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Possible changes with California "Out of State" boat delivery tax laws

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Old 05-13-2003, 11:03 AM
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Post Possible changes with California "Out of State" boat delivery tax laws

I took "out of state" delivery when I bought my new boat two years ago. As a precaution, I contracted an attorney to handle the logistics and to insure that things were done properly.

This is a portion of a letter received from him today explaining possible changes to the tax laws. I would recommmend David without hesitation. Here is the letter.

===============================

WEIL & WYATT
ATTORNEYS
249 East Ocean Blvd., Suite 801
Long Beach, California 90802
Telephone: (562) 432-8618 Fax: (562) 432-8638
e-mail: [email protected]


You will recall that this office was retained to assist with the purchase of your yacht, and to structure the purchase as an “offshore” or out-of-state delivery to be exempt from California sales tax. According to our records, the yacht may still be outside of California or, if it has returned, you may not have filed for a tax exemption yet. I am writing at this time to advise of a possible change to California law, and to encourage you to contact me if you are thinking of bringing the boat back to California. If your plans call for the boat to remain outside of California permanently, you may disregard this letter. And, I apologize for this “form letter” style of communication, but I wanted to bring you up to date as quickly as possible.

State Assemblyman Lloyd Levine (a democrat from Van Nuys) has introduced a bill (AB 694) that may eliminate the “offshore delivery” process. The bill provides that any yacht that is purchased by a California resident will be presumed to have been purchased for use in California. Period. The bill also provides that a non-resident will be presumed to have purchased the boat for use in California if it is ever subject to California registration or property tax laws, or if it is in California for more than 6 months during the first year of ownership. The proposed bill may be viewed on the internet, at:

http://www.leginfo.ca.gov/cgi-bin/po...&author=levine



The bill has not yet been signed into law. It was heard on April 21st by the Assembly’s Revenue and Taxation Committee, and sent off to that committee’s “Suspense File.” It is scheduled for another hearing on May 21st. It has bounced around a bit, but if it ever comes out of the committee it will require a 2/3 vote of the state legislature before it is presented to the Governor. I should note that in its current form, the bill suffers from several obvious Constitutional problems that may throw a roadblock in front of it for a while. In view of these issues, we do appear to have some time before we need to start worrying, but it is important that we stay on top of things. It’s clear that this issue has appeared on the radar of our elected representatives, and during our current budget crisis it is not likely to go away.

The biggest problem that the proposed bill presents to people in your position is the question of the effective date. The proposed bill does not change the fundamental tax law. Remember - if your intent at the time of purchase was to use the boat outside of California, you will not owe the tax. This will not change. However, the proposed bill changes the method used to test or to determine your intent. As such, even if the law is not passed until after you return to California, you may have a problem if the test is changed before your file is reviewed.

Please take a look at the bill and give it some thought. If you have any connections in Sacramento or with Assemblyman Levine, it may help to write a few letters or to do some other form of lobbying. Regardless, you may feel free to give me a call at any time to discuss your options. Thank you.


Sincerely,

WEIL & WYATT
David Weil
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Old 05-13-2003, 11:20 AM
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Nort, you just need to buy a place in Havasu. When Kalifornia came after me for tax on my last boat, I showed them proof that I owned a house there and the communist bastards left me alone.

My neighbor's house is for sale
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Old 05-13-2003, 11:56 AM
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Nort,

This post couldn't have been more timely for me. I've been fighting with the state on this very subject for a boat that was purchased out of state and remained out of state for over the 90 days. Unfortunately I didn't consult anyone before the purchase was made and now it's a war with the State of Cal. I may be contacting David to see what his assesment is.
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Old 05-13-2003, 12:57 PM
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Default Re: Possible changes with California "Out of State" boat delivery tax laws

Quote:
Originally posted by PhantomChaos
a democrat from Van Nuys
'Nuff Said
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Old 05-13-2003, 05:32 PM
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Old 05-13-2003, 05:47 PM
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BUCK UP and pay your taxes!!!!
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Old 05-14-2003, 12:17 AM
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Nort, I bought from Jeff C and paid no taxes nor registration...
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Old 05-14-2003, 06:47 AM
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Quote:
Originally posted by garshev
BUCK UP and pay your taxes!!!!
Yeah! Nort, you cheap SOB - don't you know that there's lots of welfare receipients depending on you? Cripes, what do you want them to do, work???

