Take Advantage of the New Sales Tax Cap
Tuesday, January 05 2016 @ 08:28 AM CST
“Now that the sales tax on boat purchases has been capped at $20,000, there has never been a better time to buy a boat in New Jersey” Mark Allen, Show Manager
There has never been a better time to buy a boat in New Jersey. Time was if you bought a boat in New Jersey you paid 7% sales tax. On a 30’Jupiter priced at $275,000, that tax amounted to $19,250.00. On a Viking priced at $1,000,000 the tax amounted to $70,000. A lot of money in either case!
Unfortunately for New Jersey, boat buyers soon discovered that they could buy either of the above boats in a neighboring coastal state like New York, Delaware, Maryland or even Florida where the sales tax on noncommercial vessels had been reduced to 3.5% and capped at $20,000. In these cases, the tax on the 30’ Jupiter would amount to only $9,265, and $20,000 on the Viking thanks to the $20,000 cap (a $50,000 savings). Is it any wonder that the businesses of boat building, boat selling, boat maintenance and recreational boating in general have been in freefall for years in New Jersey?
Last month on December 9th, Governor Christi with the concurrence of the vast majority of New Jersey legislators approved a measure which effectively places a $20,000 “cap” on the amount of New Jersey sales tax imposed on non-commercial boats. Per the above illustration, prior to passage of this measure, New Jersey boat dealers were required to impose the entire 7% sales and use tax on all non-commercial boat sales, regardless of cost. Given that the price tag of most new yachts generally exceeds one million dollars, this sales tax burden was excessive and placed New Jersey boat dealers and buyers at a distinct disadvantage when compared to neighboring coastal states since most of these states already benefit from a sales tax cap similar to the new cap enacted by New Jersey’s legislature. With the enactment of this measure, the New Jersey legislature has effectively “leveled the playing field,” thereby enabling New Jersey’s boat dealers to get “back into the game,” and compete. It also allows New Jersey’s boat buyers to “buy local.”
In an effort to ensure that the measure benefits all New Jersey boat buyers, regardless of cost, the legislature also halved the state sales tax for ALL boat purchases. In any case, the maximum sales tax a New Jersey boat buyer will now pay has been at capped at $20,000. Industry professionals are confident that the new 3.5% across the board sales tax will provide a very real incentive for boat buyers of every class and size along with generating a much needed across-the-board boost to New Jersey’s entire boating industry.
So, what does this new legislation mean to you, the New Jersey boat buyer?
It means that when you buy that new or used boat the sales tax will be capped at 3.5% saving you a bundle of cash. It also means that those who have purchased a boat out-of-state will no longer be punished when they return that vessel to New Jersey for a visit, service or to fish a tournament.
Why? Because in addition to encouraging New Jersey boat sales, the measure also established a 30 calendar-day grace period for the imposition of the use tax when New Jersey residents make these type purchases. Previously, a vessel purchased out of state by a New Jersey resident was subject to the use tax if and when that vessel returned to New Jersey waters for any reason including service, to fish a tournament or even for a simple visit. This was the method used by New Jersey taxation to discourage state residents from buying their boats out-of-state and avoiding the existing sales tax. In practice, the method backfired since it also discouraged state residents from returning to New Jersey with their boats for periodic visits or to fish tournaments.
One of the bill’s key sponsors, Senator, Jeff Van Drew he summarized the challenge this way, “New Jersey has a long history of boat building, particularly in our shore areas. Unfortunately, production has declined in recent years as a result of the recession, Superstorm Sandy and other factors that have led to a loss of both business and jobs. We have the ability to strengthen the industry, but we have to make the necessary changes to do that.” The Senator went on in his statement to offer the following promise, “By capping the amount of sales tax imposed on non-commercial boats, we will compete with states like Pennsylvania, Maryland, Delaware and Florida. Updating and changing our tax policies will help bring consumers back to our state for these purchases, repositioning us as a competitor in this industry and supporting and growing local jobs.”
Thus, this recently enacted sales tax cap must be seen as a win-win-win; a win for New Jersey boat buyers, a win for New Jersey’s boating industry and a huge win for New Jersey itself.
So, take advantage of this new sales tax cap and come out to the Strictly Boaters Boat Show, April 29th – May 1st.