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Some residents of California have been circumventing the sales tax by taking
delivery of a vessel more than 12 miles offshore, cruising directly to Mexico, and storing it in a marina for a ninety days. Under the old rules, this allowed the purchaser to avoid paying sales tax because the boat had been owned and operated outside of California for a minimum period of time. California buyers also traveled north to Peget Sound, purchased boats here, cruised the Pacific NW or SE Alaska for the summer before running down the coast in the fall to a home port- also avoiding the sales tax. New rules appear to require ownership of the vessel for at least 12 months prior to bringing it to California, and may be even more stringent than that as there is apparently a clause that says a vessel is presumed to be purchased for use within California if it is purchased by a California resident. Got the following message this morning from the local brokers' association: CALIFORNIA BUYER ALERT! The California Legislature has recently changed its regulation regarding purchases of vessels in California and purchases of vessels by residents of California. Firstly, a vessel is considered to be purchased for use in California if bought by a California resident; if it is subject to the State's registration or property tax during it first 12 months of ownership; or if it is used or stored in the State for more than half of the time during its first 12 months of ownership. The new regulation does not apply to vessels purchased prior to October 1, 2004, or to vessels that are subject to binding purchase contracts entered into prior to October 1, 2004. This means, a non-resident may still purchase a vessel outside of California and not be subject to the State's tax if the boat is used outside of the State for more than half of the owner's first year of ownership , unless the vessel is subject to the States property tax or vessel registration laws. A non-resident may still purchase a vessel off-shore and immediately bring it back into California and stay for up to, but not more than, 6 months (subject to the property tax and registration requirements). The old rule of a vessel being sales tax exempt if purchased and used outside of California for more than 90 days is no longer true. After October 1, 2004, a California resident will be subject to the sales or use tax if a purchased vessel is brought into the State at anytime within the first year of ownership. Once again, the changes go into effect on October 1, 2004, so any transaction involving California resident must be closed or committed to with a binding purchase contract prior to that date. |
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