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Guide

CA

Forming an LLC for your boat in California

Use tax at your marina's rate, a 12-month lookback on out-of-state buys, and an $800-a-year franchise tax that can catch an out-of-state LLC too.

Last updated: July 2026 8 min read
Use tax rate
7.25%
statewide base + district tax, at the mooring
LLC franchise tax
$800/yr
every year, zero income or not
Property tax
1%
basic rate, assessed every Jan 1
Look-back window
12 months
presumption on out-of-state purchases

California boaters deal with the most layered tax-and-registration picture in the country: a use tax whose rate depends on which marina you pick, a 12-month lookback on out-of-state purchases, an annual county property-tax bill, and a Franchise Tax Board that charges LLCs $800 a year for the privilege of doing business here. An LLC can still be the right way to own a boat in San Diego, Marina del Rey, Newport Beach, or the San Francisco Bay — but only if you understand what it does and doesn’t change. This guide is the honest version.

Use tax
7.25%
base rate + district tax, at the mooring
12-month test
Since Oct 1, 2008
presumption on out-of-state buys
LLC franchise tax
$800/yr
organized, registered, or doing business here
Property tax
1%
basic rate, assessed annually Jan 1

Why California boat owners form LLCs

The core reasons match our national boat LLC guide:

  • Liability. A guest hurt on the swim step, a crewed day gone wrong, a fuel-dock incident — when an LLC owns the boat, a boat-related claim is aimed first at the LLC and its assets rather than everything you own. (It never shields you from your own negligence at the helm, and insurance stays your first line of defense.)
  • Co-ownership. Partnership boats are common in expensive California slips. An LLC gives shared owners real percentages, an operating agreement, and a buyout mechanism that doesn’t require re-titling the boat.
  • Privacy. The LLC’s name — not yours — appears on registration, documentation, and marina paperwork.
  • Transfers. Selling membership interests can move the boat without re-documenting it — with the honest caveat that California tax agencies look at substance, and a transfer structured to dodge tax invites scrutiny.

What an LLC does not do in California: make use tax, property tax, or the franchise tax go away. Here’s each, precisely.

California use tax: the rate follows the mooring

Buy a boat from a California dealer and sales tax is collected at the sale. Buy from a private party, or out of state, and California use tax applies instead when the boat is for use here — see the CDTFA’s vessel tax guide for the full mechanics. The statewide base rate is 7.25%, with district taxes on top that vary by locality — and for boats, the applicable rate is the one where you principally moor or berth the vessel (for DMV-registered boats, the registration address). Pick a slip in Long Beach and you pay Long Beach’s combined rate; pick San Diego and you pay San Diego’s. Who you pay depends on the boat: the DMV collects at registration for undocumented vessels, while owners of USCG-documented vessels report and pay directly to the CDTFA.

The 12-month test (and the ghost of the 90-day loophole)

California’s famous “yacht loophole” — take offshore delivery, keep the boat out of state 90 days, sail home tax-free — is long gone. Since October 1, 2008, the rule set out in Revenue and Taxation Code Section 6248 has been a 12-month test: a vessel purchased outside California and brought in within 12 months of purchase is presumed to have been acquired for California use, and owes use tax, if any of these hold:

  • the purchaser is a California resident,
  • the vessel is subject to California property tax during its first 12 months, or
  • a nonresident purchaser uses or stores the boat in California more than half the time in that first year.

CDTFA enforcement is real

Assume the CDTFA will know about your boat. Vessel purchases surface through DMV registration, Coast Guard documentation records, county assessor rolls, and marina slips — and the CDTFA’s own guidance is written around it contacting purchasers, with payment due by the end of the month after you’re contacted. Vessel and aircraft purchases are a standing audit focus precisely because the “out-of-state LLC bought it” structure is so common. If your boat lives at a California dock, plan on California use tax; anything else needs documentation strong enough to survive an examiner.

The $800-a-year gotcha: California’s LLC franchise tax

This is the part most boat-LLC articles skip, and it’s where we’d rather be straight with you.

Every LLC that is organized in California, registered with the California Secretary of State, or doing business in California owes the $800 annual franchise tax — every year, even with zero income, until the LLC is dissolved or withdrawn. And “doing business” is deliberately broad. The FTB’s own guidance on doing business in California treats an out-of-state LLC as doing business here if it’s commercially domiciled or managed from California, or if its California property, payroll, or sales exceed annually adjusted thresholds — the property threshold sits around $75,000 (inflation-adjusted each year), which a boat moored in a California marina can exceed all by itself.

