PDA

View Full Version : Sales Tax Question


jbkriss
03-12-2012, 11:26 AM
If someone were to buy a new boat but not register it in the state it was sold and used, would could they avoid paying sales tax?

cbryan70
03-12-2012, 11:36 AM
Depends. Are you buying from a dealer? Depends on which state you are buying it in and what state you are titling it in. Alot of states have reciprocating tax agreements with other states.

Either way if they collect tax's for that state and you register it in another you should get a refund for the amount of tax's you paid for where you register your boat.

shepherd
03-12-2012, 12:25 PM
When I bought my boat (used) in NC, I paid FL sales tax when I got it home and registered it.

2RLAKE
03-12-2012, 12:27 PM
once you register it .. they will validate that you paid tax somewhere ... there is no double taxation but they are going to assure it was paid somewhere

NatesGr8
03-12-2012, 12:40 PM
There is double taxation in CT. Thats why my boat is registered in NH. CT doesn't care when and where you paid sales tax, if its going to be registered in CT then you must pay the assessed sales tax (6%) prior to registration. But it looks to me like down your way you can get away with only paying 1 sales tax.
Nate

Jeff d
03-12-2012, 12:53 PM
In Louisiana there's no sales tax on private boat sales including those with an out of state private seller. You do have to pay sales tax on the portion of the sale price that's attributed to the trailer though. So, every trailer in Louisiana is "$100". When I bought my 230 VRS from a lady in Florida I paid $9 in sales tax.

I think if the year model is very recent you have to show documentation that the previous owner paid taxes in their home state when purchased new. Mine was 10 years old at the time so I didn't have to show any proof.

BrooksfamX2
03-12-2012, 01:05 PM
Sorry, cant help, no sales tax in Oregon.......:)

mattb
03-12-2012, 02:43 PM
as stated previously, in reciprocating states you only pay tax in the state you are registering it. in non-reciprocating states, you get double taxed unfortunately. Where does this question stem from?

cbryan70
03-12-2012, 02:45 PM
You still should not got double taxed. In theory you should only have to pay the difference. Private party there is alot more leeway.

erkoehler
03-12-2012, 07:23 PM
No matter what state your required to pay or show proof that you did pay tax at the the time of registration.

ricford
03-12-2012, 08:01 PM
I live in the Toronto area of Canada. I bought my used boat in Georgia from a dealer and he didn't charge me sales tax. When I brought it over the border I had to pay the Canadian and Ontario tax there.

kgrove
03-13-2012, 02:25 AM
It can be done... legally in some cases, and therefore many people push the limits or do it flat out illegally quite often as well.

One way.... If you can legally register the boat in a state without sales tax such as Oregon or Montana (I'm sure there are others), you are not required to pay sales tax even if the purchase is made in a state that does have sales tax. I'm sure the laws would differ by state, but generally speaking, you need to be able to provide a mailing address at which to register the boat or vehicle. You may also have to testify that the boat will be in that state for more than 50% of the year, even if that means it is in storage. The intent of the rule is to work if you have a second home in a non-taxing state at which you would use or store the vehicle/boat. Once you've had the boat for some period of time, there is nothing preventing you from re-registering the boat in a taxing state and not paying taxes, the same as if you had moved. I've heard there are mail forwarding services that will provide a physical mailing address at which you could register the boat even if you don't own property in the non-taxing state, but I couldn't tell you how to find those services or what you ask for. Even if you can find one, I'd be very careful to make sure the way you are doing so is legal as if I've heard these services exist, I'm sure your state's Department of Revenue and the IRS have heard as well and are looking for them.

A second method I've heard is creating an LLC in a non-taxing state and having your LLC purchase the boat and register it in that state. I think you would still have to testify that the boat will be in that state for more than 50% of the year. The people I know who have done this did it for RVs and had it in storage in those states for 6-7 months anyway. As summer begins they fly to their RV in May and return it to storage in September and fly home again. I have no idea about the legalities of how these folks have done it, but they've been doing it for more than a decade either legally or without being caught. This could work if you live near a non-taxing state and don't mind storing the boat in that state.

