Captain's Tips

State Tax Laws for Boaters

By
Bob
Arrington

For many of us our boats represent a sense of adventure hard to duplicate elsewhere in our lives. We purchased them with dreams of cruising to distant harbors and exploring waters far from home. Or many have purchased their boats to become their homes, freeing themselves of a permanent address. So what happens to the dream of cruising when you receive a letter from a state's tax authority stating you owe them taxes for using your boat in their waters?

All states require boats above a certain size to have some form of registration, although some may accept federal documentation in lieu of state registration. in addition to requirements for registration, many states require some sort of tax to be paid for boats purchased or used within the state.

There are three types of taxes which can be levied on boats by state and local governments; sales tax, use tax and personal property tax. Some states collect all three and some states collect none. This is further complicated by local county government's involvement in personal property taxes. Due to the potentially high cost of these taxes on expensive boats, many owners have gone to great lengths to minimize or avoid these taxes all together when purchasing their boats. as budget strapped states look for additional revenue, many have increased their patrolling of marinas looking for boats registered out of state. They are casting a wide net, looking for anyone suspect of violating their tax policy in hopes of catching the few that are. Unfortunately, a number of innocent boaters just out cruising or living aboard are being caught in that net in the process.

Because this can be such a complicated issue, we've asked an expert to contribute to this subject with us. Dirk Schwenk of Baylaw, LLC is an attorney based in Annapolis specializing in maritime law. Dirk has written extensively on boat tax policy and offers registration and tax consulting for anyone purchasing a boat.In our conversations with Dirk we learned there are two separate questions on this tax issue, one is: How to minimize or avoid paying tax on a boat when it is purchased? Which we are not addressing in this article. The other is assuming the boat was lawfully purchased and registered in a state, regardless of whether that state collects sales tax or not: How does a boater keep from paying the use tax while traveling to other states that may be attempting to collect taxes just for using the boat in that state's waters?

If our members want us to help them plan a summer cruise to New England or winter cruise to Florida, how can they know they are not going to be in violation of a state's use tax policy?

Use tax defies simple answers, because every state is different and most states treat their residents differently from the rest of the if you are truly cruising (in the sense of moving between various states every couple of months) and you do not have the boat in your state of residence (New Jersey, for example, asserts the right to tax a resident's boat on the first day it is in the state). I generally try to put my clients in a position where their boat is most often in a state that:

  • 1) They like to cruise.
  • 2) They are safe from tax because they either have paid some tax or because they have a definitive exemption.
  • 3) If their plans change, they send me a quick email to go over their float plan. There are several states that have capped their use tax or have exceptions for boats that are not purchased there, so once established in such a location, a boat owner can feel secure that they will not be bothered. Florida can be very tax-friendly for people that are not residents, do not own real property or are otherwise not closely tied to the state.

So if I understand your answer above correctly, a boater does not necessarily have to register their boat where they live and where it is registered can affect the ease with which they can travel from state to state?

Correct. Generally a boat must register in the state in which it is used most, so the boat's location is more important than the owner's location. For some boats, it is difficult to identify the main place of use, so i generally try to have those boats initially register in a location that has a connection to the boat and then change the registration if the boat later comes to rest in a particular state. I do not recommend that a boat be in the United States with no identified state it draws too many questions. For the very large vessel, a capped state like Florida or Maryland is a good option, since the tax amounts are not that large relative to the value of the vessel and they are desirable states in which to locate and do not have personal property tax. Depending on circumstances, Florida may not require any tax.

With the approach states are using, what should our members do if they receive a letter from a state attempting to collect a tax on their boat?

First they should look at it and see whether it is an assessment of tax (the equivalent of a tax bill) or a letter of inquiry. An assessment is much more serious and typically has a very short period in which it can be appealed. if it is an assessment for a significant amount of money, they should consider hiring counsel that specializes in maritime law. A letter is somewhat less serious and if there is a simple and honest answer (such as I keep my boat in Delaware), an owner can simply respond. counsel should almost certainly be consulted if there is a significant penalty (indicating that the assessor suspects fraud); if the amount of money at issue is fairly high (say over $10,000) or out of line with the value of the boat; or if the taxability of the boat is going to be a close call, and a slip of the tongue may be the end of the defense.

