boat tax

I thought it be a good idea to cover taxes for the noob boaters and even some of the salts.   

Typically,  most brokers are not going to know all the rules.  This is particularly true if you do Coast Gaurd (CG) registration over state registration and purchase your boat from out of state.  Or are not 100% sure on where you plan to berth it at time of your purchase.    

What is Coast Guard registry aka National of Federally registered?  

Since close to the beginning of America the Coast Guard has been making sure that ships entering the harbor aren't up to shenanigans. They can board a boat without a warrant and check everything down to how many cockroaches it has aboard.  The good thing is that they're one of the only remaining institutions in America that really works for and protects the people.  If you get boarded, it's really just to make sure you're safe.  However, if you're doing something obviously stupid they going to have a problem with you.  And I want to stress "obviously".  They won't toss your lockers looking for legally questionable items.  They're more concerned with proper documentation and that your boat is outfitted with the right safety gear.  But remember, if they see something illegal, they're 100% obligated to do something about it.  There is no gray area on this.  eg Don't leave your bong in the same drawer as you registration papers or on the bar when you're out on the water. Stow it properly. Anyway, I digress.  Back to the Coast Guard and documentation.  The  CG offers a national registry for vessels over 25 feet.  This is at it's basic level just a registration and tag service.  Kinda like your car.  What's different on your car is that you pay taxes so that the state will issue the tag and registration.  With the CG you pay a "document fee" to get a registration and you make up your own tag (the name and hailing port of your boat).  Nowhere in the CG registration are state taxes addressed.  This is where most people get into trouble.  Enter the state that the boat spends the majority of it's time in.  Mind you, not where it was purchased, or was on the land getting worked on, or what hailing port you put on the back, or where the owner lives.  The vessel's time in the water, ready to go, is what clarifies what state gets the gold.   

Legally the state cannot request a re-document of the boat to charge you taxes if you are CG registered.  The CG registration takes precedence.  But, they can require that you pay taxes or submit a registration "fee".   Not all states do this.  And this is where the gray area begins.

I'm going to give an example of how this can go horribly wrong for a new boat owner. We're going to use Maryland as the bad guys in this situation.  (If you're dealing with another state, go to their DNR registration web page to see what their requirements are.)  Now, let's say you purchase a boat in Georgia, want to berth it in the Chesapeake Bay, and you live in West Virginia .  The boat is a 44' Cruisers aft cabin and you steal it at $153000.  While your getting your contract, insurance and documentation together, your Georgian broker tells you to get the CG registration because it's national and you can go anywhere with it (ie the Caribbean). "It's what all the big boats do".  So, after that's all done, you fly down to pick up your boat, bring it up the coast and end up have a mechanical issue in NC.  You have to abandon your trip because the repairs are going to take too long.  But, you're already planing to continue the trip two months down the road and you leave it in the boat yard that's fixing it.  Things happen and that two months turns into six.  Finally, you get the boat to MD but it's the end of the season and you have to winterize and come back in spring.  A year has passed by in a blink.  Towards the end of next season you're enjoying the bay and DNR boards you for a safety check.  No problem, everything is in order, you folks have a nice day on the water.  Another couple seasons come and go.  Life is good and you're a proud and confident captain.  That September you get a letter from MD DNR.  It tells you that an officer has spotted your vessel multiple times in MD waters and there's no record of you ever paying the boat excise tax.  Your pucker seizes up to the size of a dime and you panic. Because it says, the tax is 5% of the assessed value, plus since we have a record of boarding you two years ago, that's a 10% fine of the owed tax and 1.8% interest on that every month since that time we boarded you.  That's $12050 please.  And once the state issues a tax statement the burden of proof is on you.  Moving your boat to another state, selling or sinking it won't save you.  They've got you.  Unless you can prove that the boat wasn't in state waters the majority of that two years.  Which is very tough to do.  Even if it's the case.

You might not have set out to do anything wrong in this situation.  You just didn't know.  It's a nasty pill to swallow and there's no way out.  Nightmare.  What's crazy is there are a ton of boaters that knowingly try to get away with this.  It's understandable, that's a lot of cash for zero return.  Here's the thing though, if it was planned for in the beginning, you wouldn't even give it an afterthought.  You could just look at it as part of the purchase price. There again, kinda like a car.  

The gray area and lack of enforcement is what tempts people to try to not pay.  Here's what can help you pick the right way to go with this:

1. Really consider your boating plans, will you need CG registration?  Or is state registration good enough.  Most people do not need CG, unless their bank requires it.
2. Moving from states that charge to other states that charge doesn't mean you have to pay twice.  Typically, the second state will credit what you've already paid toward what they want to charge.  So, if you're not 100% on where you want to berth just remember this for later.
3. Try to plan the expense into your purchase price.  You're already reading this so you're way ahead of the game.  Just stay out in front of it.
4. As tempting as it is, don't wait to go to DNR to pay, just bite the bullet
5.  If you're coming from a non taxing state and your boat has an unscheduled long stop in a taxing state for repairs, it may be less expensive and time consuming to store it on the land than to pay the tax. 

Boat tax can end up being a jack in the box because all of the states have different rules.  Coast Guard Documentation does have it's advantages for a few of us. But, it doesn't apply to most. Just figure out where you want to boat and then research the state requirements before making that offer.  

Mike 

life's a port.