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Yacht Tax Savings: Washington’s Marine Tourism Bill is Signed into Law—Boon to Super Yacht Entries

Larger yachts are typically owned in entities for a variety of reasons, including liability protection. Until recently, non-resident entity-owned yachts entering Washington waters fared less well with the state use tax and registration requirements than did non-resident individually-owned yachts.
The tide is changing—with the recent passage of the Marine Tourism Bill. Effective September 1st, under this new law, non-resident entity-owned yachts will be able to stay in Washington for up to 180 days in any 365-day period without the need to pay the one-time use tax or annual registration fees. The savings from this exemption are significant since combined taxes and fees can total 10 percent of the value of a boat.
Peter Schrappen, Government Affairs Director of the Northwest Marine Trade Association (“NMTA”), wrote about the organization’s five-year lobbying efforts that eventually led to Governor Jay Inslee signing the Marine Tourism Bill into law:


“What a win! This accomplishment is a culmination of five years of coordinated efforts. Persistence pays off, especially when you have bipartisan champions like Sen. Barbara Bailey (R) and Rep. Steve Tharinger (D) leading the effort with their colleagues along with Governor Inslee’s support. Everyone knows how beautiful our cruising area is; now we are turning the corner with laws that make it easier to visit.”


The new law, in effect, would allow non-resident entity-owned boats to come into the state for personal (non-business) use without incurring the previously charged taxes and fees, provided the vessels are between 30 and 164 feet in length. And because the exemption is applicable only to non-residents, no Washington State resident individual can have more than a 1 percent interest in the owning entity, either directly or indirectly through tiered ownership structures.
Before the Marine Tourism Bill, non-resident entity-owned yachts could be in Washington for only 60 days in any 365-day period without tax exposure. In contrast, non-resident individually-owned yachts have for years been able to stay in Washington for 180 days in any 365-day period, provided permits were obtained.
Non-resident owners, regardless of status as individuals or entities, can obtain permits before the 61st day in Washington if the vessel is currently registered in the state of principal operation or documented under federal law, and has been brought into Washington for personal use. Permits are good for 60 days.
The permit fees for non-resident individually-owned boats are a flat $25, and for non-resident entity-owned yachts the permit fees are $25 per foot for vessels between 30 and 99 feet, $30 for vessels between 100 and 120 feet in length, and $37.50 for vessels between 121 and 164 feet in length. A non-resident entity vessel owner may not obtain more than two permits within any 36-month period.
Fred Robinson is an attorney in Seattle with the firm of Carney Badley Spellman, P.S. and works closely with yacht owners.

 

New Fees

The fee of $26.00 for the renewal of a Certificate of Documentation will commence with November 2014 renewals.  The rule goes into effect on November 10th, hence documents that renew at expiration on November 31st, will be subject to the $26 fee.  Payment must accompany the CG1280 Application for Renewal.   Submission for late renewals must be received by NVDC within 30 days of the date of expiration that appears on the Certificate of Documentation.  The late fee remains at $5.00 and must accompany the $26.00 renewal fee.  The total amount required for a late renewal is $31.00.
The method of payment remains the same, i. e. check, money order or credit card using the appropriate credit card authorization form.  Remember, application fees, which now includes this renewal fee are non-refundable. Work is under way to expand electronic payment capability but for the moment, payment processing is status quo. 
NVDC plans to provide a letter when the renewal notice is sent out to the managing owner, detailing the new charge and payment terms. 

Finally, this fee applies to all documented vessels, commercial and recreational.


Mexico impounds boats, angering U.S. boaters 1/9/2014

U.S. owners are unable to move boats, as new government agency cites improper paperwork identifying the vessels.

To read more, clink on the link below:

http://www.ocregister.com/articles/boat-596729-mexico-boats.html


 

The National Vessel Documentation Center sent out the following statement regarding its’ closure during the weeks of September 10th and September 17th.

