Looking to save money on sales tax? Consider an offshore delivery. What is an offshore delivery? Read on.
An offshore delivery is when a client chooses to take delivery of their boat in a location outside of California, in order to use the boat in a location outside of California. The biggest advantage of this decision is that the buyer does not have to pay sales tax (which is about 9% of the purchase price).
In order to take advantage of this break in sales tax, the buyer must follow very specific rules and not appear to intend to bring the boat back to California, or appear to be keeping it out of state specifically to avoid the sales tax.
Performing an Offshore Delivery
Here’s how it usually works. We will take your new boat three miles off the shore of Point Loma where you are in international waters. We will document this by taking pictures of the GPS location, the day’s newspaper to verify the date, a picture of you behind the helm, and photos of the exchange of final payment. We’ll then go back to shore and submit all required paperwork and get it notarized. You will then provision your vessel before you take it into Mexico shortly thereafter. You will be required to keep your vessel in Mexico for 6 months to 1 year, depending on your state of residence. Contact us to get recommendations of marinas to where you can keep your boat in Mexico.
We highly recommend using an attorney to insure you follow this tax code. Contact us for a list of attorneys who specialize in this type of transaction.
Here are some Key Points of Offshore Delivery
- The Purchase contracts (new or brokerage) must state that the offshore delivery as a contingency.
- The purpose is not to avoid sales tax.
- You should not keep your current slips or anything that could be argued that you intend to return to California.
- California buyers must keep the boat out a minimum 365 days.
- The client must keep all records of usage out of the state to verify it has been used not stored. There is no specific usage amount required by the state; however we suggest you use it as much as possible.
- The owner can not use the boat or put equipment on it until he has taken delivery out of the state.
- California Attorney’s who are experts in this tax code and others relating to your boat purchase.