State Taxes: Shipping/Living overseas and leaving income tax state with a South Dakota PMB address

Hello,

Bit of a long post, sorry about that. I live a nomad sort of mariner lifestyle, often spending most of my year when not on ships traveling overseas through various foreign countries, only returning to the US to hop back on board ships and leave again to make more money. However from 2020 until late 2023 I started shipping out of an income tax state because one of our union halls there had a labor shortage due to the pandemic.

While shipping was indeed good over there, the caveat was was that due to the lockdowns and travel bans not allowing me to travel overseas and keeping me stuck in the income tax state in-between shipping jobs, I became a resident of the income tax state and got a Drivers License there- before then I was a resident of tax free Florida from a previous address I had while I was still land based (but at that time I no longer had a place in Florida). While in the income tax state in-between ships, I was staying at a Seamen’s Home, a temporary residency for sailors that, through their own lease, states that the establishment is for mariners looking to ship out for work purposes only and is only limited to 90 day stays at a time maximum, and is not a permanent residency or residential address. Despite this, due to the chaotic and unpredictable nature of the pandemic with the lockdowns and travel bans, I became a resident of that state and got a DL there, which in hindsight was probably pretty stupid and overkill- however this was never intended to be permanent, and was only due to the exceptional, unusual and chaotic nature of the pandemic that had me stuck in the state at the Seamen’s Home for longer than I would have liked to have been. It should also be said, the ships themselves were international/interstate, did not travel anywhere intrastate, and only docked in the state for two days once every month or so before leaving the state destined for somewhere else outside of the state. With that being said, for three years during the height of the pandemic from 2020 until just a few months ago in October 2023 I had this income tax state’s Driver’s License and paid state taxes to that state due to being stuck there in-between ships. However, now that the pandemic seems largely behind us and travel restrictions and travel bans have been lifted, I have resumed my overseas travel rootless nomadic lifestyle again. In October of 2023, I officially looked to break ties with the income tax state and traveled to South Dakota- a tax free state which allows rootless nomadic travelers to become residents- and then registered with a South Dakota mail forwarding service, obtained a PMB address, and used that PMB address to obtain a South Dakota Driver’s License, which I then used to register to vote in South Dakota, and then I was off to the Philippines for the rest of 2023. I officially filed my 2023 taxes as a part year resident of the aforementioned income tax state.

My question then I guess is, is this enough to officially break ties with the income tax state for state tax purposes? Please keep in mind, I never owned any property in that state, never signed a lease for an apartment or house in that state, never bought or owned a car in that state, never registered to vote in that state, never opened up a local bank account there, etc, I don’t even think I stayed in the state longer than 186 days per year to qualify as a tax resident- I just merely stayed at the temporary and transient Seamen’s Home there for an unusual and exceptional extended period of time in-between ships due to the chaotic nature of the pandemic, I only had a Drivers License from the state, and I don’t, and never have, intended to live there permanently in the future. I don’t really live or own any assets anywhere and never really have besides a current storage unit in Florida, and South Dakota is the only state that really caters to those with my sort of rootless travel lifestyle. My specialized mariner tax accountant says I should be OK, he also even went as far to say that with me ending the tax year of 2023 with a tax free state residency voids me having to pay any state taxes at all to the income tax state for 2023, even when I held the Driver’s License from therebefore October 2023, as I will be filed as a transient worker due to the mariner Amtrak law- any thoughts on that one? Too aggressive or should be OK? That being said, what do you all think about this situation? Despite me never having any property or residential address in the income tax state while I was a (temporary) resident there during the pandemic, is having a South Dakota PMB address and voting registration (and health insurance in Washington state) enough to officially cut loose from that state? This year, for what it is worth, I am shipping out of a different state and will probably not even step foot in the aforementioned income tax state this year at all, and then once that is done, I’m off to travel overseas again for the rest of the year.

Thanks and sorry for the long post. Appreciate any help I can get.

I have a South Dakota PMB drivers license and residency. I left my home state to obtain one and travel the country in a camper.

Keep a few things in mind for legal reasons.

Most banks will not accept a PMB as a home address. Keep your home address as a friend or family members with banking institutions. I have read horror stories of people switching to a SD PMB address and updating their bank account info and getting their accounts frozen. From my understanding it is completely legal to have a different home address with your bank.

As far as car insurance, it may be another issue. I got insurance through State Farm that specializes in people living in RVs and motor homes. I had to drop my previous insurance. Most insurance companies require a “garageable” address.

