I AM NOT A LAWYER, AND NOTHING IN THIS POST SHOULD BE INTERPRETED AS LEGAL ADVICE. AS ALWAYS, READERS MUST DO THEIR OWN DUE DILIGENCE BASED ON THE DETAILS OF THEIR OWN PERSONAL CIRCUMSTANCES.
10/2016: Article edited-for-update to clarify understanding and add detail.
Vehicle registration and titling – automobile, aircraft and boat – are normally handled by state vehicle and traffic laws. Taxes are handled under various sections of state revenue laws. From state to state, these laws and not consistent; in some cases, actually mutually exclusive. For cruisers – especially those who travel the US East Coast seasonally – it is extremely difficult to comply with the laws of all of the states at the same time. Boaters must understand that there are gray areas to which personal preference and judgement must be applied. Different people will have different preferences for “operating near the boundaries.” The ability to deal with ambiguity will be a great personal asset.
For boats that move between states while cruising, this complex area is fraught with questions that can only be answered based on the circumstances of the individual doing the asking. Where is the owner’s legal residence? What are the “principle cruising waters” of the boat? Who determines the boat’s principle cruising waters? Based on what factors/conditions? Was a sales tax paid when the boat was purchased? If so, what was the percentage rate? Does the boat’s state of registration have a Personal Property Tax? A Use Tax? What is the time-limit for a non-resident visitor before the registration must be transferred to the visited state? Does the visited state require the vessel to be registered “somewhere” before entry? Is the boat USCG Documented? For USCG Documented vesselsIs, is state registration also required in the state where the boat is domiciled? All of this creates very complex questions which are specific to the details of each individual boat owner’s situation.
I’ll start with some terminology that is widely mis-understood and mis-used:
In law, title is the means by which the owner has just and legal possession of his or her property. It is distinct from the document that provides evidence of the title; e.g., a deed or certificate-of-title. Title can be lost or acquired only by the methods established by law; that is, by inheritance or by purchase. Several persons or entities may have different titles to the same asset. While one holds a legal title (a claim to the asset that is recognized by a court), another may hold an equitable title (the right to have the legal title transferred to them if certain conditions are met/not met). This occurs if there is a mortgage or other lien.
Title – USCG Certificate of Documentation:
The process of obtaining a US Coast Guard Certificate of Documentation is an administrative process of the US Federal Government administered by the US Coast Guard. It is analogous to a state’s registration and titling processes. The process results in the issuance of a Vessel Identification Number and a title document called a “Certificate of Documentation,” or “COD.” The Vessel Identification Number identifies the vessel, and is associated with the vessel’s Hull Identification Number; i.e., the boat, not the owners. The US Coast Guard vessel COD is recognized internationally as a certificate of ownership and nationality. Therefore, documented vessels are protected as vessels of the United States.
The COD is equivalent to a title document. The issuance process includes a title search to ensure the vessel is the legal property of the seller and clear of mortgages, bank loans, Mechanic’s Liens or other financial encumbrances. That can be an advantage for both seller and buyer at time of sale.
To be eligible for US Coast Guard documentation, the owners of the vessel must be citizens of the United States. Usually, any boat over 26 feet in length qualifies for US Coast Guard Documentation. A documented vessel falls under federal law enforcement jurisdiction vs. the jurisdiction of any state or local agency for recovery and prosecution in the event of theft or involvement in criminal activity.
Title – State:
Each state has a titling process for vehicles, vessels and aircraft. The state title is proof of legal ownership, but not necessarily equitable ownership, as equitable title will be subject to satisfaction of mortgages, bank loans, Mechanic’s Liens, and any other recorded encumbrances. These processes operate at the state level, and enforcement is the responsibility of state authorities. In international cases, there is no backing for the owner by US federal authorities.
