Boaters Beware - July 1 Registration Date - Be on the Look Out for Washington's Boater Registration and Excise Tax
ESPN just recently listed the top ten states for boat sales, and Washington came out number seven at $339 million. It comes as no surprise to those of us who know the beautiful protected waters of the San Juan Islands, tucked way behind Vancouver Island, are perfect for boating. What does take many boaters by surprise is Washington's dual registration and excise tax requirements for vessels, commercial and pleasure alike. Every year, July 1 marks the date boats must register and pay any excise taxes due or owing for the following year.
Washington's registration of vessels is administered by the Department of Licensing, and the excise tax is administered by the Department of Revenue. Boaters often get inconsistent advice from a variety of sources, as to the requirements for the pleasure of owning or using a vessel in Washington. The requirements are different for residents of Washington from non-residents of Washington. The requirements are also different for entities owning a vessel that is used in Washington. And finally, the requirements are different for documented vessels.
Washington's Department of Revenue is extremely aggressive in collecting Washington's sales and use tax on the sale or use of a vessel in Washington. Likewise, the Department of Revenue is increasingly more aggressive in investigating cases of nonpayment of the Watercraft Excise Tax, (a/k/a the WET tax).
We often have clients call us in September, after the Department of Revenue has mounted a case against a vessel and its owner for failure to register, improper usage of the vessel in Washington without paying the use tax, failure to register the documented vessel, and/or failure to pay the WET tax.
Here are a few tips to consider prior to geting the notice of audit from the Department of Revenue:
a. Keep an accurate and current log book for the vessel. This will be the first item the Department of Revenue will seek in discovery in an audit.
b. If the vessel is owned by a nonresident: Know the time periods the vessel can be in Washington without incurring the use tax. The vessel can be used in Washington for a period of 60 days in a 12 month period (not a calendar 12 month period, but first date of entry begins the 12 months). The vessel's use can be extended for another 6 months (if owned by an individual and not an entity) if the owner obtains a special identification permit from the Department of Licensing.
c. If your vessel is Coast Guard Documented: special requirements for documentation and a US Custom's cruising license must be obtained. The requirements change depending on whether the owner is a Washington resident or not.
d. Keep receipts for repairs made in Washington. Keep receipts for repairs made outside of Washington. If the vessel was not actually being 'used' due to repair, these receipts can help strengthen negotiations with the Department in an audit.
e. Be aware: Washington's Department of Revenue shares information with Habor Masters, marina employees, and US Custom Agents. Don't be fooled into thinking that you will not get caught.
For more on ESPN's top ten states for boat sales see the full story.