Pay your taxes!!!!
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Old 05-14-2003, 08:53 AM
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hmmmm , another reason to live at loto

all kidding aside , hope it works out for you guys
 
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Old 05-28-2003, 09:51 AM
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Date of Hearing: May 28, 2003

ASSEMBLY COMMITTEE ON APPROPRIATIONS
Darrell Steinberg, Chair

AB 694 (Levine) - As Amended: April 10, 2003

Policy Committee: Revenue and
Taxation Vote: 5-2

Urgency: No State Mandated Local Program:
No Reimbursable:

SUMMARY

This bill establishes the rebuttable presumption that a vehicle,
vessel, or aircraft purchased outside this state is purchased
for use in California and is subject to California use tax if
that vehicle, vessel, or aircraft was:

1)Purchased by a California resident.

2)Subject to California's vehicle registration or property tax
during the first 12 months of ownership, or

3)Used or stored in this state more than half of the time during
the first 12 months of ownership.

This bill would not apply to any vehicle, vessel, or aircraft
used in interstate or foreign commerce pursuant to regulations
prescribed by the Board of Equalization (BOE).

FISCAL EFFECT

The BOE estimates this bill would result in an increase in state
and local sales and use tax revenue of $54.6 million annually,
as follows:

State General Fund (5.0%) $34.5 million
Cities and Counties (2.25%) $15.5 million
Special Districts (.67%) $4.6 million

COMMENTS

1)Background . Current law imposes use tax on the purchaser of








AB 694
Page 2

tangible personal property that is purchased out-of-state for
storage, use, or other consumption in the state. The use tax
is levied at the same rate, and on the same tax base, as the
sales tax, and must be remitted to the BOE, or in the case of
a vehicle or vessel, to the Department of Motor Vehicles.

Under current law and BOE regulations, a vehicle, vessel, or
aircraft purchased by a California resident is presumed to
have been purchased for use in California and is subject to
the California use tax. Also, a vehicle, vessel, or aircraft
purchased by a nonresident is presumed to have been purchased
for use in California if it enters this state within the first
90 days of ownership. These transactions are subject to the
tax unless all of the following occur:

The purchaser takes title to and possession of the
vehicle, vessel, or aircraft while it is out of state, and
The purchaser makes the first functional use of it
outside the state, and
The purchaser uses it out of state for more than 90 days
before the vehicle, vessel, or aircraft first enters
California.

Under BOE Regulation 1620, Interstate and Foreign Commerce, in
determining the 90-day period of use outside California, the
time is not counted when the vehicle, vessel, or aircraft was
in shipment, or in storage for shipment, to California.

If the vehicle, vessel, or aircraft is purchased outside
California and is first functionally used outside California
but enters the state within the first 90 days of purchase
(exclusive of time of shipment or storage for shipment to
California), the vehicle, vessel, or aircraft is presumed to
have been purchased for use in California unless it is used or
stored outside the state more than 50 percent of the time
during the six-month period immediately following the first
entry into California.

1)Purpose . This bill was prompted by a Sacramento Bee article
concerning a perceived tax loophole in which California
purchasers of yachts from California yacht retailers arrange
for delivery of the yachts outside the territorial waters of
California, leaving them in Mexico for the 90-day period, then
bringing them into California to escape the California sales
and use tax. Essentially, yacht brokers have discovered that








AB 694
Page 3

the 90-day and 6-month rules in existing law and regulations
can be manipulated in a variety of ways by purchasers seeking
to avoid payment of use tax

This bill has the effect of shifting the burden from BOE, who
under existing law is required to prove that use tax is owed,
to the purchaser, who under the provisions of this bill is
rebuttably presumed to owe use tax unless he or she can prove
otherwise.



Analysis Prepared by : Stephen Shea / APPR. / (916) 319-2081
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