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Sales Tax from State to State

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Bill Sloane
1st Mate

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USA
91 Posts

Initially Posted - 03/30/2007 : 00:47:50

In buying a used boat from a private party in one state and taking it to another state, do you only pay sales tax in the state that you bring it to and register it in? I assume you don't have to pay sales tax twice.

I am wondering how that works.

Bill Sloane

Suede Shoes C-25 SR/SK No. 496
Olympia WA

Edited by - on

Champipple
Master Marine Consultant

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USA
6855 Posts

Response Posted - 03/30/2007 : 06:31:30

In Ohio you register the title in the county you live in. When you register the title, the tax is collected on the purchase price listed on that title. There could be a possibility that the sellers location requires them to collect sales tax (if out of state). If that is the case, you would have to pay the tax twice. There might be means to recoup that initial tax money - similar to getting the gst tax back when departing Canada. But I can't say for certain.

Edited by - on

Steve Milby
Past Commodore

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USA
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Response Posted - 03/30/2007 : 07:05:37

Generally the law requires that you either pay a sales tax in the state where the sale took place, or a use tax in the state where you use the boat, or a combination of the two, which cannot exceed the higher of the two tax rates. If the sales tax is 5% in the state where you bought the boat, and the use tax in your home state is 6%, then the your home state can only assess you the 1% difference between the two rates.

When you buy the boat, make sure you keep your records showing that you paid the sales tax, because, when you register the boat in your home state, they are supposed to require that you pay your home state's use tax, except to the extent that you prove that you paid the foreign state's sales tax. If you paid the sales tax but can't prove it, then you get to pay the whole use tax.

Also, if you do extended cruising outside your home state, always carry the original tax documents with you. Years after the purchase, local marine authorities doing a routine stop of your boat can require you to pay their use tax, unless you can prove that you paid it elsewhere.

I should add that the only way I know of that you can legally manipulate the situation to your advantage is, if the sales tax at the point of purchase is higher than the use tax in your home state, you can usually claim an exemption from the sales tax, and pay the use tax on the full purchase price in your home state, at the lower percentage. (But, that requires that you remove the boat from the state where the boat was purchased within a reasonably short period of time, usually about 30 days. Check with the tax authorities in the state of purchase for details.)

Edited by - Steve Milby on 03/30/2007 08:21:21

Frank Hopper
Past Commodore

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Pitcairn Island
6776 Posts

Response Posted - 03/30/2007 : 07:46:28

Here in NRA land we don't worry about sales tax on a private sale.

Edited by - on

dlucier
Master Marine Consultant

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Virgin Islands (United Kingdom)
7583 Posts

Response Posted - 03/30/2007 : 08:34:50

Kansas doesn't assess sales tax on boats?

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Frank Hopper
Past Commodore

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Pitcairn Island
6776 Posts

Response Posted - 03/30/2007 : 09:02:24

I don't know of anyone who has paid it if the boat is bought from a private party. Sales tax should only be paid on items that are purchased specifically for commercial resale anyway. I cannot imagine the justification for charging it on the transfer of private property.
BUT they do on cars which is a rip; however they can only charge based on the cash price so a lot of things get sold mighty cheap. I once bought a brand Alfa Romeo for "$1 and other valuable consideration", I paid 3 cents sales tax.

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Champipple
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Response Posted - 03/30/2007 : 09:10:48

the city/county/state doesn't hit you up when you tranfer the title?

Edited by - on

Dave Bristle
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Djibouti
10005 Posts

Response Posted - 03/30/2007 : 09:28:24

With all due respect for the esteemed attorney in our midst, much of what Steve said does not apply here in CT (or most of the northeast as I know it). Here, the private seller doesn't report anything to the state, and therefore is not responsible for sales/use tax. However, to register the boat, you must present a signed bill of sale (no boat titles here) stating the sale price, and then pay sales tax on that amount. (As an aside, if you under-report the sale price, you're helping to reduce the "blue-book" value of that model--that's where it comes from.)

Even a manufacturer, if selling and delivering to an out-of-state buyer, does not collect or pay sales tax in the manufacturer's state. If the manufacturer or distributor has operations in the buyer's state, then they must collect and pay to that state, and the buyer shows the record of that when registering the boat.

