Comment by: Visitor (6/23/2007 9:21:30 AM)

So it does appear from the conflicting federal laws that the Marshall Island corporation would have prevented Washington from collecting their sales or use tax regardless of how long you stayed in state? Am I reading the correctly? If the corporation is already formed, what are the remaining issues with Marshall Island registration? - Scott

Scott: I am not an expert in this area, and I am not an attorney. The document I posted has the best information I've seen as to what is possible in the state of Washington. I would caution anyone reading any of this to seek accurate information (if it exists) from their own lawyer.

From my understanding, you are correct: If I do an offshore registration, I would not be taxed in Washington State. The filings I did with the state were for the purpose of getting an official answer from the state on this. 

There are costs associated with offshore registration. I would need to form the offshore corporation. This corporation then needs to file tax returns in the foreign country. When the boat enters the US, it has to go through customs clearing, as though it were a foreign boat entering the US. Some states have restrictions on how long a foreign boat can reside within the state, and charge fees for cruising permits. These cruising permits sometimes are difficult to obtain, expensive, and put restrictions on what you can do. They sometimes require advance notification before the boat is moved. I've heard horror stories of boats being charged multi-thousand dollar penalties for moving their boat between ports, and not notifying customs 72 hours in advance.

My understanding is that some of the extra headache of being foreign flagged is as a result of Homeland Security. Since 9/11, the US is tracking foreign vessels moving in US waters closely. In our case, if the boat was going to be used in the Pacific NW for most of its life, foreign flagging would be a nightmare. We move regularly back and forth across the Canadian border. This would mean frequent interaction with customs. Similarly, we're not the type of people to sit still, and don't like to hold to a precise schedule. This makes it difficult to constantly need to report our movements to the authorities.

My mood varies from day to day as to what we'll do. Given our cruising schedule, and that our boat is out of the US for most of the next 10 years, here's what I am planning (which could still change):

- US Flag the vessel
- Document it with the US Coast Guard
- Spend a few weeks in Washington State, and only register with Washington State if it can't be avoided. If it is true that I have 45 days to register, then almost certainly this won't be an issue.  
- I do not plan to pay annual registration fees to Washington. On our 62, I stopped paying once we left the state. I am not sure if there will be a penalty for the years we missed if the boat re-enters the state 10 years from now. I don't think there is... (but, there might be!)

Ken W