I would suggest you speak to a tax attorney regarding avoiding California sales/use tax. It just seems to me that if it was that easy, everyone would do it. What works in AZ may well not work here.

Mike

Blair,
I agree with Mike. Consult a tax attorney. My uninformed opinion is that as soon as you try to register the boat, you (or your LLC) will probably have to pay the sales tax. Most states call it a "Sales and/or Use Tax".

We had a boat in an LLC but it was a bonafide charter boat. The purpose for the LLC was to act as a 'firewall' between the charter boat and our personal lives. The vessel was taxed as a commercial vessel in Washington state, which was significantly more advantageous, however we had to make doggone sure that the vessel was indeed a commercial operation. We never used the boat personally, although we did have repositioning trips, shakedown cruises, and the occasional weekend maintenance.

Your state may have unique rules, so see an attorney. If you buy the LLC, you are buying more than just a boat; you're buying the LLC's potential liabilities.

One thing you SURE don't want to do, and that is to own and use a *personal* boat in an LLC to shelter from tax. A business is a business and the asset must be used as a business tool. Tax fraud carries severe penalties in every state.

[Your state may have unique rules, so see an attorney. If you buy the LLC, you are buying more than just a boat; you're buying the LLC's potential liabilities.

One thing you SURE don't want to do, and that is to own and use a *personal* boat in an LLC to shelter from tax. A business is a business and the asset must be used as a business tool. Tax fraud carries severe penalties in every state.[/QUOTE]

Ditto the comments regarding buying the LLC's liabilities. Also, if the LLC is going to own it, the expenses to operate and maintain the vessel should be paid out of the LLC ....not personal.

Yeah, there used to be a "gimmick" in some states where brokers were recommending, "Just set up an LLC and place the boat in charter" in order to avoid sales/use tax. (The idea being, that you could list it as a charter with charter companies and either have it "under repair for commercial certification" or simply unavailable on dates where clients might want to use it. In short, it's sneaky and you'd only be asking for trouble from the IRS.

We just bought a 56' classic motoryacht with the long term intent to turn her into a floating bed & breakfast (under an LLC). However, our attorney let us know that if she wasn't certified and operational in some capacity within five years that we'd likely get a tax bill plus penalties for the sales tax.

That said, I've always thought that it was a little excessive to have a 10% sales tax on a $150k boat. There isn't a 10% sales tax on a $150k house!

Anyway - back to the LLC thing. The yacht we just bought was in an LLC as well and the owners were hoping to sell the charter business as part of the deal. However, we didn't want anything to do with the liabilities of their LLC, so we bought the boat separately, letting them dissolve the LLC on their own terms.

That said, on a documented vessel, you always run the risk of a maritime lien during or even months/years after the sale. Sure, the seller will sign a warranty deed and the Title company will insure a clear title, but that doesn't mean that you might show up to the dock one day to find that a shipwright has "stolen" the boat for $10,000 in previous work for a previous owner, etc... The warranty deed is only as good as the seller who signs it. ;^>

Sorry for the rambling. Hope that helps!