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Division of Taxation

COVID-19 Related Tax Information
COVID-19 Extension of Time to File and Pay
Information about the Federal Economic Impact Payment – Stimulus Check

Frequently Asked Questions – Boats and Other Vessels Partial Sales Tax Exemption (half of the applicable Sales Tax rate); $20,000 Sales Tax Cap

  1. What is the definition of "boat or other vessel"?

    Based on legislative intent, a "boat or other vessel" is:

    • a means of transportation for travel on water, and
    • propelled otherwise than by muscular power, such as a motorboat, sailboat, yacht, and cruiser.
  2. Does the new law apply to leases and rentals of boats or other vessels?

    Yes. The partial Sales Tax exemption (half of the applicable Sales Tax rate) and the $20,000 Sales Tax cap (maximum amount of Sales and Use Tax the State can collect on an eligible sale) also apply to leases and rentals of boats or other vessels.

  3. Does the new law apply only to noncommercial boats or other vessels?

    No. The partial Sales Tax exemption (half of the applicable Sales Tax rate) and the $20,000 Sales Tax cap apply to both commercial and noncommercial boats or other vessels.

    Note: Several types of commercial boats and vessels are currently exempt from Sales Tax in full. More information is available in the "Commercial Fishing Boats" section of Tax Topic Bulletin S&U-6 , Sales Tax Exemption Administration.

  4. Do the partial Sales Tax exemption (half of the applicable Sales Tax rate) and the $20,000 Sales Tax cap apply to sales, leases, and rentals of personal watercraft?

    Yes. The partial Sales Tax exemption (half of the applicable Sales Tax rate) and the $20,000 Sales Tax cap apply to sales, leases, and rentals of personal watercraft.

    "Personal watercraft" means a power vessel defined as a Class "A" vessel by the United States Coast Guard, and:

    • Is designed to be operated from a sitting, standing or kneeling position;
    • Is equipped with an internal combustion engine which powers a water jet pump; and
    • Cannot be operated in a manner so as to disengage the pump so as to prevent the vessel from making headway. (N.J.S.A. 12:7-62).
  5. Does the partial Sales Tax exemption (half of the applicable Sales Tax rate) and the $20,000 Sales Tax cap apply to sales, leases, and rentals of canoes and kayaks?

    No. Based on the definition above, the Division has determined that canoes and kayaks are not entitled to the partial Sales Tax exemption (half of the applicable Sales Tax rate) or the $20,000 Sales Tax cap. Sales, rentals, and leases of canoes and kayaks are subject to the full Sales Tax rate unless another statutory exemption applies (e.g., sales of tangible property made by qualified sellers in Salem County or in an Urban Enterprise Zone).

  6. Do the partial Sales Tax exemption (half of the applicable Sales Tax rate) and the $20,000 Sales Tax cap apply to used and brokered boats or other vessels?

    Yes. The new law does not distinguish between new and used boats or other vessels, so brokered sales (in which a dealer acts as a go-between for the seller and the purchaser) and casual sales (sales between individuals with no broker) are eligible for the partial Sales Tax exemption (half of the applicable Sales Tax rate) and the $20,000 Sales Tax cap.

  7. Does the partial Sales Tax exemption (half of the applicable Sales Tax rate) apply to services, parts, and labor?

    No. The new law only applies to sales, rentals, and leases of boats or other vessels. Charges for all services (repairs, maintenance, etc.), parts, and supplies are subject to the full Sales Tax rate unless another statutory exemption applies (e.g. sales of tangible property made by qualified sellers in Salem County or in an Urban Enterprise Zone).

  8. What are examples of items that ARE NOT entitled to the partial Sales Tax exemption (half of the applicable Sales Tax rate) and the $20,000 Sales Tax cap?

    The partial Sales Tax exemption (half of the applicable Sales Tax rate) and the $20,000 Sales Tax cap do not apply to sales, rentals, and leases of:

    • Canoes
    • Kayaks
    • Inflatable rafts with oars
    • Paddleboards
    • Paddleboats (other than mechanically powered)
    • Rafts
    • Row boats
    • Surfboards

    Sales, rentals, and leases of these items are subject to the full Sales Tax rate unless another statutory exemption applies (e.g., sales of tangible property made by qualified sellers in Salem County or in an Urban Enterprise Zone).

  9. Do the partial Sales Tax exemption (half of the applicable Sales Tax rate) and $20,000 Sales Tax cap apply to new boats or other vessels sold as packages with trailers, motors, and accessories?

    Trailers are separate and distinct from the boat or other vessels and are not eligible for the partial Sales Tax exemption (half of the applicable Sales Tax rate) or the $20,000 Sales Tax cap. The price for the trailer must be separately stated on the invoice for the boat or other vessel or the entire sales price will be subject to the full Sales Tax rate.

    If the accessories and motors are included in the sales price of the boat or other vessel and are affixed at the time of purchase, the partial Sales Tax exemption (half of the applicable Sales Tax rate) and the $20,000 Sales Tax cap apply.

  10. Are delivery charges imposed on the sale of a boat or other vessel eligible for the partial Sales Tax exemption (half of the applicable Sales Tax rate) and the $20,000 Sales Tax cap?

    New Jersey law defines "delivery charges" as charges by the seller for preparation and delivery to a location designated by the purchaser of personal property or services including, but not limited to, transportation, shipping, postage, handling, crating, and packing.

    By law, delivery charges are part of the sales price of tangible personal property. Therefore, delivery charges charged by a seller in connection with the sale, lease, or rental of a boat or other vessel are eligible for the partial Sales Tax exemption (half of the applicable Sales Tax rate) and the $20,000 Sales Tax cap because the taxability of the delivery charges follows the taxability of the underlying boat or other vessel.

  11. What is the tax treatment of sales of boats and other vessels that occurred before the February 1, 2016, effective date of the new law?

    If the boat or other vessel is sold and physical delivery or transfer of title took place before February 1, 2016, the full Sales Tax rate applies. If the boat or other vessel is sold but physical delivery or transfer of title takes place on or after February 1, 2016, the Sales Tax rate is half of the applicable. This applies whether or not a full or partial payment has been made before delivery.

  12. What is the tax treatment if the sale of the boat or other vessel occurs in Salem County or an Urban Enterprise Zone?

    Qualified sales of boats and other vessels in Salem County or in an Urban Enterprise Zone are already entitled to a partial Sales Tax exemption (half of the applicable Sales Tax rate). The new law does not allow a further reduction of this already reduced rate.

    Note: However, sales of boats and other vessels in Salem County or in an Urban Enterprise Zone are entitled to the $20,000 Sales Tax cap.

  13. Can I get a refund of Sales Tax if I was incorrectly charged 1) more than the half of the applicable Sales Tax rate or 2) an amount that exceeded the $20,000 Sales Tax cap on an eligible purchase of a boat or other vessel?

    Yes, you may apply for a refund of Sales Tax paid to either the seller or the Division of Taxation. To request a refund from the Division, file a Claim for Refund (Form A-3730) within four years from the date you paid the Sales Tax and enclose all supporting documentation of the tax paid. We will refund the Sales Tax as long as the tax was "erroneously, illegally or unconstitutionally collected or paid".


Last Updated: Monday, 03/16/20