as per visit and that's what we were told. No where is their mention of accumulated time or 60 days per year or anything else and other sections of code use the word visits to talk about education and such.

Visits longer than 60 days
If you'll be on Washington waters for more than 60 days, you must apply for a permit on or before the 60th day of your visit.​

Section 12 is entirely separate and addresses those who want to stay longer.

(12) A vessel owned by a nonresident person brought into the state for use or enjoyment while temporarily within the state for not more than six months in any continuous twelve-month period that (a) is currently registered or numbered under the laws of the state of principal use or (b) has been issued a valid number under federal law. This type of vessel is exempt from registration only for the first sixty days of use on Washington state waters. On or before the sixty-first day of use on Washington state waters, any vessel under this subsection must obtain a nonresident vessel permit as required under RCW 88.02.620;​

Then 88.02.620 covers the permits

(c) Is valid for two months.​

Actually 2 months, not 60 days for the permits, but nothing is 90 days. I do not know where you're getting 90 days. Please link if you've found a different law.

So section 5 allows visits of 60 days with no limits to the number or time in the law. Section 12 allows one to extend the visit by 2 months at a time. A lot of confusion is caused by people lumping parts of the 2 sections. Section 5 is visits up to 60 days. Section 12 is extending a visit for a longer time.

The above are all boat registration laws.

What you refer to as a cruising permit is really a sales tax permit of sorts, is called a "use permit", come from the Department of Revenue, and it reads like this:

Purchasing a Permit
When purchasing a use permit from a Washington licensed vessel dealer that also sold the vessel to the nonresident at the sale time, the nonresident individual must:
l Show proof of current nonresident status (i.e., driver’s license),
l Make an irrevocable election to take the exemption and purchase a 12-month use permit,
l Complete an affidavit for the vessel dealer; and
l Display the use permit on the vessel for which it is purchased.
The cost of the use permit is:
l $500 for vessels 50 feet and less
l $800 for vessels greater than 50 feet.
Use permits are valid for 12 consecutive months and may not be renewed.
Before the use permit expires, the vessel must be removed from Washington waters for a minimum of 24
months.​

You are correct it must remain out of the state for 24 months. I was in error thinking it was longer.

 

[Hippocampus]

Think about the federalist papers when reading this thread. Basically the issue of reciprocality between the states. All to often this is an issue. Be it income tax, sales tax, or whatever. Premise to my limited non lawyerly mind is you can’t be taxed twice in the same time period for the same thing. But if you haven’t been taxed at all or marginally on a asset or income stream then you can in a non resident state.
So people play differential tax rates and no tax states. Makes for confusion, litigation, non productive energies by LEO etc. I bought the last several boats in a no sales tax state. I’ve never bought those boats in to my “home” state . My home state loses all the taxes and incomes that would be generated by my having the boat there even transiently. I’m inconvenienced.
Think the same issues applies to RVs and cars. People game it. No moral or ethical reason not to. Still, we’re one country. Wonder if taxation at a federal rather than state level would be more efficient and fairer.

 

[Shrew]

One thing to keep in mind. In the US, there are 50 states, with 50 different policies on registration and taxes. Some states the time is consecutive, allowing you to leave and come back. Some time is cumulative for the year. Some states are longer than others. Some have 'use tax' some sales tax, some no tax. Some states have titles, some states don't have titles.

I strongly urge everyone to consider this and clarify which state they're talking about. Just because it's done one way in Wisconsin doesn't mean that is how MD does things.

 

[kthoennes]

Think about the federalist papers when reading this thread. ... Wonder if taxation at a federal rather than state level would be more efficient and fairer.

Well, the current situation may be chaotic and messy and hard to figure out and certainly does invite gamesmanship, but every time these threads come up I thank God once again for the current state of affairs, and for the state I live in now in contrast to some others. Please shoot me in the head if I ever had to live in California for example. On the other hand my brother lives there, more power to him, to each his own, but I'll tolerate some bureaucratic tax and fee and regulatory chaos so we can each choose how to live our lives. I'm not arguing politics or partisanship, I'm talking about the structure of gov't and daily life. And just look at the federal tax code if you think a single authority would clarify or simply this endless patchwork of boating fees and taxes.

Besides, if local, state, national, and even international taxes and regulation on boats were globally consistent, half the threads on boating forums would vanish from the earth.

 

[Hippocampus]

Can’t argue government wouldn’t figure out a way to screw things up. Still think money is money. Capital gains, interest, salary, profit etc. would like to see a graduated tax the same for all. Of course that going no where either.

 

[slowgoesit]

Brett, 60 days is indeed the length of time you can stay in the State of Washington without a permit and without paying sales or use tax if you can prove residency in another state, but to be legal on the 61st day, you must purchase a permit. At the time of purchase we were given the option of 1-90 day permit, or paying for two 90 day permits for a total of 180 days. The advantage of doing this over a 1 year cruising permit (I was calling it a cruising permit, because that's what it had on the form when we paid, it may have another name as well) is that you can leave for a period of time (not sure how long), then come back and start the process over again with purchase of 90 day permits.

