Boat Sales Tax Rates by State
A 2023 VanDutch 32 cruises Florida waterways, where sales tax is capped at $18,000.
I couldn’t find a guide to sales tax by state, so I wrote one.
Just like most of my blogs, this one was conceptualized from frustration. I was looking for a simple guide to boat sales tax by state, and couldn’t find one. Then I figured most people were doing what I was doing. And here we are.
Before we dive in please note: sales and use tax rates can change with the wind. This blog is an attempt to aggregate information into one place, but I am not representing this as an “up to the minute” report. I update this blog every so often, because it does get big traffic, but the bones are as of August 2024.
How does sales tax work on boats?
Just like all goods, boats incur sales tax at closing. Sales tax rates vary by state, from 0% all the way to 8%+ percent. Some sales tax rates are the aggregate of a state rate plus/minus a county tax. You’ll see those adjusted rates mentioned in the table below, when I was able to find the information.
Sales tax is usually imposed as a “use tax”, meaning, where you use the boat is where you’ll pay your tax. If you want to boat in other states for longer periods, you can acquire a “cruising permit”, which allows legal use in a state without paying sales and/or use tax. Some states have separate charges for use tax. Please research your state’s tax code to ensure you have the most up to date information.
Whether you’re buying new or used, sales taxes usually apply, except for very rare circumstances. In Arkansas, non-dealer transactions are not subject to sales tax. 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 separate use taxes and/or property taxes on vessels. These alternative scenarios are not covered in this article.
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 below to the calculators I found during my research.
Currently there is no federal tax on vessels. Let’s hope it stays that way!
The tax rates listed in the table below are exclusive of exceptions and “creativity”, and only apply to recreational use. Commercial vessels are usually taxed differently and involve a set of parameters for which the boat needs to follow to earn the adjusted commercial rate. I don’t include implications for commercial use in this article.
This blog is intended to showcase the macro landscape of state sales tax. If there are special tax credits or programs you’ve utilized in your state which aren’t mentioned here, please email us at HELLO@RNMARINE.COM and I will include it in the article.
Tax Havens, Tax Caps and Tax Rates
What states have zero boat sales tax?
If you’re boating in these states, you’re in luck. State sales tax doesn’t apply. That doesn’t mean you’re free of all fees. You’ll likely have an annual state registration fee which may be higher than the national average.
Alaska
Oregon
Delaware
Montana
New Hampshire
Rhode Island
What states have a cap on boat sales tax?
Tax caps are my favorite sales tax programs. They are a magnet for the state to register larger vessels, which brings additional jobs, industry work, and an increased marine interest.
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
NOTE: 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 |
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Legal Ways to Reduce Your Sales Tax
As we approach closing, my clients always ask how they can pay zero sales tax. In most cases, I tell them they are crazy. That said, there are two ethical/legal ways which I am familiar with to reduce your sales tax. Use them if — and only if — they apply to you and your tax professional approves the strategy.
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 be taxed only on the difference between the new purchase price and the valuation of your trade. This is especially great when you’re buying in a state with a high sales tax rate.
[Contract Price] - [Trade-in Value] = Net Purchase Price
When using the Trade-in reduction, you’re taxed on your net purchase price, which adds up to great savings.
Option 2: Commercial Operation
In some states — including Florida — a vessel purchased solely for commercial activity can be exempt from state sales tax, due to sales tax being paid on each of the charters your company executes.
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 while 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.
Ask Me Anything!
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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 structured commercial charter operations, and designed and executed 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]
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