taxes

Boat and Boat Motor Taxes

The retail sales of boats and boat motors are subject to either:

Boat trailers are subject to motor vehicle sales and use tax.

Because different taxes apply to boats and boat trailers, the seller should always separate the sales price of these items on the sales invoice.

Boat and Boat Motor Sales and Use Tax

The boat and boat motor sales and use tax applies to the purchase of a boat that is 65 feet or less in length measured from the tip of the bow in a straight line to the stern.

This includes:

  • motorboats
  • sailboats
  • jet skis and other motorized personal watercraft

Boat motors subject to boat and boat motor sales and use tax include:

  • outboard motors (gasoline or diesel)
  • electric motors attached to a boat subject to boat tax and sold with the boat for one price, such as trolling motors

The boat and boat motor sales and use tax rate is 6.25 percent. The tax is based on the sale price less any allowance for the trade-in of another boat or boat motor.

Permitted dealers collect the tax at the time of sale and remit it to the Texas Parks and Wildlife Department. If the seller does not collect the tax, the buyer must pay the tax when obtaining the boat’s title and registration from the Texas Parks and Wildlife Department or participating County Tax Assessor-Collector’s Office.

Out-of-State and New Resident Purchases

A Texas resident who buys a boat or boat motor in another state and brings it into Texas owes the 6.25 percent boat and boat motor use tax. The buyer can receive credit for tax legally due and paid in another state for a boat or boat motor brought into Texas when titling and registering the boat.

A new Texas resident who brings a boat or boat motor into Texas qualifies for a $15 new resident tax instead of the 6.25 percent boat and boat motor use tax.

The buyer pays the tax when obtaining the boat’s title and registration from the Texas Parks and Wildlife Department or participating County Tax Assessor-Collector’s Office.

Boat and Boat Motor Sales and Use Tax Exemptions

The following entities can buy boats and boat motors tax free:

  • volunteer fire departments
  • the federal government
  • Texas state agencies
  • Texas cities
  • Texas counties
  • other Texas political subdivisions

Limited Sales and Use Tax

The limited sales and use tax applies to the purchase of a boat that is greater than 65 feet long measured from the tip of the bow in a straight line to the stern.

Limited sales and use tax also applies to boats designed to be propelled by a paddle, oar or pole, such as:

  • canoes
  • kayaks
  • inflatable boats and rafts
  • punts

In addition, limited sales and use tax applies to the following transactions:

  • renting or leasing boats or boat motors
  • sales of electric motors and accessories, such as life jackets or ladders, sold separately from the boat
  • repairing and remodeling boats and boat motors

The limited sales and use tax rate is 6.25 percent state tax, plus any applicable local tax up to 2 percent. If the seller has a Texas sales and use tax permit, the seller collects the tax at the time of sale and remits it to the Comptroller’s office.

If the seller does not collect the tax, the buyer must pay the tax to the Comptroller’s office using Form 01-156, Texas Use Tax Return (PDF). If the buyer has a Texas sales and use tax permit, the buyer can pay it on their next sales and use tax return.

Out-of-State Purchases

Use tax is due on a boat purchased in another state and brought into Texas within one year of purchase. Credit can be taken for tax legally due and paid in another state for a boat brought into Texas. See Rule 3.338, Multistate Tax Credits and Allowance of Credit for Tax Paid to Suppliers, for information on how to apply the credit and determine the use tax due.

The buyer must pay any use tax due to the Comptroller’s office using Form 01-156, Texas Use Tax Return (PDF). If the buyer has a Texas sales and use tax permit, the buyer can pay it on their next sales and use tax return.

Limited Sales and Use Tax Exemptions

The sale, by the builder, of a ship of eight or more tons of fresh water displacement and used exclusively and directly in a commercial enterprise is exempt from limited sales and use tax.

The sale of the following items is exempt when purchased to be used on a ship or vessel of eight or more tons of fresh water displacement and used exclusively and directly in a commercial enterprise:

  • materials, equipment and machinery that become component parts of the ship or vessel (including commercial fishing and pleasure fishing). Examples: fuel filters, batteries, fire extinguishers, life jackets and towing gear
  • materials and labor used in repairing, renovating or converting the ship or vessel

The sale of the following items is exempt when purchased for use on a ship or vessel operating exclusively in foreign or interstate coastal commerce:

  • materials and supplies purchased by the ship or vessel owner or operator that become component parts of the vessel or are used in its maintenance and operation
  • materials and supplies purchased by a person providing stevedoring services when loaded aboard the vessel and not removed before its departure

To claim the exemption when buying qualifying items, the buyer must provide the seller a properly completed Form 01-339, Texas Sales and Use Tax Exemption Certificate (PDF).

94-170
(01/2018)