None of this makes the LLC pointless — liability separation, co-ownership, and privacy are worth real money too. It means the tax math should be done honestly: for a California-kept boat, budget the use tax, the county property tax (about 1% of the boat’s assessed value, every year), and — if the LLC is organized here, registered here, or run from here — the $800.

DMV registration vs USCG documentation

California runs the same two-track ownership system as everywhere else, and an LLC can be the owner on either track:

  • CA DMV registration. Undocumented vessels register with the DMV, get a CF number for the hull, and renew on a two-year cycle for modest fees. The DMV collects any use tax due at registration — this is where a private-party purchase gets taxed.
  • USCG documentation. Vessels of at least five net tons (a volume measure — many boats from roughly the mid-20-foot range up qualify) wholly owned by U.S. citizens can be federally documented instead; documented vessels don’t register with the DMV. An LLC can be the documented owner if it meets the Coast Guard’s citizenship requirements — for a recreational endorsement, NVDC guidance requires the LLC’s members to be U.S. citizens. Documented owners handle use tax directly with the CDTFA.

Either way, the county assessor still finds the boat: vessels are assessed annually at fair-market value as of January 1, at the 1% basic rate plus local voter-approved additions. Marina operators report slip holders to assessors, so this bill arrives whether or not you registered anything.

And before any transfer of a boat you already own into a new LLC: check the tax consequences and get lender consent if the boat is financed. California can treat a transfer for consideration as a taxable sale.

Where FilingDesk fits

FilingDesk forms Wyoming, Florida, and Delaware LLCs today — flat $99 plus the state fee ($199, $224, and $209 all-in respectively), with a human specialist reviewing every filing, EIN and operating agreement included, no upsells. California formation is on our roadmap.

When you’re ready to form the LLC that will hold the boat, start here.

Frequently asked questions

How much is use tax on a boat in California?
The statewide base rate is 7.25%, plus district taxes that vary by locality — and for boats, the rate that applies is the one in effect where you principally moor or berth the vessel (or, for DMV-registered boats, your registration address). A boat kept in a Marina del Rey slip is taxed at that area's combined rate, regardless of where you live or where the owning LLC was formed.
What is California's 12-month test for boats?
A vessel purchased outside California and brought into the state within 12 months of purchase is presumed to have been bought for use in California and owes use tax — for example, if the buyer is a California resident or the boat is used or stored here more than half the time in that first year. You can rebut the presumption with hard evidence of principal use outside California: mooring receipts, fuel and repair invoices, and delivery documentation. This replaced the old 90-day rule, which briefly returned in 2007–2008 before the 12-month test became operative on October 1, 2008.
Does a Wyoming or Montana LLC avoid California use tax on my boat?
No. California use tax attaches to the boat's use and mooring in California, not to the owner's state of formation. The CDTFA identifies vessels through DMV registration, Coast Guard documentation, and county assessor records, and contacts owners about use tax — an out-of-state LLC on the title doesn't change where the boat floats. Out-of-state LLCs remain useful for liability, privacy, and co-ownership; they are not a tax device here.
Does the $800 franchise tax apply to an out-of-state LLC that just holds a California boat?
It can, and owners should assume it may. Every LLC organized in California, registered with the California Secretary of State, or doing business in California owes the $800 annual franchise tax. FTB treats an LLC as doing business here if it is managed from California or its California property, payroll, or sales exceed annually adjusted thresholds — the property threshold is around $75,000, which a boat moored in California can exceed on its own. If you live in California and run the LLC from here, the managed-from-California test likely applies regardless.
Do I register my boat with the DMV or the Coast Guard?
Undocumented vessels register with the California DMV, which issues CF numbers and collects use tax at registration. Boats of at least five net tons (many boats from roughly the mid-20-foot range up) can instead be federally documented with the USCG — documented vessels skip DMV registration, and their owners pay any use tax directly to the CDTFA. An LLC can be the owner in either system, subject to USCG citizenship rules for documentation.
Does California charge annual property tax on boats?
Yes. County assessors assess vessels each January 1 at fair market value, and the basic property-tax rate is 1% plus any voter-approved local additions. This applies wherever the boat is habitually moored — San Diego, Orange County, Los Angeles, and Bay Area assessors all bill boat owners annually — and it applies to LLC-owned boats the same as personally owned ones.

Sources

This guide is general information, not legal advice. FilingDesk is not a law firm.

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