Tax implications of WA resident keeping boat in OR?

[Camasonian]

My wife and I are currently shopping for a trawler or tug to keep on the Columbia. We live on the Vancouver side of the Columbia but it looks like 95% of the marinas and slips are on the OR side of the river.

I expect there are many Vancouverites who have boats in Portland marinas. I'm just wondering what the legal and practical tax implications are if we buy a boat, register it in OR and keep it in an OR marina. WA has a hefty 8.2% sales tax and OR has no sales tax so for the average yacht I expect the tax savings would reach 5 figures. My parents still live in Portland so I do have an OR address to use if necessary.

Am I missing anything here? Is this common?

 

[Lepke]

If necessary put the boat in your parents name. Your residency is usually determined by where you vote. Everything is on computer, so no hiding where you live.
I don't know WA laws, but some states allow you to bring in a boat or vehicle if you owned it out of state (for some period of time or mileage) without paying sales tax.

 

[Camasonian]

I'm not really trying to cheat on taxes so not inclined to go that far. Just wondering what the actual and practical rules are. We would not actually owe WA taxes on a house that we owned in OR. I'm wondering what would happen with a boat that is registered in OR and stays in OR.

We probably do enough property tax evasion by all the shopping we do on the OR side at Ikea and Home Depot and all the other stores over there. But if it is perfectly legal to own a boat in OR and not pay WA taxes then that is something I'll consider.

EDIT: I guess regardless of the tax implications of keeping the boat in Portland, I think, as WA residents, we would for certain owe taxes the minute we brought it up to Puget Sound for cruising. So there is probably no way around it and no point in trying to game the system if we plan on using the boat in WA each summer.

I'm still figuring out the implications of this. The WA Dept. of revenue web site has a LOT of detailed exceptions for non-residents who bring their boats to WA but no information for WA residents who own boats in OR.

 

[syjos]

Boaters have kept boats in Oregon as a second home, license it in Oregon.

I believe that you can cruise Washington for six months without paying the sales tax.

If the boat is registered in Oregon, Washington would not have that info.

The way boat owners got into trouble with the tax in the past is registering the boat out of state but mooring the boat in Washington. Other boaters will turn you in, there was a hotline a while back where Washington State paid for information about tax scofflaws. Additionally, municipal marinas will turn you in. And I've seen police boats cruising marinas checking for current sticker and out of state registered boats.

 

[dhays]

WA state has a current enforcement emphasis on tracking down those residents that are not registering vehicles in WA. Lots of folks have cars that are registered in OR, yet they live in WA.

In your case, there is nothing wrong with owning and keeping the boat in OR. In fact, OR would require that you register the boat in OR since that is where you keep it. As was mentioned, there is a given time frame beyond which WA will want you to register in WA. I believe that is 90 days. So unless you are cruising in WA for 90 consecutive days, you don’t need to worry about it. Double check with WA and find out how long anyone can bring a boat into WA without registering it here.

 

[Camasonian]

Boaters have kept boats in Oregon as a second home, license it in Oregon.

I believe that you can cruise Washington for six months without paying the sales tax.

If the boat is registered in Oregon, Washington would not have that info.

The way boat owners got into trouble with the tax in the past is registering the boat out of state but mooring the boat in Washington. Other boaters will turn you in, there was a hotline a while back where Washington State paid for information about tax scofflaws. Additionally, municipal marinas will turn you in. And I've seen police boats cruising marinas checking for current sticker and out of state registered boats.

My reading of the WA tax exemption for out-of-state boats crusing in WA waters is that it ONLY applies to non-residents. At least the the way the law is worded is that it specifies non-residents. So if you are a WA resident and bring a boat from OR to sail in Puget Sound you will owe taxes from day 1. Maybe I am mis-reading this. Perhaps there are lots of WA residents who do it and don't get caught. I'm just trying to understand what the law actually says, not what a lot of WA residents manage to get away with without getting caught.

