Boat Sales Tax Rates by State
A VanDutch cruises Florida waterways, where sales tax is capped at $18,000.
We couldn’t find a guide to sales tax by state, so we wrote one.
Usually my blog topics are based on my own daily findings or frustrations, then I summarize it here for your education. That’s exactly how this blog came to be. I was researching the macro environment of state sales tax rates, and decided you’d probably want to know too.
First things first, sales and use tax rates at the state and local level can change with the wind. This blog is an attempt to aggregate information into one place, but it IN NO WAY is something you should consider to be law. I’m writing on August 16, 2024, and by next year, your local government could adjust rates.
How does sales tax work on boats?
Just like all goods, boats incur sales tax at closing. Every state has a different rate, with some offering huge incentives. Those rates are usually imposed as a “use tax”, meaning, where you use the boat is where you’ll pay your tax. If you want to boat elsewhere for longer periods, you can acquire a “cruising permit”, which allows legal use in a state without pay sales and/or use tax. Whether you’re buying new or used, sales taxes usually apply, although there are exceptions for very rare circumstances like buying a cheaper boat directly from an individual. These exceptions vary state to state.
A few tips & tricks to understanding the vessel tax landscape before diving in:
Today is about Sales Tax and how it relates to your next vessel purchase. Rarely states can impose use tax and/or property tax. These alternatives are not covered in detail.
Some states impose state rates PLUS a local tax. These local taxes can vary heavily county by county. Check with your state to see if they offer a calculator based on your address. I’ve added links in the table to the ones I came across during my research.
Currently there is no federal tax on vessels. Let’s hope it stays that way.
Listed tax rates are exclusive of exceptions, any “creativity” and apply to only recreational use. Commercial vessels are usually taxed differently and involve a set of parameters for which the boat needs to run to earn the adjusted commercial rate. I don’t include implications for commercial use in this blog.
This blog is intended to showcase the macro landscape of state sales tax. If there is a special program you utilize that I haven’t mentioned, please share with us to HELLO@RNMARINE.COM and I will include it in the article.
With that said, let’s get into it…
Tax Havens, Tax Caps and Tax Rates
What states have no boat sales tax?
If you’re boating in these states, you’re in luck. State sales tax doesn’t apply, but you’re not completely off the financial hook. You’ll likely still have an annual state registration fee.
Alaska
Oregon
Delaware
Montana
New Hampshire
Rhode Island
What states have a cap on boat sales tax?
Tax caps are some of my favorite programs. They are a magnet for larger vessels, which increases jobs, marine activity and revenue in the states listed below.
Virginia // 2.00% tax - $2,000 cap
North Carolina // 3.00% tax - $1,500 cap
New Jersey // 3.50% tax - $20,000 cap
Maryland // 5.00% tax - $15,900 cap (as of July 1, 2024)
South Carolina // 5.00% tax - $500 cap
Florida // 6.00% tax - $18,000 cap
New York // 8.25% tax – imposed at your local rate for the first $230,000 of the sale ($18,795 cap)
All Other State Sales Tax Rates (low to high)
Due to formatting, this table is best viewed from a computer.