Vessel registration is an administrative procedure of state government, usually under the state’s Vehicle and Traffic statutes. For cars, it results in the issuance of license plates; for boats, it results in the issuance of a Vessel Identification Number, and usually decals to prove that the process is complete and current. Registration serves to document the contact information of owners and provides a tracking system for the vehicle/vessel/aircraft and provides a mechanism for collecting infrastructure use taxes. For wheeled vehicles, It grants a “license” that permits the use of public rights-of-way. For boats, it provides a license to use public trust waterways under the state’s jurisdiction. Registration does not prove ownership. In some states, a use tax is collected as part of the initial/periodic re-registration process. The use tax is not an excise tax or personal property tax, but both excise and personal property taxes can tag along on the registration process. SOME STATES REQUIRE REGISTRATION OF USCG DOCUMENTED VESSELS AND SOME STATES DO NOT REQUIRE STATE REGISTRATION OF USCG DOCUMENTED VESSELS.
Sales Tax/Excise Tax:
Whether a tax paid for the purchase of a vessel is a sales tax or an excise tax or a use tax is a matter of definition of the state department of revenue law where the tax is assessed. To a buyer, it matters little. There is no federal excise tax in the US, but many states impose one. The excise is applied at the time of transfer of title (sale), commonly at a percentage rate of the sale price. Some states do not impose an excise. The rate of excise imposed by states that do varies from state to state.
In a state that imposes a sale-time excise, the tax will be due and payable on a new boat at the time of registration.
Maryland and Florida also have maximum caps on excise tax rates. Others may; do your own due diligence.
All of this varies from state to state. Using Florida as an example, if an owner moves a currently owned boat from Maryland to Florida, the following Florida tests apply [cit: Florida Department of Revenue Brochure GT-800005]:
1. the boat was purchased outside Florida, AND
2. it’s been registered in some US jurisdiction for more than 6 months (registered, like a car, not titled, like the USCG COD), AND
3. You DID NOT intend to bring it into Florida when you bought it,
then there will be no excise due if you choose to register the boat in Florida. [cit: Florida Department of Revenue brochure, GT-800005.]
Personal Property Tax:
Specific items of personal property (vs. real property) may be taxed by some states, counties and local municipalities. PPTs are usually imposed on an annual basis. The owner of the property as of January 1 before the fiscal year begins is generally the entity assessed. Not all state, county and municipal jurisdictions impose PPTs. Items that are subject to PPTs vary widely from jurisdiction to jurisdiction.
Personal Property Taxes can attach to the assets of non-resident transients in some jurisdictions under some circumstances. If a non-resident fails to pay a lawfully imposed PPT, the debt can and may be recorded as a lien against the title of the asset.
A “use tax” is a tax on “goods and services that you bring into Florida untaxed or taxed at a rate less than Florida’s.” [cit: Florida Department of Revenue brochure GT-800005.] This definition is fairly consistent across the US. Use taxes are essential equivalent to sales taxes, except applied to those who acquired the goods or services in another taxing jurisdiction. Selected “Use Tax” scenarios that apply to boaters follow:
- For resident boaters who purchase a boat within their state of residence jurisdiction, the sales tax – if any – is paid at the time of vessel registration. Simple and clean.
- For non-resident boaters who move from one state taxing jurisdiction to a new state, a sales tax (or equivalent use tax) may be due upon vessel registration in the new state.
- For non-resident boaters who cruise through a taxing jurisdiction other than their home jurisdiction, a reciprocity period applies. During that reciprocity period, no taxes are assessed. If the length of stay exceeds the reciprocity period, a sales tax (use tax) may be due in the new taxing jurisdiction. The reciprocity period varies from state-to-state. How the use tax is collected also varies from state to state. (Note: see “Reciprocity,” following below.)
- What happens if a currently owned boat is moved from state to state depends on the department of revenue law of the new state. Usually, credit is given for the amount of excise paid in another state at the time of prior registration there. So, moving a boat from Maryland (5% excise) to New York (8-3/4% excise), the owner would pay NY 3-3/4%. Moving the boat from Maryland (5% excise) to Ohio (5.75% excise) would result in a 3/4% tax. Moving the boat from Maryland to Rhode Island (no excise) would NOT result in a refund. [Cit: rates based on BoatUS information, updated occasionally, and located here: http://www.boatus.com/gov/states/default.asp.%5D
- Some states require marina managers to report the presence of non-resident boats on specific dates (like January 1st) to Department of Revenue authorities for the purpose of applying use taxes upon the owners.