Trying to imagine what I would say if I happened to get boarded or pulled over in WA with a WA drivers license and a boat registered in my name with OR registration. Don't imagine they would be very sympathetic, nor would I in their shoes.

 

[gsholz]

As a WA resident you owe tax from the first day you bring it into WA. Anchoring on the WA side of the Columbia will do it.
If you move to WA and bring your old boat or RV the use tax is due too. Don’t forget the yearly property taxes on vehicles.
Oregon registration fees are lower, no personal property taxes but you pay 10% income tax. But Salem is working hard on a sales tax. The call it a gross revenue tax for businesses. Guess who will be paying that tax.

 

[Camasonian]

As a WA resident you owe tax from the first day you bring it into WA. Anchoring on the WA side of the Columbia will do it.
If you move to WA and bring your old boat or RV the use tax is due too. Don’t forget the yearly property taxes on vehicles.
Oregon registration fees are lower, no personal property taxes but you pay 10% income tax. But Salem is working hard on a sales tax. The call it a gross revenue tax for businesses. Guess who will be paying that tax.

That's what I thought. Thanks.

My neighborhood in Camas is full of people driving around with OR plates who I'm pretty sure are just evading WA taxes on their cars. Sounds like the same exact thing applies to boats. Since part of the reason for buying a boat is to use it in Puget Sound and the San Juans it sounds like there are no advantages to be had by keeping the boat on the OR side of the river.

 

[bshillam]

About two years ago I called the state for this exact reason. Here is what the state tax agency told me. As a Washington residence if I was to even use it on the Columbia I would owe Washington taxes on it as a residence. I was moving to Oregon in just a few months so I had the boat moorage off the Willamette, never used it on the Columbia. Waited until I moved and then started using it.

If you have no intention of moving to Oregon. Moore the boat wherever and pay Washington the use tax you owe them. Use the boat a lot!

 

[syjos]

There is another way to reduce your Washington State sales tax on a boat or RV

Washington considers the hull and machinery as a motor vehicle or vessel. That would be the engine and running gear, generator, wiring, plumbing etc.

Everything else on the boat or RV is considered personal property and not subject to a vehicle excise or sales tax. Bedding, curtains, kitchen accessories, books, charts, coffeemakers, anchor and chain, lines, fenders, furniture, spare parts, electronics, canvas, enclosures, window covers etc. are considered personal property.

When purchasing a boat, obtain two receipts. One for the hull and machinery. And the other for personal property. Compile a detailed itemized list of the personal property included in the sale with current value of the items. The value of the personal items need to be realistic. I try to use eBay prices as fair current value. Do not use current retail prices even for fairly new items.

Out of the dozen or so clients that consulted with me on this process, only one received an inquiry from Washington State Dept. of Revenue. And when the itemized list of personal property was presented to them, we prevailed.

 

[Camasonian]

There is another way to reduce your Washington State sales tax on a boat or RV

Washington considers the hull and machinery as a motor vehicle or vessel. That would be the engine and running gear, generator, wiring, plumbing etc.

Everything else on the boat or RV is considered personal property and not subject to a vehicle excise or sales tax. Bedding, curtains, kitchen accessories, books, charts, coffeemakers, anchor and chain, lines, fenders, furniture, spare parts, electronics, canvas, enclosures, window covers etc. are considered personal property.

When purchasing a boat, obtain two receipts. One for the hull and machinery. And the other for personal property. Compile a detailed itemized list of the personal property included in the sale with current value of the items. The value of the personal items need to be realistic. I try to use eBay prices as fair current value. Do not use current retail prices even for fairly new items.

Out of the dozen or so clients that consulted with me on this process, only one received an inquiry from Washington State Dept. of Revenue. And when the itemized list of personal property was presented to them, we prevailed.

Great advice, thanks! I assume this is only a technique you can use on used boats bought from a private seller? Because no way is WA going to exempt things like new electronics from sales tax just because you bought them attached to a boat instead of in a box from West Marine.