You will not be able to purchase a firearm with a PMB on your driver’s license.

If you read the coast guard CG-719B forum, in big bold letters it says that a “PO BOX IS NOT ACCEPTABLE” for a home address. A PMB address is technically different than a PO Box but your mileage may vary and who knows if the USCG will give you issues over this.

As far as taxes, I registered my address with my company as soon as I received my SD drivers license and stopped paying state income tax. I didn’t backdate anything and I don’t think I would recommend that. The word fraud comes to mind. However I’m not a CPA so this is not financial advice. I also haven’t filed my taxes this year so we will see how that goes.

If you want more details about the process feel free to message me.

Do your research and keep it all legal. The government doesn’t mess around with taxes. It sounds like you need to really speak to a qualified CPA to get the answers you are looking for.

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Hi Green, thank you for your detailed reply. Sent you a DM :slight_smile:

As soon as you surrendered your Hawaii driver license and got your SD DL would be the date of SD residency. I am on year 2 of being a SD resident and had some banking address issues thanks to the over reach of the Patriot Act. They will accept next of kin or other address which makes no sense for security reasons, but gotta play the game.
Merchant Mariners, traveling nurses and RVers lifestyles are most common. SD is easiest state. TX and FL are next with more requirements. I purchased a home in another state and still maintain SD for state taxes. I can buy guns in that state with my deed. My home/property are not my primary residence and classed as a vacation home to avoid state income tax.
I see new grads and others that pay state taxes to where their parents live or where they rent. Voluntarily paying state taxes. If you are single, I would start researching how to become a resident of a state tax free state. RV nomad videos are the most popular.

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Best thing is to rent a room (monthly lease) in a no tax state, maybe $500 an month, and have your own landline phone installed, so that you have a utility bill at that address. Stay there some, keep some stuff there. Meet neighbors and make friends. Get a driver’s license and register a car at that address. Open a local bank account. Find reasons to talk to a bank manager often. Same with auto insurance. Register to vote. Get a library card. Get your mail forwarded there. Find some part time jobs, driving Uber , washing dishes or whatever, and get some local income so that you’ll get W-2s at the end of the year sent to that address.

Then change your address to a private mail box. If anyone asks , explain that it’s for security and to facilitate forwarding of your mail while you are traveling overseas. The longer you keep the room the better. Then move out of the rented room (keep all your receipts).

Certain states, like California may continue to chase you for taxes almost forever claiming that you never really intended to become a permanent resident of the no tax state.

A friend became a resident of Pennsylvania with a low 3% income tax for a year in order to break away from his high tax state. Before he became a resident of a no tax state.

If you have an apartment or room overseas , register it with the American Embassy as your residence.
That will strengthen your claim that you no longer live in the high tax state.

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Hi tugsailor, not a bad idea to go through those steps you mentioned to keep things as safe as possible for sure, the thing is though I never had an apartment, house, car, local bank account, voter registration card, library card or any of the other ties you mentioned to the income tax state at all. I was merely just staying at a temporary Seamen’s Home for an extended period of time (still less than the 186 cut off time for tax residency as well) due to COVID restrictions and simply had a Driver’s License from that state for the 3 years during the height of the pandemic when there was nowhere else to go. Would it still be necessary in your opinion to do all those steps you mentioned in your post when my ties to the income tax state were already super loose and my circumstances clearly demonstrated I was not a resident (besides just simply holding a Driver’s License from that income tax state)? Thanks.

Thanks gMate, I agree that as soon as I got the SD DL that my residency date starts there, my only other question I guess then is that my merchant mariner tax accountant thinks I should be good as well claiming the transient Amtrak law in the income tax state for the whole year of 2023, rather than just up to October 2023 when I became a SD resident, claiming I was just looking to ship out of Hawaii rather than live there (which is technically true) to avoid paying taxes to the state for the whole year. This would entitle me to receive all my Estimated State Taxes I paid throughout 2023 to that state in the form of a tax refund (a nice couple thousand dollars). Which would be great, however I just want to get others opinions though if such a claim seems a bit too aggressive, he personally is confident however that it isn’t. Thanks!

If your accountant stands by it then I’d go with that. They can help in the event of an audit. I wouldn’t ask an accountant forum about nav rules of the road. Good luck.

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To hopefully add some comfort to your decision. I did the same thing in 2022. SD drivers license, PMB, voting, digital library card, vehicle registration and insurance and live a semi wandering life on my boat in Mexico and Central America.

