On December 9, 2015, New Jersey Governor Chris Christie signed legislation that will provide for boats and vessels 1) a partial exemption from sales and use tax, 2) a maximum amount of sales and use tax that may be imposed, and 3) a 30-day grace period for use tax imposition.
New Jersey Public Law 2015, Chapter 170 (S-2784/A3856), provides a 50% sales and use tax exemption for sales of boats and other vessels. Thus, only 50% of the sales price of a boat or vessel will be subject to New Jersey’s sales and use tax. Also, Chapter 170 establishes a limit of $20,000 as the maximum amount of sales and use tax that may be imposed for each sale of a boat or vessel. Both of these provisions will take effect February 1, 2016.
Chapter 170 also establishes a temporary presence exemption for certain boats and vessels. The use of a boat or vessel for temporary periods, totaling 30 days or less in a calendar year, will be exempt from New Jersey’s compensating use tax. In order to qualify under the 30-day grace period use tax exemption, the boat or vessel must have been purchased outside of New Jersey by a New Jersey resident for use outside of New Jersey. Further, the boat or vessel must be legally operated by the resident purchaser and meet requirements pursuant to federal law or federally approved numbering system, applicable to boats or vessels, adopted by another state. Finally, the resident purchaser cannot be engaged in any employment, trade, business, or profession within New Jersey where the boat or vessel will be used in New Jersey. All of the requirements must be met in order for the 30-day grace period to be applicable. This temporary presence exemption will take effect on January 1, 2016.
The New Jersey Office of Legislative Services has estimated that for the first few years New Jersey will lose $8 million to $12.3 million per year in revenue from the 50% partial exemption alone. New Jersey will also lose revenue from the other provisions of the legislation, but it is unclear as to the total amount of loss. One can conclude that this legislation is intended to bring New Jersey closer to New York’s updated exemptions regarding the purchase of boats and vessels passed effective June 1, 2015.
TECHNICAL INFORMATION CONTACT:
Jeremiah T. Lynch
Principal
Ryan
212.871.3901
jeremiah.lynch@ryan.com