Time limits apply for the length of time that a state will honor vehicle and vessel registrations from other states. For business travelers and vacationers (short term visits) any state’s vehicle registration is honored everywhere. Likewise, for boaters, any state’s vessel registration is honored everywhere. However, time limits may affect long range cruisers, such as “snow birds,” in some situations. The laws of the various states generally require “domestic” registration within a reciprocity period. This varies from 30 to 90 days, depending on the state.
Florida Sojourner’s Permit:
Florida has a unique use tax called a Sojourner’s Permit. This is a short-term form of registration of the vessel in Florida. It does not change the homeport state of registration, but it extends the lawful reciprocity period in Florida, usually by several months. Those who cruise and move occasionally will almost certainly not come into contact with the authorities on this one, but those who leave their boats in a marina for the entire winter season may.
The “Sojourner Permit” is a temporary registration that allows out-of-state visitors to remain in Florida longer than the 90-day standard reciprocity period. The Sojourner’s Permit applies only to Florida, and does not supersede, cancel or impair the home-state registration of the vessel. The Sojourner’s Permit applies statewide across Florida as a legislative provision of the State of Florida. With the Sojourner’s Permit, there is no sales tax assessed, since by definition, the intended stay is “temporary.”
Vessel owners apply for the Sojourners Permit at any of the various county tax collector offices. There is a standard State of Florida fee. A small number of counties also tack on local fees. The Sojourner’s Permit expires in the birth month of the first person on the vessel’s certificate of title. If the vessel is owned by a trust, a corporation or an LLC, the Sojourner’s Permit expires in June.
Here is a link to the vessel registration fee schedule. At the bottom of the page is a list of counties that charge the local surtax: http://www3.flhsmv.gov/dmv/Proc/Fees/Fees-04.PDF
To apply for the Sojourner’s Permit, submit HSMV Form 87244. Here is a link to the form: http://www.flhsmv.gov/dmv/forms/btr/87244.pdf
Here is a link to all Florida HSMV office locations. Use one that offers full service. https://www.flhsmv.gov/locations/
In addition to the Sojourner’s Permit mentioned above, Florida law also requires that a vessel be registered in some US jurisdiction to be eligible in the first place for the 90-day reciprocity “deal.” The “logic” here is, “reciprocity” implies a courtesy extended between two or more entities; if the boat isn’t registered somewhere, then there’s no state with which to extend the courtesy of reciprocity.
Florida law requires that boats be registered AT THE TIME THE BOAT ENTERS FLORIDA WATERS. (Michigan and some other states have similar laws.) In the very specific case of a boat from a state that DOES NOT register boats, the Florida Sojourner’s Permit will satisfy Florida law; i.e., registered – albeit temporarily – in FL.
The specific requirements for legal residency vary from state to state. Furthermore, different state agencies have different definitions of what constitutes “residency” when the topic is receiving public benefits, in-state tuition at colleges, and liability for income tax. All decisions around changing residency have tax implications, and due diligence will be based on each person’s personal situation. For those without land holdings and living on a boat, changing residency is actually very easy. A few items seem obvious:
- maintain a residence for personal use in the state;
- get a driver license;
- register an automobile;
- register to vote;
- live in a motor home or vessel which is not permanently attached to any property while not having a permanent residence in any other state;
- use an address in the state for federal/state income tax filings.
All of the above items “show intent” for the purposes of filing a “Declaration of Intent to Domicile” in Florida. Florida is a very common seasonal destination for “snow birds.” Snow birds often own property in other states, and not everyone who spends the season in Florida intends to change residency. To establish fully legal “primary” residency in Florida, one need only fill out a one-page form called “Declaration of Intent to Domicile.” The form is filed with the clerk of the circuit court’s office in any county courthouse. You are a Florida resident at the moment the clerk signs that form. Florida does not have a personal income tax, but for other-state tax purposes, that declaration would take effect the next following calendar January 1st. Send a copy to the appropriate taxing authority in the former state of residence as proof of change of residency.