Tax Guide for Purchasers of Vessels 中国人 한국인 ਪੰਜਾਬੀ Español Tiếng Việt

You can report your purchase of a documented vessel and pay the use tax by using the CDTFA's online services and selecting the option to File a Return or Claim an Exemption for a Vehicle, Vessel, Aircraft, or Mobile Home under Limited Access Functions.

Your tax payment is due on or before the last day of:

• The month following the month you were contacted by the CDTFA, or
• The twelfth month following the month in which you purchased the vessel, whichever period expires first.

Penalty and interest charges will begin to accrue once the due date has passed.

You do not need to file a use tax return with the CDTFA if you registered your undocumented vessel with, and paid the use tax directly to, the DMV. However, if you purchased an undocumented vessel without completing registration with DMV, any use tax due on your purchase must be paid directly to the CDTFA. You can report your purchase of an undocumented vessel and pay the use tax by using the CDTFA's online services and selecting the option to File a Return or Claim an Exemption for a Vehicle, Vessel, Aircraft, or Mobile Home under the Limited Access Functions.

Your tax payment is due on or before the last day of the month following the month of purchase.

Penalty and interest charges will begin to accrue once the due date has passed.

For example, if you live in Anaheim, California, but moor your documented vessel in Long Beach, California, you must pay tax at the rate charged in the city of Long Beach.

You can look up the current tax rate by address on our Find a Sales and Use Tax Rate webpage. You may also find a list of current and historical rates on our California City & County Sales & Use Tax Rates webpage.

For example, if you purchase a vessel for $50,000 and give the seller your current vessel valued at $30,000, and $20,000 in cash, you owe tax on the entire $50,000 purchase price.

For example, if you previously paid $1,500 sales or use tax to another state for the purchase of the vessel, and the California use tax due is $2,000, the balance of the use tax due to California would be $500.

A broker is a person who arranges transactions between buyers and sellers, and who does not have the power or authority to transfer title of the vessel to the purchaser. A broker is not considered the retailer, and therefore is not responsible for the payment of tax. If the broker collects and reports the correct amount of tax to the CDTFA, you have no additional liability. However, if the CDTFA determines that an insufficient amount of tax was collected and reported, you will be billed for the additional tax. For example, if the broker incorrectly collects tax based on an 8 percent tax rate when the applicable tax rate was really 9 percent, you will be billed for the additional remaining tax due.

If the broker collects an amount for sales or use tax but fails to report it to the CDTFA, you will be credited for the amount of tax paid to the broker provided you have a receipt from the broker showing the amount of tax paid to the broker.

You can report your purchase of a documented vessel and claim an exemption or exclusion using the CDTFA's online services and selecting the option to File a Return or Claim an Exemption for a Vehicle, Vessel, Aircraft, or Mobile Home under the Limited Access Functions.

Many tax exemptions and exclusions for vessel purchases have a test period of 6 to 12 months. If the applicable test period has not elapsed before the due date of your use tax payment, we recommend that you submit copies of documentation currently available. You may submit the remaining required documentation after your test period has expired. (See the below exemptions and exclusions for information on what documentation is needed to support your claim.)

The process for claiming an exemption for an undocumented vessel is the same as for a vehicle. Please see our Vehicles page, Claiming an Exemption from the Use Tax, for more information.

However, when a vessel purchased outside of California, is first functionally used outside of California, and is brought into California within 12 months from the date of its purchase, it is presumed that the vessel was purchased for use in California and is subject to use tax if any of the following occur:

• The vessel is purchased by a California resident.
• The vessel is subject to property tax in California during the first 12 months of ownership.
• If purchased by a nonresident of California, the vessel is used or stored in California more than one-half of the time during the first 12 months of ownership.

If the vessel enters California within the first 12 months of purchase, you may overcome the presumption that the vessel was purchased for use in California by providing the following documentation to support your claim:

• A copy of your purchase agreement.
• A statement signed by the seller verifying the date and location of the vessel's delivery out of state.
• Documentation showing the location and use of the vessel between the date of sale and date of delivery, if different.
• Evidence of tax paid to another state.
• A copy of the insurance policy which indicates the navigational limits of the vessel.
• Slip rental/mooring receipts, repair invoices, maintenance receipts, and fuel receipts from the date of out-of-state delivery and for the next 12 months. These documents should identify the vessel by name or documentation number.
• Foreign port of entry documents, if applicable.
• Credit card/bank statements supporting the location and use of the vessel from the date of out-of-state delivery and for the next 12 months.

Notes

*Pursuant to Article 3, Section 2 of the California Constitution, California's territorial boundaries extend three nautical miles beyond the outermost islands, reefs, and rocks of this state and include all waters between those islands and the coast.