 

[DDW]

My understanding as well was if you are a WA resident, you owe tax the day your boat enters the waters of the state.

I wonder what the consequences of placing the boat ownership in a corp or LLC based in another state are. I'd assume they cover that somehow "exclusively for your use" or some such, but ask the question. Even as an alien, you have to pay the tax after 60 days.

 

[syjos]

Great advice, thanks! I assume this is only a technique you can use on used boats bought from a private seller? Because no way is WA going to exempt things like new electronics from sales tax just because you bought them attached to a boat instead of in a box from West Marine.

Yes, used boats and RV's. If the used boat is less than 5 to 10 years old, a little more involved.

A lot of brokers will tell you this is not doable. They get protective of their commission so you have to let them know that they will earn commission on the boat and personal property.

Sellers become concerned that they will get in trouble. You have to reassure them that all they are doing is providing a separate receipt for boat and personal property. What the buyer does with the recipts should not haunt the seller at a later time.

 

[syjos]

My understanding as well was if you are a WA resident, you owe tax the day your boat enters the waters of the state.

I wonder what the consequences of placing the boat ownership in a corp or LLC based in another state are. I'd assume they cover that somehow "exclusively for your use" or some such, but ask the question. Even as an alien, you have to pay the tax after 60 days.

So is it 60, 90 days or 6 months in the state before tax is due.

I have friends that store vintage and collector cars in Oregon in order to avoid Washington State sales tax. They will occasionally bring one to Washington and keep it here for a while. They use the storage facility address for any correspondence regarding the cars.

 

[DDW]

It is 60 days. That can be extended by 60 days with a cruising permit (must be applied for in person before the first 60 is up). That can be extended another 60 days (again in person before the second 60 is up). Then you must leave the state for 180 days or be taxed.

Some of the finer points are ambiguous, and as two agencies are involved (and apparently don't agree on interpretation), you roll the dice a bit after 60 days. There is also a holiday when the boat is being worked on by a Washington business. This is talked up by brokers a lot. "Just tell 'em it's being worked on for a year, and replace a windshield wiper...". But the law says you must apply for the holiday on a form signed by the biz owner and notarized, describing the work done, every 60 days. This an application for exemption, which may be denied, and now you owe the tax for sure. If it leaves the dock an employee of the company must be on board.

There is a reason why a lot of non-residents keep their boats in Canada rather than Washington. Not clear Washington is better off on balance, but I've not seen the numbers.

 

[DDW]

Oh, also, if you buy the boat from a broker there is a one time, one year permit available for $500. Then you must leave the state.

 

[Crusty Chief]

Just a recommendation, you should probably seek legal advise if you are considering mooring the boat on the Oregon side, especially Washington residents.
Oregon doesn’t care where your a resident of. They only require you to register the boat and dink if applicable, even CC documented boats.
We are residents of Nevada and are happy to pay the Oregon registration as no way to register the boat out of our home state of Nevada.
As a general rule, we dont leave or cruise the boat in Washington or California for more than 90 days a year. They are both very diligent in tracking Non-Resident property being in there waters for more than 90 days. They can and will try to collect sales tax and property tax on personal property if that personnel property is within the guidelines of the tax code. Several friends have had to fight the system and most times they have lost. A few of them were turned in by friends or concerned residents.
Now that we are cruising down the West Coast we pay close attention to time in state waters and once we get to the East Coast we will have to pay attention to the state guidelines there, just like we have here on the West Coast.
It’s a shame that states want to go after cruisers so hard, especially since we tend to support local business so much while cruising.
Best of luck on the boat search.

 

[twistedtree]

My understanding as well was if you are a WA resident, you owe tax the day your boat enters the waters of the state.

I wonder what the consequences of placing the boat ownership in a corp or LLC based in another state are. I'd assume they cover that somehow "exclusively for your use" or some such, but ask the question. Even as an alien, you have to pay the tax after 60 days.