Yet a third way to do it is with a private party transaction. If you can have a private party in the non-taxing state purchase the boat and then you purchase the boat from them as a private party, there generally is no sales tax. Again - you'd have to check with a lawyer to make sure on the legality. I inquired once with respect to a car and was told (in my state anyway) that an individual was allowed to sell 5 cars a year without being considered a dealer.

The sure fire way to avoid sales tax is to purchase a used boat through a private party. In most states, this is not subject to sales tax.

The real trick on all of these if you don't want to get busted is to check with a lawyer. There are some completely clean ways to avoid sales tax, but they may not apply to you. There might be ways of pushing the envelope a little or a lot, but you'd need a lawyer to tell you for sure what your up against. There are also some flat out illegal ways of doing it where you can logistically avoid sales taxes, but you could find yourself in deep **** if you get caught. And one thing to think about if you opt for the illegal route (or for that matter one of the gray areas where you are pushing the envelope), what happens if you are pulled over using your boat on your local lake and it is registered to a different state than your drivers license and truck's license plate?

I hate sales tax with a passion, but its nothing to mess around with.

2RLAKE
03-13-2012, 07:45 AM
It can be done... legally in some cases, and therefore many people push the limits or do it flat out illegally quite often as well.

One way.... If you can legally register the boat in a state without sales tax such as Oregon or Montana (I'm sure there are others), you are not required to pay sales tax even if the purchase is made in a state that does have sales tax. I'm sure the laws would differ by state, but generally speaking, you need to be able to provide a mailing address at which to register the boat or vehicle. You may also have to testify that the boat will be in that state for more than 50% of the year, even if that means it is in storage. The intent of the rule is to work if you have a second home in a non-taxing state at which you would use or store the vehicle/boat. Once you've had the boat for some period of time, there is nothing preventing you from re-registering the boat in a taxing state and not paying taxes, the same as if you had moved. I've heard there are mail forwarding services that will provide a physical mailing address at which you could register the boat even if you don't own property in the non-taxing state, but I couldn't tell you how to find those services or what you ask for. Even if you can find one, I'd be very careful to make sure the way you are doing so is legal as if I've heard these services exist, I'm sure your state's Department of Revenue and the IRS have heard as well and are looking for them.

A second method I've heard is creating an LLC in a non-taxing state and having your LLC purchase the boat and register it in that state. I think you would still have to testify that the boat will be in that state for more than 50% of the year. The people I know who have done this did it for RVs and had it in storage in those states for 6-7 months anyway. As summer begins they fly to their RV in May and return it to storage in September and fly home again. I have no idea about the legalities of how these folks have done it, but they've been doing it for more than a decade either legally or without being caught. This could work if you live near a non-taxing state and don't mind storing the boat in that state.

Yet a third way to do it is with a private party transaction. If you can have a private party in the non-taxing state purchase the boat and then you purchase the boat from them as a private party, there generally is no sales tax. Again - you'd have to check with a lawyer to make sure on the legality. I inquired once with respect to a car and was told (in my state anyway) that an individual was allowed to sell 5 cars a year without being considered a dealer.

The sure fire way to avoid sales tax is to purchase a used boat through a private party. In most states, this is not subject to sales tax.

The real trick on all of these if you don't want to get busted is to check with a lawyer. There are some completely clean ways to avoid sales tax, but they may not apply to you. There might be ways of pushing the envelope a little or a lot, but you'd need a lawyer to tell you for sure what your up against. There are also some flat out illegal ways of doing it where you can logistically avoid sales taxes, but you could find yourself in deep **** if you get caught. And one thing to think about if you opt for the illegal route (or for that matter one of the gray areas where you are pushing the envelope), what happens if you are pulled over using your boat on your local lake and it is registered to a different state than your drivers license and truck's license plate?

I hate sales tax with a passion, but its nothing to mess around with.

most states do charge sales tax even if purchasing through private parties ... property is being transferred and is subject to tax once registered

davidstan
03-13-2012, 08:34 AM
most states do charge sales tax even if purchasing through private parties ... property is being transferred and is subject to tax once registered

This is mostly true. I bought from an individual in Ga with no tax but registered in Al caused a one time tax of 3%(like a sales tax)

73blue
03-13-2012, 12:45 PM
most states do charge sales tax even if purchasing through private parties ... property is being transferred and is subject to tax once registered


This. The seller doesnt have to collect the sales tax unless he sells so many a year, but the buyer still has to pay sales tax when he registers it.

kgrove
03-14-2012, 12:56 AM
Maybe most states isn't correct, but I know there is no sales tax on transactions between private parties in Arizona, California, Nevada, and New Mexico, the states I have made major purchases in or from.