As for WA,... Go to their DMV (or whatever) web site and see what they say.

Edited by - Dave Bristle on 03/30/2007 09:29:47

suttergold
1st Mate

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USA
49 Posts

Response Posted - 03/30/2007 : 10:00:00

In California, regardless of where the boat is purchased, upon registration of the boat with California Department of Motor Vehicles (DMV), you have to pay sales tax. I have heard that individuals get two bill of sales, one to show DMV and another for your insurance company.
Our Govenator Arnold wants his cut.

Edited by - suttergold on 03/30/2007 10:02:26

dlucier
Master Marine Consultant

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Virgin Islands (United Kingdom)
7583 Posts

Response Posted - 03/30/2007 : 10:05:29

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by Dave Bristle
 Here, the private seller doesn't report anything to the state, and therefore is not responsible for sales/use tax.<hr height="1" noshade id="quote"></blockquote id="quote">

Dave,

Steve never mentioned the private seller being responsible for the use/sales tax, only the buyer.

Edited by - on

dlucier
Master Marine Consultant

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Virgin Islands (United Kingdom)
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Response Posted - 03/30/2007 : 10:23:37

Bill,

It appears what Steve said regarding sales/use tax apllies to you.

From the Washington DMV...

[url="http://www.dol.wa.gov/vehicleregistration/registerboat.html"]Washington State Dept of Licensing[/url]

Edited by - on

Dave Bristle
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Djibouti
10005 Posts

Response Posted - 03/30/2007 : 10:40:18

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by dlucier
 <blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by Dave Bristle
 Here, the private seller doesn't report anything to the state, and therefore is not responsible for sales/use tax.<hr height="1" noshade id="quote"></blockquote id="quote">

Dave,

Steve never mentioned the private seller being responsible for the use/sales tax, only the buyer.
<hr height="1" noshade id="quote"></blockquote id="quote">
But if the buyer is in another state, he would have no reason to report the sale to the seller's state (and pay tax there), as implied by Steve's comment. Only the seller might be required to do that--perhaps to cancel his registration.

Never mind--Bill has his answer, straight from the horses mouth.

Edited by - on

dmattlin
1st Mate

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USA
39 Posts

Response Posted - 03/30/2007 : 10:52:55

If taxes are paid on the boat it self and say for instance the boat is sold for 5,000.00. You pay the person selling the boat 5k and on the Bill of sale you report that you purchased the boat for 500 dollars and the sails we purchased for 4,500.00. Would this help with lowering the ammount of taxes pay on the vesel?

Edited by - on

Dave Bristle
Master Marine Consultant

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Djibouti
10005 Posts

Response Posted - 03/30/2007 : 11:01:56

Edited by - on

Frank Hopper
Past Commodore

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Pitcairn Island
6776 Posts

Response Posted - 03/30/2007 : 11:14:44

We have no titles in Kansas either and we register with the Parks authority for hull numbers. But remember I am the guy who paid $425 for PP tax.

Edited by - Frank Hopper on 03/30/2007 11:15:44

johnsonp
Admiral

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USA
606 Posts

Response Posted - 03/30/2007 : 11:17:01

Well, I just bought a Catalina 310 in Califorina from a broker and did not pay Ca sales tax, but will have to pay here in the state of Washington .....I think it's 8.17% ....then it's in the tax system.
My C250 is fore sale here in Wa maybe some one from Ca will buy and balance out the interstate tax.
paulj C250WK # 719

Edited by - on

Steve Milby
Past Commodore

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USA
5904 Posts

Response Posted - 03/30/2007 : 11:19:27

You guys are confusing the obligation to pay sales tax with the obligation to collect it. In most states, when you sell a car or a boat in a private sale, the seller doesn't have to collect the tax from the buyer. He signs over the certificate of title and indicates the sales price on the title. When the buyer takes the certificate of title to the registrar to register the boat in his name, the registrar collects the sales tax.