WA has plugged this loop hole, and I think rightfully so. The rules that allow visitors are different for LLC-owned boat, and include a specific test to see if the LLC owner(s) are WA residents. So if a WA resident owns the LLC, it's the same as the WA resident owning the boat, and tax is due immediately when the boat enters the state.

 

[twistedtree]

It is 60 days. That can be extended by 60 days with a cruising permit (must be applied for in person before the first 60 is up). That can be extended another 60 days (again in person before the second 60 is up). Then you must leave the state for 180 days or be taxed.

Some of the finer points are ambiguous, and as two agencies are involved (and apparently don't agree on interpretation), you roll the dice a bit after 60 days. There is also a holiday when the boat is being worked on by a Washington business. This is talked up by brokers a lot. "Just tell 'em it's being worked on for a year, and replace a windshield wiper...". But the law says you must apply for the holiday on a form signed by the biz owner and notarized, describing the work done, every 60 days. This an application for exemption, which may be denied, and now you owe the tax for sure. If it leaves the dock an employee of the company must be on board.

There is a reason why a lot of non-residents keep their boats in Canada rather than Washington. Not clear Washington is better off on balance, but I've not seen the numbers.

All excellent points, and I discovered a few other ambiguities and differences of interpretation even within the same agency. For example:


- Most seem to agree that the first 60 days are days in WA waters, not calendar days running from first entry. In other words, if you are in WA for 3 days, then are in Canada for 4 days, you have use 3 of you 60 days, not 7. So the 60 day clock stops when you are not in WA waters.


- But the 60 day add-on time is interpreted differently, even within the same agency. The registration people who administer it (issue the license/permit) have paperwork and applications that all assume the extension is 60 consecutive calendar days. This directly contradicts the wording in the actual law which is identical to the wording for the first 60 days, and clearly states days of "use in WA waters". A state DOW person who was hounding me interpreted it the same way as the registration people, but a friend got a binding determination from DOR saying the opposite, i.e. it's treated like the first 60 days.


- I also got into a debate with the DOR about whether your 60 visitor days stop accumulating when you file a repair affidavit, or if they keep running. And the same question applies to the add-on 60 day permits. Does that clock stop when you file a repair affidavit, or not? It's unclear.


I finally left WA, even though I was spending good money (and sales tax) in the state. Being a visitor in a state with a nearly 10% boat tax went from a high-stakes, low-risk endeavor because the rules seemed clear, to a high-stakes, high-risk endeavor when I realized I could get snagged by any one of these different interpretations. So like many, many WA boaters, off I went to Canada where the rules are clear and they welcome visitors. The net for WA was 1) they lost the business revenue and the associated sales tax revenue that I was providing, and 2) they didn't get the use tax either. And I didn't get to spend more time in WA, which I wanted to do. It was a loose, loose, loose. Simply brilliant.

 

[DDW]

Another grey area is what is "use in WA state waters"? Is the clock running on a dry stored boat, while it is dry stored? Nobody seems to know. Actually the statue says something like "60 days after entering the waters of the state of WA" which is unclearer still. Suppose you keep a boat on a trailer. You bring it into Washington and put it in the water one day a year. Do you get 60 years? or owe tax 60 days after the first splash? The documentation company in Anacortes told me the latter. Suppose I bring a boat in on a trailer and store it for a year before it gets wet. Do I owe taxes within 60 days? or not until 60 days after it gets wet? Does rain count as the "waters of WA state"?

 

[schrater]

Camasonian — I’m in your exact same shoes, and came to the same conclusions you did after researching. Although I’m sure there are many trying to get around paying the WA taxes, I didn’t like the idea of always being on the dodge. And the potential of cruising up in the Puget Sound made it even more convincing that I should just pay it and keep the peace of mind like a good citizen.

 

[Kawini]

Twisted Tree - Thanks very much for that detailed explanation as to the interpretations of Washington’s visiting boater requirement. Extremely helpful.