The National Vessel Documentation Center will be upgrading its computer system and as a result, the system will be taken off line at 6:00 p.m. EDT on Thursday 13 September 2012 and is expected to be back up for testing at 8:00 a.m. EDT on Tuesday 18 September 2012 and will resume normal operations on Wednesday 19 September 2012. While the facility will still be open,all services, including web and telephone requests will not be available since we will not have access to our computer system. Additionally, in preparation for the transition, information requests/applications received via all methods (i.e. mail, fax, e-mail,FedEx, etc...) starting Monday, 10 September, will be considered filed, but will not be processed until after the system is operational. Obviously this will result in a backlog for all areas of work, commercial and recreational, but we will attempt to minimize the impact as much as possible. We apologize for the inconvenience in advance.


 

First American Title Insurance Company

On August 25, 2010, First American Title Insurance Company announced that it would no longer offer title insurance on vessels. John Casbon, President of the company, assured all existing policy holders that the cessation of this service would not affect current vessel title insurance policies. Below is a copy of the announcement:

45 Note


 

Electronic Filing of Documents for USCG documented vessels

A new ruling was recently passed that allows for the electronic filing of certain documents to transfer ownership of USCG documented vessels.  As this final ruling was up for review and comment for quite some time, there weren’t any negative comments to oppose the ruling; so it was passed and implemented.  As this ultimately will be viewed as an expeditious way to file documents, so can it be seen as an open door to fraud.  The American Vessel Documentation Association (AVDA) has recommended that its members continue to require all Original Bills of Sale and Preferred Ship Mortgages in their offices before giving an “Official Okay to Release Funds" to yacht brokers and lenders.  This will ensure that all documents are executed properly and meet electronic filing requirements. Original documents will also lessen the possibility of fraudulently signed documents.  It has also been the general consensus of most marine lenders that they will also require the documentation services to be in possession of all original recordable documents before they will release funds.  Once original documents are received by the doc service, they can then be filed electronically if they so choose.  

I strongly suggest that you continue using only documentation services who are ADVA members to handle your USCG documentation needs as AVDA members adhere to a higher standard than non members.  Should you have any concerns or wish to verify whether a documentation service is a member of AVDA, please call 888-832-2832 or visit our website www.americanvessel.com

Kathy Krencik, President of AVDA (written for the California Yacht Brokers Association)


 

CHECK FRAUD AND THE YACHTING INDUSTRY

The yachting industry, like all others that deal with the transfer of funds, must be constantly vigilant in fulfilling its fiduciary duty toward its clients.  Anyone in a position of receiving and disbursing trust funds is vulnerable to fraudulent practices aimed at stealing funds.  Most prudent brokers, lenders and documentation companies have rigid procedures for clearing and disbursing trust funds.  The old belief that a cashier’s check is as good as cash has gone by the wayside in a time of high tech reproductions.

Although the practice of clearing all checks, including cashier’s checks, has become somewhat more difficult due to the Privacy Act, it still must be accomplished in order to provide due diligence in a transaction.  If the check has not been cleared and been finally paid into the issuing trust account, any disbursement of funds may be subject to reversal by the bank, thereby making the disbursement a conversion of another’s trust funds.

Simply verifying that the party’s bank account can cover the check is not adequate; if the check is forged, it was not drawn on that account in the first place.  Verifying that the cashier’s check was purchased is not adequate; there is no way to know that the check received was the check purchased until it has been received and accepted by the issuing financial institution.  Believing the party providing the check is “good for it” is not adequate; those out to defraud do so based on their credibility.

The only manner to protect all parties concerned is to refrain from disbursing funds from a trust account until any and every check has been cleared, accepted by the issuing bank and irreversible by the payor.

Everyone has heard the horror stories:  the buyer who sailed off on the million dollar yacht after giving the dealer a phony cashier’s check; the broker that refunded a buyer’s deposit only to find out the check was no good; the buyer who was allowed to take possession, only to wreck the boat and stop payment on the cashier’s check before it was finally paid.  It may only take one incident of this kind to put a business out-of-business.