I guess the real moral to the story, however, is that many states differ on all kinds of rules about sales tax and boat or vehicle registration. The one truism is the ones who do have sales tax all keep a lookout for people skirting the rules and neighboring states without sales tax attempt to help keep people from the taxing states honest by not making it easy to register in the wrong state.

GoneBoatN
03-14-2012, 09:57 PM
Note for California (from the CA DMV):

Use tax based on the purchase price may also be due. New legislation effective October 1, 2004 through July 1, 2006 requires payment of use tax on a vessel purchased outside California and brought into California within 365 days of the purchase date. Use tax is based on new registered owner's county of residence.

NOTE: The registration fees must be paid prior to placing the vessel on California waters to avoid penalties.

Another note:
Use tax is generally imposed on the purchaser of tangible personal property that is used, consumed, or stored in this state. Sales of vehicles, vessels, and aircraft by licensed dealers are usually subject to sales tax, for which sales tax reimbursement is collected at the time of purchase. Use tax applies to the cost of vehicles, vessels, and aircraft purchased from non-dealers (for example, private parties) or from outside California for use in this state. Use tax also applies to most leases of tangible personal property. Private party sales or brokered transactions are normally subject to use tax. If the first use of the property occurs in California, use tax may apply even if the purchaser is not a resident of the state. The sales and use tax are "mutually exclusive," which means that either sales tax or use tax applies to a single transaction, but not both.

So to the OP's original question, if buying used in CA from a private party and taking it somewhere else, you would not pay CA tax. Then you deal with the rules of the state you are taking it into.

PA Prostar
03-15-2012, 05:40 PM
Note for California (from the CA DMV):

Use tax based on the purchase price may also be due. New legislation effective October 1, 2004 through July 1, 2006 requires payment of use tax on a vessel purchased outside California and brought into California within 365 days of the purchase date. Use tax is based on new registered owner's county of residence.

NOTE: The registration fees must be paid prior to placing the vessel on California waters to avoid penalties.

Another note:
Use tax is generally imposed on the purchaser of tangible personal property that is used, consumed, or stored in this state. Sales of vehicles, vessels, and aircraft by licensed dealers are usually subject to sales tax, for which sales tax reimbursement is collected at the time of purchase. Use tax applies to the cost of vehicles, vessels, and aircraft purchased from non-dealers (for example, private parties) or from outside California for use in this state. Use tax also applies to most leases of tangible personal property. Private party sales or brokered transactions are normally subject to use tax. If the first use of the property occurs in California, use tax may apply even if the purchaser is not a resident of the state. The sales and use tax are "mutually exclusive," which means that either sales tax or use tax applies to a single transaction, but not both.

So to the OP's original question, if buying used in CA from a private party and taking it somewhere else, you would not pay CA tax. Then you deal with the rules of the state you are taking it into.

For what it's worth - this is the correct answer to the OP's question. Keep in mind, it will be called use tax when dealing with the state your are taking it into. Use tax is basically stating you had a taxable transaction occur outside the state, but the benefit of that transaction will be consumed/enjoyed within the state. The state can not charge you sales tax because the transaction occured outside the state boundries, but they can charge you use tax if you bring a taxable product into the state. As states struggle with budgets, you'll be hearing more of this in the coming years.

One word of advice - my two cents - I'd pay the use tax. Otherwise, having the boat registered in another state that you may have no business in is just opening up yourself to problems. God forbid if you ever have an insurance claim, you're company isn't going to want to pay in that scenerio. In fact, I had trouble insuring a boat (very long story related to sales/use tax and registration) that was registered in GA, but located in PA. PA didn't want to insure it because it was registered in GA. GA didn't want to insure it because is was in use in PA. I hate insurance companies to begin with but to give them an easy reason not to honor a claim to save a little bit of money doesn't make sense. I'd rather have everything on the up and up.