Catamarans :: Tax

Sales taxes are levied in the U.S. by the individual states. Each state is somewhat different in their approach to this subject.

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If you don't intend to keep your yacht in your state of residence for more then 60 days you will not be required to register your yacht in your state. Whether you owe this tax has to do with where the yacht is registered and where and how the yacht will be used.

Speak to our brokers about this matter. Combined they have attended every legal seminar and tax seminar for yachts ever held in Florida and stays up-to-date with all the nuances and changes in the tax code.

They can also give you a copy of the Florida Department of Revenue's summary on this subject.

TAX BOOKLET DOES NOT TELL WHOLE STORY

The Florida Department of Revenue's booklet on Sales and Use Tax does not necessarily include all of the ways you can be exempt from tax, so be sure to consult your broker. He is there to assist you in every legal way. http://sun6.dms.state.fl.us/dor/

THE USE OF CORPORATIONS

Some yacht buyers, who qualify, will register their yachts in a tax-free state like Delaware in the name of a corporation. These cost around $375 to form and around $100/year to maintain. The yacht registration fee in Delaware is determined by size of vessel and is usually between $50-90/year to renew. You may also need mail-forwarding est. cost $125. This is the most cost-effective registration. You may want to "Document" or Federally-register your yacht if you are traveling outside the U.S. Ask your broker to explain the differences between Documentation and state-registration. There is no sales tax or use tax in Delaware. There are five other U.S. states that do not tax yacht sales. To learn more about setting up a Delaware corporation check www.corpamerica.com.

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OFFSHORE REGISTRATION

Offshore registration is another legal way to avoid paying sales/use taxes and U.S. Customs duties. However, you can expect to pay $2,000 to $5,000 to set up an offshore corporation. Many larger yachts prefer to register foreign flag. Some U.S. lenders are comfortable with yacht documented in "Red Ensign" countries. i.e. former British colonies like the BVI, Cayman Islands, Bahamas, and Barbados.

Other lenders will insist upon U.S. Documentation. Check with your lender early on. The drawback to offshore registration is that you will have to enter the U.S. once/year to renew a Cruising Permit in order to remain in U.S. waters. The other drawback is that the attorneys in these offshore jurisdictions charge $1,000-5,000/year to maintain the holding corporations. But you can usually achieve anonymity of ownership by using this strategy.

TAX BENEFITS FOR YOU

If you live in the US or most European countries, you can reduce your taxable income by writing off certain yacht ownership expenses. The most common U.S. tax benefit is to treat your yacht as a second home which is possible if you don’t already have a second home and your primary residence is valued at less than $1 Mil. This method will allow you to write off your interest expense on your loan. The other method is by actively managing your yacht in a charter business. Many travel agents do this. This method will allow you to write off your operating expenses as well as interest expense.

CONSULT AN EXPERT

No matter how smart your personal accountant is, he probably has little experience in the caveats of tax laws in regard to yachts. Contact an expert.

Mike Kimball, CPA, has written several books on the subject:

Phone: 903-561-9555
Website: www.yachtstaxadvisor.com

For those of you would like to familiarize yourself with both Florida and California's use and sales tax...

Phone: 916-369-1200
Website: www.astc.com

Legally Avoid Sales Tax
Phone: 916-265-6009
Email: Avoid Sales Tax

TIP: You are allowed to deduct mortgage interest on your primary residence and one other residence. Deduct the loan interest on your boat! The definition of what constitutes a residence is very broad and includes RV's, campers, and boats- so long as they have cooking, toilet, and sleeping facilities.