Additionally, use tax does not apply to the purchase of a vessel brought into this state within the first 12 months of ownership exclusively for the purposes of repair, retrofit, or modification. Any repair, retrofit, or modification to a vessel must be done by a licensed repair facility. Therefore, the exclusion is inapplicable when a vessel that enters California during the first 12 months of ownership for the purpose of repair, retrofit, or modification performed by any person other than a licensed repair facility.

Notes

**For purposes of this exclusion, a licensed repair facility must hold an appropriate permit issued by the CDTFA and must be licensed to do business by the city, county, or city and county in which it is located if the city, county, or city and county so requires.

A qualifying family member includes a:

• Parent
• Grandparent
• Child
• Grandchild
• Spouse or registered domestic partner (as referenced in Family Code section 297.5).
• Brother or sister (related to you by blood or adoption), if the sale occurs when both are minors.

The exemption does not extend to purchases from stepparents or stepchildren if a natural parent or child is not involved or there is not a legal adoption. The exemption also does not apply to transactions between ex-spouses after a decree of divorce.

For example, a purchase from your biological or adopted child would qualify as an exempt family transaction; however, a purchase from your stepchild generally would not.

To qualify for the exemption, you must supply documentation to support the family relationship, such as birth certificates, marriage license, and/or adoption paperwork.

To qualify for the exemption, you must supply documentation to support the following:

• The vessel was principally used in commercial deep sea fishing outside the three mile territorial waters of California during the first 12 consecutive months after the first operational use of the vessel, and
• You are a person who is regularly engaged in commercial deep sea fishing.

Generally, if your gross receipts from commercial deep sea fishing activities are less than $20,000, it is presumed that you are not regularly engaged in commercial deep sea fishing.

Documentation needed to support your exemption claim:

• A copy of your purchase contract.
• 12 months of Commercial Fish Receipts identifying the species and location caught.
• Vessel logs showing GPS readings and engine hours.
• A copy of your income tax return(s), including profit and loss statements.
• Copies of California Department of Fish and Wildlife fishing licenses and boat registration.
• Photographs of the entire vessel showing rigging.

This exclusion only applies to a purchase that would otherwise be subject to use tax. No use of the vessel, other than to remove it from the state, can be made. This exclusion does not apply to a purchase from a vessel dealer subject to sales tax.

For example, you purchase a vessel from a person (private party) in San Diego who does not hold a dealer's license or a California seller's permit and immediately leave for your vacation home in Astoria, Oregon. Along the way, you stop at Marina Del Rey, have dinner, and have a boat decal added. The next day you fish in the Channel Islands. Later, you stop and visit friends in San Francisco and take them for a ride on your boat. The exclusion from use tax does not apply because you did not simply remove the boat from the state.

Delays for emergency repairs made to the vessel must be verified as functionally necessary for the vessel to continue its departure from the state. You must provide supporting documentation such as fuel, repair, mooring, and/or lodging receipts to verify the property's departure from California, plus documentation showing that the vessel did not return during the applicable test period.

Vessels 30 feet or more in length are considered mobile transportation equipment (MTE). As the lessor of MTE, you are responsible for the use tax due. If you are leasing your vessel and it is considered MTE, you must report tax based upon the purchase price unless:

• The purchaser's use of the vessel will be limited to leasing the vessel; and
• You make a timely election to report tax based on the fair rental value (i.e. the rental payments that are required by the lease).

To be considered a lease, you must give up possession and control of the vessel to the lessee. If you require the lessee to obtain your services to operate the vessel (i.e. you do not allow your customers to pilot your boat and instead require them to hire your own crew and Captain), the transaction is not a lease for sales and use tax purposes and tax must be paid on the purchase price of the vessel.

To be considered timely, if you purchased the vessel without paying tax at the time of purchase, then an election to pay the use tax based on the fair rental value of the vessel must be made:

• On or before the due date of a return for either the period in which the vessel is first leased, or
• If the vessel is purchased out of state, the reporting period in which the vessel first entered California, whichever is later.

This election cannot be changed, and if the election is not made timely, then tax must be paid based upon the purchase price of the vessel. If you elect to pay tax based on the fair rental value of the vessel and later make personal use of the vessel, then tax will be based upon the purchase price.

For more information regarding leases of MTE, see Regulation 1661, Leases of Mobile Transportation Equipment.

Vessels less than 30 feet in length are not MTE. If you lease a vessel less than 30 feet in length, as the lessor, you are responsible for collecting tax at the time rentals are paid by the lessee, providing the lessee with a receipt, and paying the tax directly to the CDTFA. Tax is not due based on rental receipts only under the following conditions:

• You paid sales tax at the time you purchased the vessel, or
• You made a *timely election to report and pay use tax measured by the purchase price.

In addition, the vessel must be leased in substantially the same form as acquired.

*To be considered timely, use tax measured by the purchase price must be reported and paid timely with a return of the lessor for the period during which the property was first leased.

Please contact your local county assessor's office for more information.