For those owners that will spend significant time in the Caribbean, offshore ownership is a topic that should at least be considered in making plans for the use and tax of the vessel. Additionally, any owners with a high value boat that has not paid any sales tax, they should have a tax plan before they are contacted by tax authorities, not after.

As you can see this can be a complicated issue with costly consequences if not managed properly. For additional information on individual state's policies, you can visit Dirk's website at baylawllc.com.

Related Articles
Dinghies: Small Boats with Big Value
|
overhead view of a man on a dinghy in the blue ocean
Dinghy | webcasamiento from Pixabay

Few items carried aboard your boat, embody the freedom of the cruising lifestyle more than your dinghy, or “tender” if you prefer. These often abused and rarely waxed little boats are a valuable part of cruising adventures. They allow you to moor or anchor out, enjoying the peace and quiet of a secluded anchorage, yet still take advantage of amenities on shore.

They take you on excursions through back water, narrow channels, and man- grove forests, too small or shallow for your primary vessel. And if you have a four- legged friend on board, you know not only the importance of getting them to shore, but oh how they love a dinghy ride.

They can even make stays at a marina more enjoyable. For instance, Dolphin Marina in Harpswell, ME, provides guests aboard boats in the marina with charts showing a half a dozen dinghy trips you can take around the islands of Casco Bay to scenic coves and remote islands that would be impossible to get the big boat into. And if you plan to cruise to the Bahamas, Caribbean or remote destinations, you need dependable transportation to shore.

The most important feature of a dinghy is that it must be easy to use. If it requires too much effort to launch and operate, you will be reluctant to anchor out as often as you might like. Ease of use is determined by several factors, such as whether you must inflate the dinghy, mount the engine, or need three people and a crane to lower it into the water. Many of these choices are determined by the size and configuration of your boat, but regardless of your boat’s size or your budget, you can create a setup that’s easy to use.

The choices for how and where to carry a dinghy fall into a few basic categories. If you do not have the option of a crane- style lifting device, you may be limited by the size and weight of your dinghy, but that does not mean you are relegated to the equivalent of a rubber toy boat. Efficient davit systems can be mounted on medium size swim platforms. These accommodate a variety of dinghy styles, both rigid and inflatable, and allow you to keep the engine mounted to the dinghy.

Also, hydraulic lift systems can carry a tender off your stern, but your transom must be capable of carrying the device, and your boat should be heavy enough to stay balanced with that much weight aft of center. If your boat meets those require- ments, the hydraulic lifts are about as easy to use as it gets.

A couple driving their inflatable dinghy through the water
Inflatable Dinghy | Canva

Another option some cruisers choose is to tow a dinghy. While I’ll admit to having done this in protected waters, it’s generally not a safe practice. There are too many documented cases of towing components fouling up props and leaving boaters stranded. If you travel to the islands, you will see many cruisers towing dinghies, but please use extreme caution if you choose to do this. Learn where and how to safely attach the dinghy to your boat, and if there is any threat of rough seas, retrieve the dinghy immediately and secure it to the mother ship.

Dinghies come in a variety of hull styles and materials, including plank- reinforced fabric bottoms, high-pressure inflatable bottoms, and rigid hulls of fiberglass or aluminum. In general, soft-bottom styles are limited to what they can do and endure, even with a high-pressure floor with a keel.

If you intend to transport serious loads of supplies and people, a rigid hull is a must. Its durability is also important if you are cruising in the tropics, where you are as likely to land on a beach as tie up at a dock. Rigid bottoms can be part of a fully rigid boat, but more often they are connected to an inflatable top tube and called “rigid inflatable boats,” or RIBs. These have become the ubiquitous tender of choice for most cruisers. You get durability and stability from the rigid hull, and buoyancy and lightweight from the inflatable top tubes. The top tubes are much gentler on the sides and finish of your boat when tied to it.

