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.