Security Notice
Quick Start for:

Boat and Boat Motor Taxes

May 2004

Boats and boat motors are subject to one of two Texas taxes - either the boat and boat motor sales and use tax or the limited sales and use tax.

Boat and Boat Motor Sales and Use Tax
Every retail sale of a boat with a length of 65 feet or less (measured from end to end over the deck, excluding the sheer) is subject to the boat and boat motor sales and use tax. The tax (6.25 percent) applies to sailboats, inboards, outboards, jet skis, and other personal watercraft, and is computed on the sales price less any trade-in allowance.

Also, the tax is levied on the retail sale of outboard motors (gasoline or diesel) but not to electric motors (such as trolling motors) unless attached to a boat subject to boat tax and sold with that boat for a single price.

A Texas resident who buys a boat or boat motor in another state and then brings it into Texas for use here owes use tax. The use tax rate is 6.25 percent, the same as the sales tax, with credit given for any sales or use tax legally paid to another state. A new Texas resident who brings a boat or motor into Texas qualifies for a special $15 use tax in lieu of the 6.25 percent use tax.

The buyer pays the tax to the Texas Parks and Wildlife Department or the county tax assessor-collector when titling and registering the boat in Texas.

A boat trailer is subject to 6.25 percent motor vehicle sales or use tax, due when the trailer is titled and registered with the county tax assessor-collector.

For more information about the boat and boat motor sales and use tax, see Boat and Motor Sales Tax Rule 3.741.


Limited Sales and Use Tax
The limited sales and use tax applies to boats greater than 65 feet in length, canoes, kayaks, inflatable boats and rafts, punts, and boats designed to be propelled only by a paddle or pole.

The rental or lease of a boat or boat motor is subject to limited sales tax.

Electric motors and accessories (such as life jackets or ladders), if sold separately, are subject to the limited sales and use tax.

Repair and remodeling of boats subject to the boat and boat motor sales and use tax are subject to the limited sales and use tax unless the repair qualifies for an exemption as explained in the following section on exemptions.

The state limited sales and use tax rate is 6.25 percent. Local sales and use tax of up to 2 percent may also be applicable.


Exemptions
Boat and boat motor sales and use tax exemptions include:

  • sales to volunteer fire departments;
  • sales to the federal government, Texas state agencies, and cities, counties, and other political subdivisions within the state.

Limited sales and use tax exemptions include:

  • sales by the builder of a ship of eight or more tons displacement of fresh water and used exclusively and directly in a commercial enterprise;
  • materials, equipment, and machinery that become component parts (such as fuel filters, batteries, fire extinguishers, lifestyle, towing gear) of a ship or vessel of eight or more tons displacement and used exclusively and directly in a commercial enterprise (including commercial fishing and taking paying passengers out for pleasure fishing);
  • materials and labor used in repairing, renovating, or converting a ship or vessel of eight or more tons displacement and used exclusively and directly in a commercial enterprise;
  • materials and supplies purchased by the owner or operator of a ship or vessel operating exclusively in foreign or interstate coastal commerce, if they become component parts of the vessel or are used in its maintenance and operation; and
  • materials and supplies bought by a person providing stevedoring services for a ship or vessel operating exclusively in foreign or interstate coastal commerce if loaded aboard the vessel and not removed before its departure.

For more information about limited sales and use tax, see State Sales and Use Tax Rules 3.292 and 3.297.


Need More Assistance?

94-170
(05/2004)

Required Plug-ins