Are you 100% confident in your assertion that the first 60 days are non-contiguous? This has been on my mind quite a bit. I live in New Mexico, and I’m in the process of buying a boat currently moored in Washington. I plan to register the boat in NM which is a no-tax state, and keep it moored in Sidney, BC.

I don’t plan to use the boat for more than 60 days in WA waters each year, but I was somehow under the impression that I have to (a) leave, (b) obtain a permit, or (c) pay tax on the 61st calendar day after the first entry, regardless of how many days I actually spend in WA.

I’d be extremely relieved to know that I was incorrect about this since it solves a couple of logistical issues for me. Have you seen this interpretation incorporated into any written document?

Thanks!

 

[Camasonian]

All excellent points, and I discovered a few other ambiguities and differences of interpretation even within the same agency. For example:


- Most seem to agree that the first 60 days are days in WA waters, not calendar days running from first entry. In other words, if you are in WA for 3 days, then are in Canada for 4 days, you have use 3 of you 60 days, not 7. So the 60 day clock stops when you are not in WA waters.


- But the 60 day add-on time is interpreted differently, even within the same agency. The registration people who administer it (issue the license/permit) have paperwork and applications that all assume the extension is 60 consecutive calendar days. This directly contradicts the wording in the actual law which is identical to the wording for the first 60 days, and clearly states days of "use in WA waters". A state DOW person who was hounding me interpreted it the same way as the registration people, but a friend got a binding determination from DOR saying the opposite, i.e. it's treated like the first 60 days.


- I also got into a debate with the DOR about whether your 60 visitor days stop accumulating when you file a repair affidavit, or if they keep running. And the same question applies to the add-on 60 day permits. Does that clock stop when you file a repair affidavit, or not? It's unclear.


I finally left WA, even though I was spending good money (and sales tax) in the state. Being a visitor in a state with a nearly 10% boat tax went from a high-stakes, low-risk endeavor because the rules seemed clear, to a high-stakes, high-risk endeavor when I realized I could get snagged by any one of these different interpretations. So like many, many WA boaters, off I went to Canada where the rules are clear and they welcome visitors. The net for WA was 1) they lost the business revenue and the associated sales tax revenue that I was providing, and 2) they didn't get the use tax either. And I didn't get to spend more time in WA, which I wanted to do. It was a loose, loose, loose. Simply brilliant.

This is the consequence of one state relying on sales tax and the neighboring states (and provinces) relying on income tax. I'd venture to say that most Oregonians with enough wealth to own a cruising boat pay more in income tax than the equivalent Washingtonian pays in sales tax for the boat and everything else.

In any event, the taxing agencies probably do their best to write clear regulations but then circumstances and loopholes always emerge that don't meet the clear letter of the law and we have to either rely on courts to make the determinations and/or go through the process of updating laws and regulations to close every loophole and ambiguity when they come up. People are infinitely clever. But then the state department of revenue has been dealing with tax arbitrage across the border for probably 100 years and probably know every trick including hundreds you haven't even thought of.

My wife and I live in WA and the amount of income tax we save compared to living across the river in Portland is about equal to our daughter's college tuition. So I just suck it up and figure I'm going to be paying some kind of tax anyway. I expect on balance, wealthy Canadians pay even more in taxes than either WA or OR residents.

For those from out of state I can understand the hassle. If tax laws were uniform across the states then none of this would be relevant. But then we wouldn't be the United STATES of America but just the State of America.

 

[Crusty Chief]

I live in New Mexico, and I’m in the process of buying a boat currently moored in Washington. I plan to register the boat in NM which is a no-tax state, and keep it moored in Sidney, BC.

Thanks!

I’m interested how you are able to do this? In Nevada they want to physically inspect the Hull I’d number, length and so on to verify documents match the vessel on out of state purchases. And since Nevada doesn’t collect sales tax on an asset bought out of state by private party this is what they require in order to issue a Nevada Title. Since moving 65,000 +/- a few pounds boat just to verify was not economically sound, we had to look at alternatives. Since the boat was already registered in Portland and CC Documented kinda made since to go that route.

