Q. I live in New Jersey but I financed a boat through a dealer in Illinois. I paid them $3,499 in sales tax. and I paid $763 for the title/recording under the financing agreement. Do I now have to pay New Jersey sales tax again to register this boat and tag my trailer towing it? I received a card in the mail saying I need to visit my local motor vehicle commission, but I don’t understand why.
A. Congratulations on the new boat.
In 2015, New Jersey changed the Sales and Use Tax Act to offer a 50% sales and use tax exemption on the sale of new and used boats or other vessels, including powerboats, sailboats, yachts and cruisers, said Martin Hauptman, partner in tax law practice with Mandelbaum Barrett, PC in Roseland.
It caps the amount of sales and use taxes so that the maximum the state can collect on a particular sale is $20,000, he said.
“As a result, the sales and use tax rate is reduced to one-half of the applicable rate. There is no additional sales and use tax rate reduction on sales in an urban enterprise area or in Salem County,” he said.
The exemption and cap apply to purchases made on or after February 1, 2016, he said.
“Because rental/leasing transactions are treated as retail sales under sales and use tax law, these changes also apply to rentals and leases of boats or other ships,” he said.
In addition to the exemption and cap, for uses beginning January 1, 2016, the law allows a grace period for certain boats or other vessels purchased out of state by a New Jersey resident for use in New Jersey. Jersey for up to 30 days of a calendar year without triggering use tax as long as certain conditions are met, he said.
“The boat or other vessel is legally operated by the resident purchaser and meets all applicable requirements under applicable federal law or under a federally approved numbering system for boats and vessels adopted by another state and the resident buyer does not carry on or carry on in that state any employment, trade, business or profession in which the boat or vessel will be used in that state,” Hauptman said.
The new partial sales tax exemption does not apply to the following trailers, which must be shown separately on invoices, and charges for services – such as maintenance and repairs – and parts and supplies, a- he declared.
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Karin Price Mueller writes the Bamboos column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. To find NJMoneyHelp on Facebook. Register for NJMoneyHelp.comit is weekly e-newsletter.