Considering Buying a Boat in Maine? Don't Be a Mainiac
- Mar 30, 2016 | Stephanie Faris
Maine’s waterways are popular with both locals and tourists, offering some of the best views of the coastline. The area is especially attractive to avid fishermen, who find the area is plentiful in trout, bass, salmon, and many other popular fish species.
During warm months, Maine’s waterways are heavily populated with boats of all types, as locals and visitors enjoy the beauty of the Atlantic Ocean.
Boat Sales Taxes
Due to New England’s popularity with boaters, Maine’s boat manufacturers enjoy thriving business.
But until a few years ago, the state’s laws may have scared a few potential buyers way. If an out-of-state buyer purchased a boat in the state, the law previously required that the boat stay in the state less than 30 days to avoid paying a higher sales tax.
Since some nearby states, like Rhode Island, offer sales tax-free boat purchases, Maine’s boating industry was suffering under the old tax laws. A nonresident who wanted to purchase a boat with the intention of leaving it in Maine for the entire season might instead have opted to buy back in their home state and either keep the boat there or relocate it to Maine after purchase.
This loss of business hurt boating manufacturers and retailers, as well as the local economy. Local businesses would have benefited from boaters returning to enjoy their purchases every weekend.
However, in 2010, politicians changed the law for out-of-state boat buyers, reducing the amount that they would have to pay on boats they purchase in the state to 2 percent, no matter how long the boats reside there. This freed up boat buyers to purchase in the state without worrying about a big tax burden.
The Maine boating industry expressed excitement about the law when it first passed, stating that the change would help manufacturers rebound from a difficult economic time in the state’s history.
Locals vs. Residents
Interestingly, the boat sales and use tax rate for residents in the state is 5 percent. Nonresidents, who pay 2 percent, get a discount for buying their boats in the state, as well as for basing their boats in Maine while they live elsewhere.
While Maine may be encouraging nonresidents to make boat purchases there, those same tax laws could drive Maine residents across state lines to buy their boats in Rhode Island, Delaware, or the District of Columbia, where sales tax isn’t charged on boats.
Maine residents will still be required to pay personal property tax each year on their boats, but they’ll at least save 5 percent by crossing state lines to make the purchase.
Considering the law is designed to drive buyers to purchase their boats in Maine, offering out-of-staters a lower rate than residents makes some sense. If the 2 percent sales tax rate leads residents of every other state in the country to purchase there, the state is looking at a lot of revenue.
Losing the revenue from residents who purchase elsewhere is less daunting, especially considering the logistical challenge of crossing state lines simply to buy and pull back a boat. Some residents will just pay the tax and get out fishing as soon as they can.