RIB’s hull bottoms have been primarily fiberglass, but aluminum hulls are gaining market share with even lighter weight then fiberglass and more durable for beach landings. The inflatable tubes come in a range of materials, including PVC, coated neoprene and Hypalon, which are widely considered the best material for the inflatable parts of a dinghy.

A well-built dinghy will provide many years of service, but it won’t last forever. A sign of a good-quality RIB dinghy is the ease with which it can be serviced and even re-tubed when necessary.

An example of a feature that could affect serviceability is the fuel tank’s type and location. Separate fuel tanks carried in dedicated compartments are easier to inspect or replace but have limited carrying capacity; built-in fuel tanks may carry more fuel and be better balanced, but may also be difficult or impossible to repair without completely un-assembling the dinghy.

It used to be your only choice of power for a dinghy was a gasoline powered outboard engine, however innovative companies have been actively introducing clean burning propane powered internal combustion engines, and most recently electric motors with impressive power and range.

When shopping, it’s best to purchase from a dealer that in addition to sales, performs complete service on the dinghy and engine. A high-quality dealer will be willing to visit your boat to determine if a particular model can be carried, launched and retrieved safely.

Read More
FAQ About Doing the Great Loop
|
Tim and Kate

My husband, Tim, and I spent most of 2021 and part of 2022 completing the Great Loop on our 31-foot Camano trawler, Sweet Day. One of the most unexpected and best parts of the trip was the opportunity to share our experience with friends and family. Guests stayed overnight, family members joined us for a day cruise, and generous friends brought over meals when we passed through their hometowns. For those who couldn’t experience Sweet Day physically, we shared our journey through our blog and Instagram, and caught up with stories when we got together off the boat.

Boaters who are familiar with liveaboard life know there is no shortage of questions that curious people ask about a nautical lifestyle. Those who are exploring this way of life may feel like there is no end to the questions you could ask.

Below is a compilation of the most common questions we posed to us about our year doing the Great Loop and living full-time on Sweet Day. Hopefully the responses will get you ready for your adventures on this incomparable waterway.

WHAT IS THE GREAT LOOP?

The Great Loop is a 6,000+ mile “loop” around the eastern U.S. and Canadian waterways. The journey takes about a year, if done consecutively, and covers 15+ states and two countries, depending on your route. A few hundred “loopers” complete the journey each year, some doing it all at once, and others covering segments year by year. Loopers plan their journey traveling by seasons to avoid hurricanes in the South and tough winters up North. The America’s Great Loop Cruisers’ Association (AGLCA) is the resource for all things related to the Loop, and we highly encourage checking them out when planning your trip.

Kate's AGLCA Flag on her boat

WHAT DOES THE FLAG MEAN ON THE BOW OF YOUR BOAT?

If you are currently looping for the first time, it is traditional to fly a white AGLCA burgee or “flag.” Once you complete the loop, it is customary to replace your white burgee with a gold AGLCA burgee to indicate to other boaters that you already completed the full loop. Those who have done the loop more than once fly a platinum burgee. All burgees can be ordered from the AGLCA website. It’s a great way to easily spot and meet other loopers.

HOW DO YOU MEET OTHER LOOPERS?

Since many of us on the loop travel the same segments of the trip at the same time, it is common to see loopers at a dock, anchorage or cruising by. The AGLCA burgee makes it easy to spot cruisers on the journey, and a lot of loopers also use the Nebo app, which shows where other loopers are physically located, so you can message each other. Sometimes we travel a few days with the same boats; others you may see one day and then meet up again a few weeks later.

DID YOU GET STUCK IN BAD WEATHER?