In the August 23, 2007 Post Intelligencer article, Andrea James discusses the issue of high tech check fraud.  For her full story go to:

http://seattlepi.nwsource.com/business/328617_badchecks23.html


NEW OPTION FOR NONRESIDENTS IN WASHINGTON

As of July 1, 2007, nonresident individuals, either purchasing a vessel in Washington or bringing a vessel registered in another State into Washington, have a new option for usage on the State’s waters.

Nonresidents may now choose to keep their boats in Washington for up to 12 months without incurring sales, use or excise tax liability.  To be exempt from the tax liability, a permit must be purchased from a participating Washington vessel dealer.  The permit is good for one year and it may not be renewed.  Upon expiration of the permit, the vessel must leave the State and may not re-enter for 24 months.  The exemption is offered only on vessels individually owned and over 30 feet.  The cost is $500 for 30 feet to 50 feet and $800 for 50 feet and over. 

This new law does not effect any existing regulation.  It is merely an additional option for nonresident individuals.  Any nonresident, including those owned by LLC, corporations, trust etc. may bring a vessel registered for principal use in another State or documented with the Coast Guard into Washington for 60 days without incurring any tax liability.  On or before the 61st day, vessels owned by individuals may purchase a two month permit to extend the stay.  (Non-individually owned vessels must leave at this time.)  One additional permit may be purchased within one year of first entry, thereby allowing the nonresident individual to keep a vessel on Washington waters for six month each year.  The cost is approximately $35 per permit and any size vessel is eligible.

The regulation requiring nonresident buyers to leave the State within 45 days of the purchase of the vessel also remains in effect.

If a nonresident elects to purchase the one-year permit, it must be decided within 15 days of entry into the State.  Once again, if the one-year permit is chosen, the vessel must leave the State upon expiration of the permit and not re-enter for 24 months.  The 60 day permits, allowing a vessel to remain on Washington waters for six months total each year, does not have a limitation on the number of years the permits may be obtained.

For the latest information for optaining and operating a Vessel in Washington State by non-residents visit the following link:

http://dor.wa.gov/content/getaformorpublication/publicationbysubject/taxtopics/nonresidentvessel.aspx

Currently, the following dealers and/or brokers have announced that permits may be obtained from their offices:

BELLINGHAM YACHT SALES
1801 Roeder Avenue
Squalicum Harbor Center
Bellingham, WA 98225
T:360.671.0990
F:360.671.0992
http://www.bellinghamyachts.com/
                                                        

CAPITAL CITY YACHT SALES                                      
611 North Columbia 
Olympia, WA 98501 
T:360.352.2007 
F:360.352.2399
http://www.capitalcityyachts.com/

CHUCK HOVEY YACHTS, LLC
901 Fairview Avenue North, Suite C-150 
Seattle, WA 98109
T:206.624.1908
F:206.624.3870
http://www.chuckhoveyyachts.com/                                                                

ELLIOTT BAY YACHT SALES                                       
2601 West Marina Place, Suite D 
Seattle, WA 98199 
T:206.285.9563 
F:206.676.3704
http://www.elliottbayyachtsales.com/

INTERNATIONAL MARINE MANAGEMENT, INC.
901 Fairview Avenue North, Suite C150
Seattle, WA  98109
T:206.993.4877   

IRWIN YACHT SALES
1109 North Northlake Way
Seattle, WA 98103
T:206.632.2900
F:206.632.2975
http://www.irwinyachtsales.com/

NORDHAVN YACHT NORTHWEST
2601 W Marina Place, Suite S
Seattle, WA 98199
T:206.223.3624 
F:206.223.3628
http://www.nordhavn.com/   

SELENE SEATTLE
2400 Westlake Ave N.
Seattle , WA 98109
T:206.352.1168
F:206.352.7221
http://www.seleneseattle.com/

 

 

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