If the buyer is from out-of-state, and is taking the boat to another state, the buyer still has to have the title transferred into his name in the state where he bought the boat. At that time, the registrar will either collect the sales tax, or, the buyer can certify that he is removing the boat from the state within 30 days, and receive an exemption from paying sales tax to that state. Then the seller has to take that out-of-state title to a registrar in his home state, where they will issue him a new certificate of title in his name in that state. If the buyer didn't pay sales tax to the state where he bought the boat, then his home state will, at that time, collect the use tax, based on the full amount of the purchase price.

Regarding the suggestion that you report the sales price as $1.00, or some amount less than the actual sales price, that's tax fraud, a criminal offense. Don't think it's never prosecuted, because I have prosecuted those cases. In order for that to happen, the seller has to participate in the fraud by writing a false price on the certificate of title. If you think about it, it wouldn't be very smart for a seller to subject himself to a criminal prosecution for tax fraud, just so a buyer can cheat the government out of it's tax money.

In the old days the tax laws were full of loopholes, and it was easy to avoid taxes in interstate transactions. It's getting very difficult nowadays, and not worth the risk.

Edited by - Steve Milby on 03/30/2007 11:26:01

dlucier
Master Marine Consultant

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Virgin Islands (United Kingdom)
7583 Posts

Response Posted - 03/30/2007 : 11:23:26

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by fhopper@mac.com
 ...however they can only charge based on the cash price so a lot of things get sold mighty cheap. I once bought a brand Alfa Romeo for "$1 and other valuable consideration", I paid 3 cents sales tax.
<hr height="1" noshade id="quote"></blockquote id="quote">

This is why some states are switching over to assessing taxes based on fair market value or some other system rather than relying on the integrity of the seller/buyer.

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Frank Hopper
Past Commodore

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Pitcairn Island
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Response Posted - 03/30/2007 : 18:43:11

The Alfa was in 1974 and a law professor suggest the ruse. He was right, it worked; however it was probably not good for my karma. As for the assessing market value to property sold between private citizens; here in kansas that bill was sponsored by a local representative who happened to own one of the biggest car dealerships in town. The year it was on the books made him very happy as his industry got to set the price of vehicles sold by individuals (for tax purposes) which made his lot prices far more competitive and made it very hard to sell used cars own by individuals. Of course when the state sponsored restraint of trade was fully understood by the populace every representative in the state got an ear full and the corrupt idea was revoked and taxes for the transactions occurring under it refigured. In fact we can now sell vehicles to family members at a $0 dollar tax valuation. By and large the burden of the bureaucracy to control integrity has usually proven to be worse than the the issue it is designed to control. BoatUS spends a lot of money protecting us from too much oversight.
The big issue I see identified in this thread is that some states title boats and some don't. No title, no registrar. This situation in Kansas probably reflects how few boats we actually have here.

Edited by - on

kevinmac
Admiral

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USA
732 Posts

Response Posted - 03/31/2007 : 09:28:17

I live in Washington, and have investigated this thoroughly since I just moved here, and had to deal with cars and such that I was moving into the state.

I assume you have lived in Olympia longer than 90 days. If you are buying from a private party in another state, that person is not going to collect any sales tax, or at least I would consider it highly unlikely. When you register the boat (and trailer, if it has one) in Washington, you will pay use tax (same rate) at the time of registration.

If you buy from a dealer in another state, then Steve's advice is what happens. If the rate in the other state is higher, you can try to apply for an exemption in that state, and it depends on what the law in that state is. In California, for example, you get to pay the California tax UNLESS the dealer actually delivers the boat to you out of state.

So in the end, you never pay both taxes, but if you buy from a dealer, you are always going to pay the higher of the two.

Steve is right that private sellers may be required to collect the tax in some states, but as a practical mattter, that does not happen very often.

I am not an attorney, pay more attention to Steve and the laws in the buying and selling states. But the above is my experience.

Last example: if you sell a car in Washington (something I am doing right now), a private seller does not collect the sales tax, the buyer pays it when he registers the car in his name.

Edited by - on

Champipple
Master Marine Consultant

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USA
6855 Posts

Response Posted - 03/31/2007 : 09:45:21

We, as well as many other states have Title and registration requirements for outboards over 10HP...ever wonder why everybody was making a 9.9. All boats of 14 feet or more must also be registered.(large dinghys for example)

dw

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dlucier
Master Marine Consultant

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Virgin Islands (United Kingdom)
7583 Posts

Response Posted - 03/31/2007 : 10:00:14

By law, when you sell a boat in Washington State, you have to report the sale (including the price) within five days of the sale.