Having a flexible schedule and keeping a close eye on the weather kept us mostly out of uncomfortable waters. We used services such as Windy, AccuWeather, and NOAA to anticipate wind speeds and wave heights. We tried to only cruise when waves were under three feet, although twice we found ourselves in five+ foot waves (once on the Chesapeake heading to Annapolis and another heading to Presque Isle, MI, on Lake Huron), because our final destination happened to be closer than trying to find an alternative place of refuge. We also encountered strong wind while at anchor and tied up to docks, especially when the wind was going against the tide outside Savannah. By staying vigilant about our lines and anchor holding, we luckily were never in any danger. They say the boat can handle more than the captain, and thankfully the only thing we ever lost due to weather was a few hours of sleep.

Kate and Tim enjoying the Superbowl from their deck

DID YOU SLEEP ON THE BOAT EVERY NIGHT?

Our trawler had a v-berth with enough room for us to sleep comfortably. Often when we were near friends and family, they would offer for us to stay on land. Sometimes we took them up on it, but we preferred to stay on Sweet Day. Just like a land house, Sweet Day had all our comforts of home (because it was our home), and anytime we didn’t have to pack a bag was a plus.

WHAT DO YOU DO ABOUT FOOD?

We ate about 75% of our meals on the boat using our tiny kitchen equipped with a small oven, three-burner stove, microwave, fridge and some pantry space. We ate out if we found a must-see place or were exhausted from a long day and not in the mood to cook. But often we were not close to a restaurant and had to be creative with what was in our pantry. We went to a grocery store two to three times a week by bike and would get enough fresh food for about three dinners (and snacks for lunches) but were limited by what we could carry and store in our boat. Because we didn’t have space for a ton of food, and sometimes our meals were whatever we had on board, so we wasted a lot less food than when living on land.

WHAT WERE YOUR FAVORITE PARTS OF THE TRIP?

We get this question all the time, and it’s still challenging to answer. Each part of the trip (inland rivers, Gulf of Mexico, Intracoastal Waterway, Chesapeake Bay, Delaware and Hudson Rivers, Erie Canal, Great Lakes) posed their unique challenges, breathtaking scenery, regional cuisine and character. The loop has too many special places to mark our favorites as each place we stopped shaped our journey, whether it was having a conversation with a dock hand to enjoying a locally made beer, to attending a community BBQ. Our country’s waterways are beautiful and a critical part of our infrastructure, and the life that is built around them is always worth experiencing.

Kate and Family on their boat

DID YOU EVER GET SICK OF EACH OTHER?

Mostly no, but sometimes we were very aware we were living together on a 31-foot boat. We learned communication is key and ultimately felt very fortunate to be on this journey together. Before the trip, we heard about the “80/80 Marriage,” which is the concept that spouses should not try to ensure each is doing their fair share (or 50/50), but each should aim to do 80%. This mindset helped a lot. At night lying in bed, I may say, “I forgot to turn off the water pump. Tim, can you do an 80 for me and get up and turn it off?” Or Tim would comment, “Kate, you really pulled an 80 on cooking dinner and doing the dishes.” We couldn’t imagine doing this trip with anyone else.

WHO WAS THE CAPTAIN?

We consider us both the captain. While we both have our strengths, each of us was involved in almost every aspect of the boat. We both drove, troubleshot boat problems, navigated, planned routes, grocery shopped, cleaned and so on. From a safety standpoint, it was important both of us could take on responsibilities should something happen to the other. This was our journey, and it was vital to us that we both were involved in decisions and operations that made this adventure possible.

Article and photos by Kate Carney

Read More
Blackwater Management
|
Pumpout | Oregon Sea Grant

Brown sludge dripped off the brim of my hat as I peered out from behind sunglasses spotted with a decidedly unpleasant substance. It was the stuff of pump out nightmares, the result of an ill-fitting connector, a sanitation system severely neglected by the boat’s previous owners and a rather poor decision on my husband’s part to try to fix it himself. “Here honey, hold this down while I go below to bang on things to see if I can get it working.” Following numerous showers and excessive disinfectant efforts, I was able to find the humor in the situation and eventually forgive my husband.

