The State, however, has recently passed three changes to the tax. These taxes primarily impact more expensive boats and boats that are not used in exclusively in New Jersey
. First and foremost, a cap of $20,000 has been placed on the total amount of tax that can be collected and taxes on boats have been cut to 3.5 percent: “Notwithstanding the provisions of P.L.1966, c. 30 (C.54:32B-1 et seq.) to the contrary, receipts from the sale of a boat or other vessel are exempt to the extent of 50 percent of the tax imposed under section 3 of the “Sales and Use Tax Act,” P.L.1966, c. 30 (C.54:32B-3) and the maximum amount of tax imposed and collected on the sale or use of a boat or other vessel shall not exceed $20,000.” N.J. Stat. Ann. § 54:32B-4.2.
The second important change has been to create a window of time in which a resident can use their boat in New Jersey without paying tax for the use. Per the new rules, a resident can use the boat for not more than 30 days in a calendar year without tax so long as it is properly registered and numbered in another state and is not being used for business in New Jersey.
“Notwithstanding the provisions of P.L.1966, c. 30 (C.54:32B-1 et seq.) to the contrary, the use within this State of a boat or other vessel for temporary periods, not totaling more than 30 calendar days in a calendar year, shall not be subject to the compensating use tax imposed by section 6 of P.L.1966, c. 30 (C.54:32B-6), provided that: (1) the boat or other vessel is legally operated by the resident purchaser and meets all current
requirements pursuant to applicable federal law or pursuant to a federally-approved numbering system for boats and vessels adopted by another state, and (2) the resident purchaser is not engaged in or carrying on in this State any employment
, business, or profession in which the boat or vessel will be used in this State.” N.J. Stat. Ann. § 54:32B-6.1 (West)
In short, if you have received an assessment from the State of New Jersey, then there are two immediate questions to ask. Is the boat owned by a New Jersey resident? Of if it is a corporation, are the beneficial owners New Jersey residents? Second, if not, is the boat privately owned and not being used in a commerce or trade
? If there is no resident and the boat is privately used, use tax should not be imposed for a temporary use of New Jersey waters.
Sales and Use Tax for Boats & Vessels
The New Jersey Sales & Use Tax Act
of boats and vessels is subject to New Jersey Sales Tax under the New Jersey Sales and Use Tax Act. This act imposes a tax of half the applicable Sales Tax rate, up to a maximum of $20,000, upon the receipts from every retail sale of boats and vessels in New Jersey. (P.L. 2015, c. 170)
Additional information on the New Jersey Sales & Use Tax Act.
The following apply to vessel transactions and use in this state under N.J.S.A. 54:32B-2, N.J.S.A. 54:32B-8.6, and N.J.S.A. 54:32B-10 of the Sales & Use Tax Act.
Vessels acquired from a dealer in New Jersey are subject to sales & use tax.
Vessel acquired by a resident of this state, including documented vessels, from a dealer outside the State of New Jersey are subject to use tax at the time of first use in this state
Vessels acquired in a casual or non-dealer sale transaction that are subject to registration
in New Jersey are subject to sales & use tax
Any vessel not meeting the requirements of the “Head Boat” exemption as defined by N.J.S.A. 54:32B-8.12 is not exempt from the sales & use tax act.
For additional information on exemptions and the taxability of boats/vessels in New Jersey, please contact the Northfield Regional Office (609) 645-6687, Neptune Regional Office (732) 869-8057 or the Casual Sales Section (609) 984-6206 in Trenton.
Out-of-state residents also may be subject to the sales tax if they are defined as residents under the Sales and Use Tax Act. For example, people who maintain a place of abode in New Jersey are required to pay tax on their vessels used in New Jersey. A boat does not have to be registered in the state to be subject to tax in New Jersey.
Notice of Sales Tax Rule
Changes – Boats and Vessels (P.L. 2015, c. 170)
P.L. 2015, c. 170 amends the Sales and Use Tax Act to provide a 50 percent Sales and Use Tax exemption on the sale of new and used boats or other vessels (including motorboats, sailboats, yachts, and cruisers) and caps the amount of Sales and Use Tax so that the most that the State can collect on a particular sale is $20,000. As a result, the Sales and Use Tax rate goes to half of the applicable rate. There is no further reduction of the Sales and Use Tax rate on sales in an Urban Enterprise Zone or in Salem County. The exemption and cap apply to purchases occurring on and after February 1, 2016. Because rental/lease transactions are treated as retail sales under the Sales and Use Tax Act, these changes also apply to rentals and leases of boats or other vessels.
Sales and Use Tax: Effective January 1, 2018, New Jersey’s general 6.875% sales and use tax will be reduced to 6.625%. In addition, other specific state sales and use tax rates will also be decreased.
The new rates are as follows:
Boat and other vessels sales tax – 3.3125%
In addition to the exemption and cap, for uses on or after January 1, 2016, the law allows a grace period for certain boats or other vessels purchased out of State by a New Jersey resident to be used in New Jersey for up to 30 days in a calendar year without triggering use tax so long as:
the boat or other vessel is legally operated by the resident purchaser and meets all current
requirements pursuant to applicable federal law or pursuant to a federally-approved numbering system for boats and vessels adopted by another state; and
the resident purchaser is not engaged in or carrying on in this State any employment
, trade, business, or profession in which the boat or vessel will be used in this State.
The Division is currently drafting regulations
. Information regarding the administration of the new law will be posted to this website as it becomes available.
Frequently Asked Questions – Boats and Other Vessels Partial Sales Tax Exemption (half of the applicable Sales Tax rate); $20,000 Sales Tax Cap
Last Updated: Wednesday, 02/28/18