09 May Do I have to pay sales tax to N.J. on my boat?

Q. I live in New Jersey but I financed a boat from a dealer in Illinois. I paid $3,499 in sales tax to them. and I paid $763 for title/registration in the financing deal. Do I now have to pay sales tax again to New Jersey to register this boat and tag my trailer that pulls it? I got a card in the mail saying I need to visit my local Motor Vehicle Commission but I don’t understand wh
— Captain

A. Congrats on the new boat.

In 2015, New Jersey amended the Sales and Use Tax Act to provide a 50% sales and use tax exemption on the sale of new and used boats or other vessels, including motorboats, sailboats, yachts and cruisers, said Martin Hauptman, partner in the tax law practice at Mandelbaum Barrett, P.C. in Roseland.

It caps the amount of sales and use tax so that the most that the state can collect on a particular sale is $20,000, he said.

“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,” he said.

The exemption and cap apply to purchases occurring on and after Feb. 1, 2016, he said.

“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,” he said.

In addition to the exemption and cap, for uses on or after Jan. 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 as long as certain conditions occur, he said.

“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,” Hauptman said.

The new partial sales tax exemption does not apply to the following trailers, which must be separately stated on invoices, and charges for services — such as maintenance and repairs — and parts and supplies, he said.

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This story was originally published on May 9, 2022.

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