[url="http://www.dol.wa.gov/forms/420063.pdf"]Vessel Report of Sale[/url]

Edited by - on

kevinmac
Admiral

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USA
732 Posts

Response Posted - 03/31/2007 : 10:14:28

You have to report the sale, but you, as a private seller, are not required to collect sales tax. That is collected when the buyer registers the boat.

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dlucier
Master Marine Consultant

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Virgin Islands (United Kingdom)
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Response Posted - 03/31/2007 : 10:19:33

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by kevinmac
 You have to report the sale, but you, as a private seller, are not required to collect sales tax. That is collected when the buyer registers the boat.<hr height="1" noshade id="quote"></blockquote id="quote">

I'm not aware of any state that requires a private seller to collect sales tax.

Edited by - on

Steve Milby
Past Commodore

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USA
5904 Posts

Response Posted - 03/31/2007 : 11:51:58

<blockquote id="quote">quote:<hr height="1" noshade id="quote">Originally posted by dmattlin
 If taxes are paid on the boat it self and say for instance the boat is sold for 5,000.00. You pay the person selling the boat 5k and on the Bill of sale you report that you purchased the boat for 500 dollars and the sails we purchased for 4,500.00. Would this help with lowering the ammount of taxes pay on the vesel?
<hr height="1" noshade id="quote"></blockquote id="quote"> This is a good example of the danger of tax avoidance schemes. What you are suggesting can probably be done legally, if it's done correctly, and if the value that you allocate to the sails is reasonably related to their fair market value. But, if you slip off that tightrope, you'll fall into the abyss of the criminal court.

First, you can't say that the purchase price for the boat is $5000 and then report it to the government as $500. If the price is $5000., then that's how you have to report it. It is what it is. Whenever you're tempted to lie to the government, remember the saga of Scooter Libby.

Suppose, however, that you actually structure the transaction so that the written offer that you submit to the seller shows that the price for the boat is $500. and the price for the sails is $4500. The question is whether the price allocated to the sails is reasonably related to the fair market value of the sails. Two or three sails for a Catalina 25 don't cost anywhere near that much brand new. Therefore, the transaction is a transparent attempt to defraud the government of it's taxes, and illegal. Suppose you allocate an amount for the purchase price of the sails that reasonably reflects their fair market value, say $500. or 600. That might be ruled a legal method for reducing the sales taxes due on the transaction, but it would only save about $30. or 35. When I bought my present boat, the sails were old and of little actual value, and I knew I'd have to replace them soon, so I didn't break out the sails separately from the rest of the sales price, because I didn't feel it was worth the few dollars it would save.

But, when I sold my C25, I prepared the documents so that the value of the boat was separate from the value of the trailer. We valued the trailer at $1500., which, if anything, was less than it's fair market value, but it served our purposes, and it was a value so low that the state could not dispute it. The boat would be used, titled and registered in Indiana, which assesses a recurring personal property tax on the value of such property. (I don't remember whether it's paid every year or every 2 years.) The trailer would be registered and kept just over the state line in Ohio, where the buyer lived. If we hadn't broken the trailer out of the transaction, the buyer would have been assessed the recurring Indiana personal property tax on the boat, based on the combined price of the boat and trailer. He could have appealed the assessment, but this made it a much cleaner deal, and the buyer only paid the personal property tax on the value of the boat, instead of on the combined value of the boat and trailer. This arrangement didn't cheat the government out of any taxes. It just made sure the buyer didn't end up paying more taxes than he legally owed.

Arrangements like this are legal, if you structure them correctly, and if they accurately reflect reality.

Edited by - Steve Milby on 03/31/2007 11:57:05

existentialsailor
Master Marine Consultant

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USA
1180 Posts

Response Posted - 03/31/2007 : 12:34:58

Cripes I'm glad I live in New Hampshire. I can't imagine paying sales tax on anything, regardless if it's a private sale or from a dealer. Unbelievable!

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