I don't know the relevant RCW, I'm not an attorney, and don't feel inclined to pay one to find out the RCW behind it, but those were the options given to us by the State of Washington on purchase. The State Officials who collected our money may have been in error, but I'm betting they weren't.
If you wish further clarification, I suggest you retain an attorney to research it for you!
On the other hand, feel free to ignore what I posted! It was worth everything you paid for it! Just trying to clarify the issue from our recent, personal experience.
As always, it pays to be informed, but the bottom line is to get out and USE YOUR BOAT!
Fair Winds and Following Seas

 

[BandB]

Two corrections, if you are commenting on Washington State. The permit is for 90 days, not 60 days in WA State, and you can purchase one additional permit for 90 day, for a total of 180 days. On the Cruising Permit, it is indeed good for 12 months, but then the boat has to be out of the state for TWO YEARS or you will be responsible for paying sales or use tax immediately upon the boat's re-entry into WA State . . . . And that even applies if you are just clearing customs into US in WA waters, or even if just passing through, say from Alaska, through BC, and then you enter into WA waters on your way down the West Coast. After the two years out of the state, it all starts over . . . We just went through that here in WA State. We had intended on being out of the state before 12 months from date of purchase, but Covid, and other stuff put us here beyond 12 months . . . . so we bit the bullet and went ahead and registered the boat in WA State, and paid Sales Tax. We will retain the proof of sales tax paid for future if/when we end up registering in another state.

Brett, 60 days is indeed the length of time you can stay in the State of Washington without a permit and without paying sales or use tax if you can prove residency in another state, but to be legal on the 61st day, you must purchase a permit. At the time of purchase we were given the option of 1-90 day permit, or paying for two 90 day permits for a total of 180 days. The advantage of doing this over a 1 year cruising permit (I was calling it a cruising permit, because that's what it had on the form when we paid, it may have another name as well) is that you can leave for a period of time (not sure how long), then come back and start the process over again with purchase of 90 day permits.

I don't know the relevant RCW, I'm not an attorney, and don't feel inclined to pay one to find out the RCW behind it, but those were the options given to us by the State of Washington on purchase. The State Officials who collected our money may have been in error, but I'm betting they weren't.
If you wish further clarification, I suggest you retain an attorney to research it for you!
On the other hand, feel free to ignore what I posted! It was worth everything you paid for it! Just trying to clarify the issue from our recent, personal experience.
As always, it pays to be informed, but the bottom line is to get out and USE YOUR BOAT!
Fair Winds and Following Seas

If a county granted you the 90 day permits, fine. That is an exception vs state law but no one going to object. This is all under Section 12. As to an attorney, we went through all this in Washington, so well advised at that time. Went through it with two boats. We stuck to Section 5, up to 60 days, then leave. Then return and up to 60 days and leave.

What you're referring to as the cruisers permit, we didn't want to pursue not knowing what might happen that might bring us back there and not needing the time. That permit also has a $500 fee attached. It's really simple for short term stays but for those of you wanting to stay longer, it's a pain. Ultimately long term stayers register in WA. And like others have complained, WA has more variations and complications than most other states.

 

[bumpkin]

Recent, experience.

Cyranog, on May 9th we closed on oug boat. Our process had some bumps because of our decisions.

First, have a real address when trying to set up your life. It has caused us no end of little problems by selling our house on a whim, for example: USPS said we couldn't have automatic payments set up to keep a box open. Our bank of 30 years put up roadblocks every step of our process.

We put our boat into an Llc. The lawyer chose Colorado. He said it was the best state for someone who wasn't going to make money. Everything is done electronically so less expense. The Llc did however, need a physical address in CO. We used our nephew's address.

The lawyer was adamant about Rhode Island registration (I think I have the correct word) because of no sales tax. I wanted South Carolina where we bought the boat because the state caps the sales tax at $200. In this case, I feel paying a little tax is better than not paying any tax and to me, looking like I'm trying to play the system. We're currently residents of AZ which doesn't charge sale tax on sales between private parties so we shouldn't look too guilty.

As a new boat owner, I suggest you don't follow my example and bring too much stuff to the boat. I spent one day taking stuff on and am now taking things off.

With so many people saying the best days of ownership is the first and last, I can tell you the 6th is not too shabby either.

Mike

 

[MVTara]

Cyranog, on May 9th we closed on oug boat. Our process had some bumps because of our decisions.

First, have a real address when trying to set up your life. It has caused us no end of little problems by selling our house on a whim, for example: USPS said we couldn't have automatic payments set up to keep a box open. Our bank of 30 years put up roadblocks every step of our process.

We put our boat into an Llc. The lawyer chose Colorado. He said it was the best state for someone who wasn't going to make money. Everything is done electronically so less expense. The Llc did however, need a physical address in CO. We used our nephew's address.


Mike

Can you tell us benefits of putting the boat in an LLC?

 

[BandB]

Can you tell us benefits of putting the boat in an LLC?

You may limit your personal liability. Note that if you're the operator, you still incur personal liability in that role.

You may be able to reduce tax obligations when you sell the boat, by selling membership in the LLC instead.

You may hide your ownership.

 

[guy with a boat]

We stuck to Section 5, up to 60 days, then leave. Then return and up to 60 days and leave.

The section of the law that you have referenced may appear to say 60 days per visit, but that isn’t the way the WA tax authorities enforce the law. WA tax law is famous for being vague and difficult to interpret, as evidenced by many discussions here on TF.

In practice, a non-resident boater has 60 days per year to be in WA without tax consequences. Beyond that, you need to deal with cruising permits and repair exemptions, both of which create other complications. Stay beyond 60 days without those other exemptions and you will get a tax bill if you show up on the tax authority’s radar. By far the best practice for non-WA boaters is to comply with the 60-days-per-year-rule and avoid the debate with the tax man.

I know you are in Florida and this is unlikely to affect you, but it’s important for other readers to have accurate info to stay out of trouble.

 

[Hippocampus]

Unfortunately now a days unless you set up multiple shells from what I understand both revocable trusts, LLC and s corps give only a thin vail of protection. We did put the boat in a trust but also have a large liability policy boat specific beyond any umbrellas.
Of course if you’re judgement proof it’s a non issue. From what I’ve heard the folks most likely to hit you are more likely to be judgment proof.