Boaters do not often like to talk about it, but sewage happens. Managing our sewage situation, also known as blackwater, is a part of boating. According to the Environmental Protection Agency (EPA), the amount of bacterial pollution from one weekend boater’s discharge of untreated sewage is equal to the amount from the treated sewage of 10,000 people during the same period. Properly managing our sewage situation is a part of boating, and it is the law.

Under federal law, it is illegal to dump untreated sewage into navigable U.S. waters, including waters within three miles of shore and inland waters such as rivers, lakes and estuaries. In addition, the EPA has designated at-risk areas as No-Discharge Zones (NDZs), forbidding any discharge, treated or not, in a body of water.

To facilitate compliance, all boats in U.S. waters with permanently installed toilets must have a Marine Sanitation Device (MSD) aboard. There are three basic Coast Guard approved MSDs. Type I MSDs involve sewage treatment to meet bacterial content standards prior to discharge. Type II MSDs meet a higher standard of limited bacterial content prior to discharge. Most recreational boats have a variation of Type III MSDs, which store blackwater in tanks for shore-based disposal or discharge beyond the three- mile offshore limit.

Type III MSDs require boat operators to manage when and where they will need to empty their blackwater holding tank. Unfortunately, mismanagement of blackwater discharge can be found throughout the boating community and the impact can be startling. Some examples:

› Untreated effluent from boats is not only environmentally harmful, but also a health hazard for other boaters.

› Improperly discharged blackwater can introduce excessive nutrients to a waterway, triggering devastating algal blooms.

› Organic matter and decaying algal blooms settle to the sea floor depleting oxygen levels and harming shellfish and other aquatic species.

› Chemicals added to toilets and holding tanks are toxic to marine life if released unchecked.

› Discharged feces can contain disease-causing organisms, which pose a risk to other boaters, swimmers or those who errantly consume contaminated shellfish.

Blackwater management is an important contributor to the health of our marine environment. Responsible blackwater management starts with knowing and caring for your Marine Sanitation Device. Blackwater systems require routine maintenance such as regular inspection of fittings, hoses and pump mechanisms. (This will also reduce the likelihood of you experiencing your own pump out nightmare like mine.)

Clean Marina award winner, Mitchell Creek Marina | Lee Roberts via U.S. Army Corps of Engineers

A FEW GOOD TIPS

› Use rapid-dissolving toilet paper specifically designed for your MSD.

› Be mindful of products used to clean toilets or treat water as some chemicals cause seals to deteriorate over time.

› Periodically, after you have emptied the holding tank at a pump out station, flush the holding tank with fresh water and pump out a second time. Many recreational boats with a Type III MSD (holding tank) also have a “Y” valve allowing direct overboard discharge when beyond the three-mile limit. Federal law requires this valve to be secured in a closed position while in inland or coastal waterways. To secure the closure, a non-releasable wire tie may be used or the valve handle removed to prevent accidental discharge.

Responsible blackwater management also involves pump out diligence. In the past, most pump out facilities were located solely at the fuel dock of a marina. While this is still a viable option at some marinas, you can now find more convenient situations.

Thanks in part to the Clean Marina initiative, increased government funding and new technology, pump out options have increased. Pump out services are often accessible in the slip or portable and brought out to your slip. Some marinas and mooring field hosts offer pump out services by boat. When making slip reservations, ask about pump out services and plan accordingly. Some marinas prefer to have their staff handle the pump out for you, while others may let you do it yourself. Take advantage of pump out availability as often as you can. Frequently pumping out helps keep your tank cleaner and reduces the risk of overflow.

According to the California State Water Resources Control Board, “Discharge from a single boat over one weekend contributes the equivalent bacterial pollution as treated sewage from 10,000 people.” One boater discharging inadequately treated blackwater can cause significant environmental damage ... but likewise one boater exercising responsible blackwater management can prevent significant environmental damage. Be the better boater.

Read More

Want to Stay In the Loop?

Stay up to date with the latest articles, news and all things boating with a FREE subscription to Marinalife Magazine!

Thanks for subscribing!
Oops! Something went wrong while submitting the form.
Marinalife articles