| State | Tax Rate | Notes/Local Tax Implications | General Info | Tax Calculator |
|---|---|---|---|---|
| Alabama | 2.000% | Local tax up to 3.83% may apply | ||
| Colorado | 2.900% | |||
| Connecticut | 2.990% | 6.35% state sales tax rate is reduced for marine purchases. | General Info | |
| Georgia | 4.000% | Local taxes vary by county | ||
| Hawaii | 4.000% | Add .5% for islands of Honolulu, Kauai, Hawaii and Maui | General Info | |
| Louisiana | 4.000% | |||
| South Dakota | 4.000% | |||
| Wyoming | 4.000% | |||
| Missouri | 4.225% | Additional local tax between 0-5.875% may apply | Local Rate Sheet | |
| Oklahoma | 4.500% | |||
| Utah | 4.750% | Local taxes vary, up to 7.55% total | ||
| New Mexico | 5.000% | |||
| North Dakota | 5.000% | |||
| Wisconsin | 5.000% | Local taxes vary, up to 5.60% total | ||
| Kansas | 5.300% | Additional personal property tax may apply | ||
| Maine | 5.500% | Can drop to 2.2% for non-residents with boats in Maine waters | ||
| Ohio | 5.500% | Local taxes may add an additional 0.5-3.0% | ||
| Arkansas | 6.000% | Non-dealer transactions are not subject to tax | ||
| Idaho | 6.000% | |||
| Iowa | 6.000% | Local taxes of +1.0% frequently apply | General Info | Sales Tax Calculator |
| Kentucky | 6.000% | |||
| Pennsylvania | 6.000% | +1% for Allegheny county and +2% Philadelphia county | PA Tax Application | |
| Vermont | 6.000% | Local taxes of +1.0% may apply | ||
| Washington D.C. | 6.000% | |||
| West Virginia | 6.000% | |||
| Massachusetts | 6.250% | General Info | ||
| Texas | 6.250% | Local taxes vary, up to +2.0% | ||
| Washington | 6.500% | Local taxes can add up to +4.15% | General Info | Sales Tax Calculator |
| Illinois | 6.500% | Non-dealer sales are non-taxable on vessels <16' | ||
| Arizona | 6.600% | Local taxes may apply, up to 3.0% | ||
| Nevada | 6.850% | |||
| Minnesota | 6.875% | Local taxes may apply | ||
| Indiana | 7.000% | Tax applies regardless of where the boat is used | ||
| Mississippi | 7.000% | |||
| Nebraska | 7.000% | |||
| Tennessee | 7.000% | |||
| Michigan | 8.000% | |||
| California | 8.250% | Local taxes vary (famously) by county | General Info | Rates by County |
Real World Sales Tax Comparisons
SANLORENZO SX76
Purchased for $4,800,000
EXAMPLE SALES TAX RATES
Connecticut: $143,520 (2.99%)
Florida: $18,000 (capped)
AZIMUT 100
Purchased for $2,995,000
EXAMPLE SALES TAX RATES
Massachusetts: $187,187 (6.25%)
New York: $18,795 (capped)
PARDO 50
Purchased for $1,745,000
EXAMPLE SALES TAX RATES
Washington D.C.: $104,700 (6.00%)
Maryland: $15,900 (capped)
Legal Ways to Reduce Your Sales Tax
If you ask me how to pay zero sales tax, I will tell you you’re crazy. That said, there are two ethical, legal ways I am familiar with to reduce your sales tax. Use them if — and only if — they apply accurately to you.
Option 1: The Trade-In Reduction
This is an easy one, and accepted in most states. If you own a boat and are purchasing your next boat through a dealer, you can trade-in your current boat for a sales price reduction. You will then be taxed only on the difference between the new purchase price and the valuation of your trade. This is especially great for people in high rate states.
[Contract Price] - [Trade-in Value] = Net Purchase Price
When using the Trade-in reduction, you’re taxed on your net purchase price, which quickly adds up to great savings.
Option 2: Commercial Operation
In some states, including Florida, if you purchase your vessel solely for commercial activity (for “resale”) the sales tax becomes an exception because you will collect sales tax from other transactions, namely, charters. If you are simply looking to not pay sales tax, this (and other) schemes are not worth the risk. You will save a marginal sum of money taking a huge risk with your governing agency.
Speak to your tax specialist before making any decisions related to information in this blog. The information provided is intended to provide an overall scope of the vessel sales tax environment, and is not created by a licensed tax specialist.
If you’d like to discuss a purchase and its taxation in detail, or if I got something wrong, shoot me an email at Reed@RNMarine.com.
About the Author
Reed Nicol is a licensed yacht broker with experience in all corners of the marine industry. He’s worked as an executive and sales director in yacht manufacturing and distribution, has started and managed commercial charter operations, and managed notable refits. Read more about Reed’s marine journey, his love of helping 1st time boaters and his entrepreneurial spirit here.
Reed Nicol [Licensed FL Yacht Broker #11926]
201-264-6356 | Reed@RNMarine.com
