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Yacht Sales Tax Exemption Makes a Comeback
Legislature brings back tax break for boats delivered offshore.
SACRAMENTO -- When legislators finally approved California’s state budget Aug. 21
after a 51-day-long impasse, it contained a nice surprise for boaters: the return
of a sales tax exemption on the purchase of yachts in California that are delivered
offshore. The new provision allows buyers of a boat, plane or recreational vehicle
to avoid paying sales tax, as long as they keep it out of the state for at least
90 days after the purchase. This replaces a measure enacted in 2004 that had required
boat buyers to keep their purchased vessel outside California for a full year to
qualify for an exemption. Senate Minority Leader Dick Ackerman, R-Irvine -- a boat
owner -- is credited with spearheading the drive to remove a renewal of the one-year
out-of-state requirement from this year’s budget. Ackerman told reporters that the
2004 law restricting the sales tax exemption “was going to be an experiment,” and
he believes that experiment had failed. Yacht brokers and boat builders statewide
had been adversely affected by 2004’s tougher requirements for buyers who sought
to avoid sales tax, Ackerman said. A return to the 90-day out-of-state requirement
for offshore deliveries is expected to provide a valuable incentive for new buyers,
resulting in increased sales of larger vessels by California yacht dealers and brokers.
The tax savings will especially be a boon to buyers of larger yachts. For example,
while the tax savings on a $250,000 32-foot sportfisher would be around $19,500,
the buyer of a $3 million 60-foot motoryacht could save a whopping $234,000 through
the exemption. In order to take advantage of the tax exemption, buyers are required
to carefully follow state tax codes. In addition to taking delivery of their vessel
outside California, they must keep the boat out of state waters for 90 days. Many
boaters opt for a slip in one of Ensenada, Mexico’s full-service marinas, which
some boaters have dubbed “the 90-day Yacht Club.” In addition, boat buyers must
be able to document all aspects of the vessel delivery and the out-of-state berthing,
to prove compliance with state law. Several books are available that describe the
process, including Capt. Lonnie Ryan’s “The 90-day Yacht Club Guide to Ensenada.”
Reputable California yacht brokers can explain details of the law regarding exemptions
and can advise buyers about the requirements involved in an offshore delivery. The
return of the 90-day requirement was approved as one of several budget compromises
with Democratic legislators, which resulted in passage of the $145.5 billion budget
signed by Gov. Arnold Schwarzenegger on Aug. 25.
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