There’s quite literally never been a better time to buy a boat in the state of New Jersey!
On Wednesday, New Jersey Governor Chris Christie signed into law a bill that cuts the sales tax on boats sold in New Jersey in half.
Sponsored by Senators Jeff Van Drew (D-Cape May) and Jeff Whelan (D-Atlantic County) and Assembly representatives Bob Andrzejcazk (D-Cape May) and Gordon Johnson (D-Bergen County), the sales tax on boats purchased in New Jersey goes from 7% to 3.5%, while the total sales tax collected on noncommercial boats and yachts sold for over $571,000 is capped at $20,000.
According to the Marine Trades Association of New Jersey (MTA/NJ) which worked hard to pass the legislation, the act takes effect immediately, provided that section 1 shall apply to sales and uses on or after the first day of the second month next following the date of enactment (February 1) and that section 2 shall apply to uses on or after January 1 next following the date of enactment.
In layman’s terms, MTA/NJ executive director Melissa Danko said the organization is working to confirm all questions relating to what exactly will be included under the reduced tax rate along with implementation and timing. “We are working on arranging a meeting with the Division of Taxation and will be providing information as soon as it is available,” Danko said.
“This is a tremendous victory for the industry and the future of boating in New Jersey,” she added.
The ‘cap’ on the biggest, most expensive boats had been one of the primary sticking points with the original legislation, prompting a conditional veto by Governor Christie in August following the bill’s passage in both the Senate and Assembly last summer. The issue for marine related businesses in New Jersey was that larger sportfishing boats in particular were being bought and registered in other more ‘tax friendly’ states. The bill’s original sponsors hoped that by capping the sales tax at $20,000 similar to what’s done in other states like Florida and New York, more of those boats would be registered, operated and serviced in the Garden State, in turn prompting more economic output over time.
"This new law will help to revive the industry through changes to our tax structure,” Sen. Van Drew told NJ.com, adding “it will allow us to compete with states like Pennsylvania, Maryland, Delaware and Florida. Ultimately, it will help to bring back consumers to our state for these purchases, supporting our shore-area businesses and growing local jobs."
The governor had conditionally vetoed the legislation because he felt that it did not apply broadly enough to boat sales in lower price ranges, and in response an amended bill was approved by a 33-1 vote in the Senate in September and approved by the state Assembly last week calling for the 50% tax reduction on all boats and other vessels sold in the state while capping the tax amount at $20,000 for boats selling for more than $571,000.
In 1990, a ‘luxury tax’ implemented as part of the first President Bush’s deficit-reduction package discouraged high-end boat purchases, resulting in the loss of about 15,000 jobs as nationwide boat sales plummeted by more than 70%. New Jersey, a state with the nation’s largest concentration of high-end boat builders from the likes of Henriques, Viking, Jersey Cape, Egg Harbor and Ocean, fared even worse that other states, as overall sales decreased 87% with employment falling 89% between 1989 and 1992.
With the overwhelming support of New Jersey legislators and the Christie administration, the supporters of the tax relief plan feel that the opposite effect will occur in the state with new purchases, expanded in-state service, and increased employment over the next several years.
According to Bob Glover at South Jersey Marina, another key component of the legislation is a 30-day grace period for those who previously moved their boat out of New Jersey to avoid paying a higher tax; and if you purchased your boat in Florida and paid their cap of $18,000, you can now return to New Jersey and your tax liability will only be $2,000!
“This would be a great time for the boaters of New Jersey to show their appreciation by bringing their boats home and doing business locally proving that the enhanced volume of business created by a boater friendly state will more than make up for any losses resulting from the cut,” Glover said.
"We truly believe this will generate more income for the state and will certainly be something that will help our industry grow and ensure the future of boating in New Jersey," Danko said.