I waited until I had a full tax year as a South Dakota resident prior to claiming SD residency for tax purposes. That being said, I was an actual resident of a tax state with an address and property there. My CPA suggested this to make a clear break. The advice given to me was to build your paper trail before cutting from an income tax state.

For the tax year 2023 using a non mariner CPA he seemed just fine with getting me refunded all of 2023 state income tax and going forward with 2024 I will be going without paying state tax and have filled out the required forms with my company’s HR department.

On a side note, I have had no problems using #xxxxx
in place of PMB for banking and other financial and government things. I do recall one of the how to’s for the PMB suggesting that you may have an easier time writing it as a unit number versus a PMB.

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This has worked for me using a postal service based in Florida. Why is SD a better choice?

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I wouldn’t say better at all. South Dakota just fit what I was looking to do a bit more.

At the time when I was looking it was between FL and SD.

I liked the mail scan feature that SD offers, and I vaguely recall car registration was an entirely remote process which I found to be helpful.

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Thanks, I do have the scan feature.

@Lee_Shore

In that case, I might have picked SD because it was closer to the state that I was looking to no longer participate in.

I remember having a reason for picking, not 100% on the why.

They have a good service, but it’s the only one I have used so I’m not a wealth of knowledge.

A shipmate uses Florida and has no complaints. I hear that they are good too. From what I understand they have a USCG COD service that is quite convenient.

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When comparing the requirements to become a resident between TX, FL, and SD, SD is the easiest and quickest. But others may suit your situation. Check out you tube for comparisons.

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@flfox720 I’ll ask my wife how she set up the library card.

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I maintain a permanent residence in Florida for easy travel to central and south America and the Caribbean. Postal service scans the mail that’s not junk and forwards it if I need it but that’s just a backstop. The predictably important stuff goes to relatives who are in touch by phone or WhatsApp.
The Florida library card I have allows me to borrow books and other material online wherever I am. In fact, I’ve never even been to the brick-and-mortar library; the whole process was quickly done online.
I also use a US VPN.

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Of course, this being an age old topic- there have been MANY court cases, appeals and etc regarding merchant seaman and their state and local tax status.

First off, let’s have a discussion regarding the background and reasoning from the “state side of things”… States want to collect as much revenue as possible- especially from contributors that don’t take anything back out of the system. State Tax burdens, liens, demands for payment from US Merchant Seaman who can’t prove a viable legal domicile have been a bone of contention since the 1970’s as I recall- the State’s involved usually did not prevail BUT this was after a costly and lengthy legal fight on behalf of the seaman.

The concepts of legal domicile, voluntary establishment, assets (meaning real assets), previous legal domicile, differences between domicile and residency- all play important factors. As does obvious intent.

IMHO- the establishment of residency and domicile in a non-state tax state is of paramount importance. The state and local governments often look for “low hanging fruit” to get revenue from individuals they KNOW are neither residents or domiciled in that state- but their mandate is revenue, revenue, revenue.

When we start adding things like collecting unemployment insurance- now it’s get really complicated. Yes, you were a domiciled resident of state a- but the steamship company you worked for was in state b, you file for unemployment in state a against state b because of the company location (not actually where you worked- you were on a ship running internationally) but state b still tries to come after you for taxes…

It’s my profound believe that merchant seaman engaged on foreign voyages for six or more months a year should have their federal and state income tax waived from that income that they actually made aboard ship… but that’s another discussion…

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Does Florida (or any other state) allow you to get a driver’s licence without any proof of permanent residency? I.e., a lease, utility bill, etc.

In SD, all that’s required is a receipt for one night’s stay in a hotel. That’s why I went with SD.

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Yes, all very good points- HOWEVER- remember that the “sticking point” is the proof that you “abandoned” and ceased your legal domicile in the PREVIOUS state. I was extremely fortunate- I left the mainland US from NYS and MOVED to the USVI- which broke all connections. There’s just a reduced form (from the pre-tax deductions) of Federal Tax payable to the USVI only- then when I moved back stateside it was to FL… The state cases for taxes against seaman usually are predicated upon the fact that a clear next domicile was either not established or was weak.

AK, FL, NV, NH, SD, TN, TX, WA and WY have no state income tax. In addition to the above- the following states don’t tax any unearned retirement income- (this includes SS, 401’s, Pensions) IL, MS, PA… So there’s 12 twelve states that are definitely more tax friendly. A simple plot of land (or other property) DL and other items would alleviate the domicile question… I know I just moved to one of them for retirement…

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Glad I came across this thread. Some helpful advice here. Soon to be Cal grad looking to get out of the state.

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