 

[Kawini]

The boat will not be titled in New Mexico; it will be USCG documented with a New Mexico home port. A wrinkle that is particular to New Mexico is that USCG documented vessels need not be registered - even to operate in the state. Nonetheless, since I will be operating entirely out of New Mexico (principally BC and AK) I don’t feel comfortable without a registration. New Mexico will allow me to register the boat for a nominal fee, but I need to have the HIN reported to the state registration board by a Certified HIN reader since the boat is not physically present.

This is all very state specific I believe.

If there are any other New Mexicans out there with PNW boats, I’d love to communicate with you about this.

 

[GFC]

Because no way is WA going to exempt things like new electronics from sales tax just because you bought them attached to a boat instead of in a box from West Marine.

When I bought our boat I went to the WA Dept of Revenue with my sales invoice for the boat. I explained that the invoice price included about $50K of work and new merchandise that I bought in OR and was being installed on the boat by an OR marina.

They deducted that amount from the invoice price and charged my sales tax on the balance.

 

[Lepke]

Wa has a use tax that is applied to items bought outside the state in places with no sales tax or a lower tax than Wa. Usually the sale price, but allowance for depreciation if used for a long period before coming to Wa. So it would be worthwhile to keep the boat outside Wa for a period of time.
https://dor.wa.gov/find-taxes-rates/use-tax
I'm glad I left that state 30 years ago.

 

[twistedtree]

Twisted Tree - Thanks very much for that detailed explanation as to the interpretations of Washington’s visiting boater requirement. Extremely helpful.

Are you 100% confident in your assertion that the first 60 days are non-contiguous? This has been on my mind quite a bit. I live in New Mexico, and I’m in the process of buying a boat currently moored in Washington. I plan to register the boat in NM which is a no-tax state, and keep it moored in Sidney, BC.

I don’t plan to use the boat for more than 60 days in WA waters each year, but I was somehow under the impression that I have to (a) leave, (b) obtain a permit, or (c) pay tax on the 61st calendar day after the first entry, regardless of how many days I actually spend in WA.

I’d be extremely relieved to know that I was incorrect about this since it solves a couple of logistical issues for me. Have you seen this interpretation incorporated into any written document?

Thanks!

I can't say 100%, which is the problem in a nut shell. But it was my experience. When I was "invited to pay use tax" on my boat, I explained that I kept careful rack of the days spend in WA that are allowed over the 365 calendar days after first entry. On that one year anniversary, the clock resets and you get another 60 days. My days of use in WA were definitely not contiguous over the 365 day window, but I always kept it under 60. Other time was under a repair affidavit, without me using the boat. At that point they stopped hassling me. BTW, they will never tell you that you are compliant. Nor will they ever tell you that your repair affidavit has been "accepted". They will stamp it received, but will never say you are "OK", instead always leaving the door open to claim you are out of compliance.


What I would suggest is that you send them a request for a binding determination. It can be done through their web site. You pose your question, and they will give you a binding answer within something like 30 days.


For what it's worth, the actual statute is quite clear that it's "days of use in WA". Not days since first use, or anything else that can be interpreted as consecutive calendar days after some event. But of course in practice all that matters is their interpretation, and then you need to go to court to challenge it. Since that doesn't look like cruising to me, I prefer just to avoid it.

 

[twistedtree]

BTW, I have no problem with WA or any other state having use taxes that are applicable to visiting boats after some period of time. My gripe is that the rules are unclear. Make them clear, and I'll decide whether to visit, and how long to stay. But if they are unclear, and I'm essentially gambling 10% of the value of my boat, well, forgettaboutit. I'll go elsewhere.

 

[gsholz]

Kawini, when you buy a boat in WA you have only 45 days to leave before sales tax is due. You can buy a cruising permit from your broker for a year ($800 depending on boat size) but then you cannot come back into WA for 2 years. This would include the Columbia River or any of the West Coast ports. Hard to do for an Oregonian that wants to go north.