Experienced Lawyers Handling All Matters Involving Texas Boat Sales Taxes and Boat Motor Taxes
Boats and boat motors are generally subject to sales tax under Texas law. While sellers are required to collect and remit applicable sales tax in most cases, buyers are obligated to ensure they still pay what they owe. As a result, sellers and buyers can both face audits involving Texas boat sales taxes and boat motor taxes—and these audits can potentially involve significant liability exposure.
At Brown PC, we assist buyers and sellers with all aspects of Texas boat and boat motor sales tax compliance. This primarily involves representing buyers and sellers targeted in audits by the Texas Comptroller. But we assist businesses and high-asset individuals with other boat-related tax matters as well. If you have questions or concerns about boat-related tax liability in Texas, we invite you to get in touch to discuss how we might be able to help.
Common Sales Tax Issues Involving Boats and Boat Motors
Various issues related to transactions involving boats and boat motors can trigger scrutiny from the Texas Comptroller. All of these issues can present substantial liability risks, and this makes it critical for buyers and sellers to ensure that they are making sound decisions. Some examples of common tax issues involving boats and boat motors in Texas include:
Buying a Boat in Another State or Country
As a general rule, Texas residents who buy boats in another state or another country are required to pay Texas sales tax at the time of sale. However, buyers are entitled to a credit for tax “legally due and paid” in another jurisdiction.
Selling to a Buyer in Another State or Country
Boats and boat motors generally are not subject to Texas sales tax if they are removed from the state within 10 days of purchase. Buyers can also avoid liability for Texas sales tax by obtaining a temporary use permit and removing the boat or motor from the state within 90 days of purchase.
Separating Boats and Boat Motors
When purchased together, boats and boat motors are generally subject to sales tax based on the total sale price agreed upon by the parties. When separated, boats and boat motors are taxed separately based on the price of each sale.
Large Vessels
Vessels that are more than 115 feet long are limited to Texas’s limited sales and use tax instead of the state’s standard sales tax for boats and boat motors. Additionally, vessels with eight or more tons of fresh water displacement used exclusively for commercial purposes are not subject to sales tax when sold by the builder.
Renting, Leasing, Repairing, and Remodeling
Renting, leasing, repairing, and remodeling boats and boat motors all generally qualify as “taxable services” under the Texas Tax Code. When taxable, these services are also subject to Texas’s limited sales and use tax instead of the state’s boat and boat motor sales and use tax.
How Our Texas Tax Lawyers Can Help
If you are facing a Texas sales tax audit related to boat or boat motor taxes, our lawyers can represent you or your company throughout the audit process. We can also seek relief post-audit if necessary. When representing clients during boat-related sales tax audits, our services include:
- Responding to a sales tax audit notice
- Assessing boat and boat motor sales tax compliance
- Communicating directly with the Texas Comptroller
- Targeting a favorable resolution during the audit
- Pursuing appeals and litigation as necessary
As noted above, our lawyers are also available to assist companies and high-asset individuals with other boat-related tax matters. If you have questions about avoiding unnecessary Texas sales tax liability or how your company can mitigate its state tax obligations on an ongoing basis, contact us today to request a confidential consultation.
FAQs: Texas Boat and Boat Motor Sales Taxes
Which statute governs boat taxes in Texas, and how do these taxes differ from standard sales tax?
Different statutes apply to boat sales in Texas depending on the vessel’s length. Vessels shorter than 115 feet in length are subject to the state’s boat and boat motor sales and use tax, while vessels of 115 feet or more are subject to the state’s limited sales and use tax.
How is the sales tax collected on boat sales?
Sellers should generally collect sales tax at the time of sale. The seller is then responsible for remitting the collected sales tax to the Texas Comptroller. If a seller does not collect sales tax at the time of sale, the buyer must pay the Texas Comptroller directly.
Are there “new resident” provisions for boats and boat motors in Texas?
Yes, Texas has established “new resident” provisions for boats and boat motors. Under these provisions, if a new Texas resident brings a boat or boat motor into the state, the resident may qualify to pay the state’s $15 new resident tax instead of the use tax that would otherwise apply.
Are boat trailers subject to the same tax as boats and boat motors in Texas?
Strictly speaking, no. Boat trailers are subject to Texas’s motor vehicle sales and use tax instead of the state’s boat sales and use tax. Practically speaking, the tax rates will be the same in many cases; however, different tax caps and “new resident” provisions may apply.
What are the penalties for failing to pay boat sales tax in Texas?
Unpaid boat taxes incur a five-percent penalty for the first 30 days and a 10-percent penalty thereafter. Interest also begins to accrue 61 days after the due date.
Request a Confidential Consultation with a Texas Sales Tax Attorney at Brown PC
If you are facing a Texas boat sales tax audit or have questions about boat sales tax compliance, contact us today. Call 888-870-0025 or inquire online to request a confidential consultation with a Texas sales tax attorney at Brown PC.