Publication 40, Watercraft Industry
Sales and Purchases of Watercraft

This section is designed to give you information on the taxability of watercraft sales, methods of tax reporting and payment, and the respective tax reporting responsibilities of registered sellers, brokers, and buyers. It also includes information on sales of exempt watercraft, as defined in the previous section.

Documented and undocumented vessels

Documented vessels

A documented vessel is a watercraft required to be documented by the United States Coast Guard that has a valid Coast Guard-issued marine certificate. Sales or use tax on documented vessels is generally paid to the seller or to us, as described later in this section.

A vessel is required to be documented with the United States Coast Guard if:

  • It will be used in international waters (outside the three-mile limit); or
  • The vessel is five net tons or more and will be used in fishing activities.

Undocumented vessels

An undocumented vessel is a watercraft that is not required to have, and does not have, a Coast Guard-issued marine certificate. Undocumented vessels must be registered with the Department of Motor Vehicles (DMV). Acting for CDTFA, DMV collects use tax from a purchaser at the time a vessel is registered, except as otherwise provided.

For more information on sales of documented and undocumented vessels, you may wish to obtain a copy of Regulation 1610, Vehicles, Vessels, and Aircraft, on our website or by calling our Customer Service Center at 1-800-400-7115 (TTY:711).

Sales and leases by registered sellers of watercraft

If you hold a valid seller’s permit and are in the business of selling watercraft, your sales are generally subject to sales tax. Whether you sell a documented or undocumented vessel, you are required to report and pay sales tax to us. Sales of tax-exempt watercraft, defined in the first section, are described later in this section. If you have questions regarding whether your vessel qualifies as documented or undocumented, the National Vessel Documentation Center provides answers to frequently asked questions.

When you sell an undocumented vessel, you must give the purchaser a sales tax certification form to present to DMV, showing that tax was paid on the sale. Copies of this certification form are available from DMV.

Watercraft exempt from sales tax

Vessels exempt by principal or functional use

As described in the first section, sales of other vessels are exempt from sales tax based on the vessels’ principal or functional use. The use must be:

  • Principally for transporting passengers or property for hire in interstate or foreign commerce,
  • Principally for commercial deep-sea fishing outside California’s territorial waters, or
  • Functionally for transporting people or property for hire to vessels or offshore oil platforms outside California’s territorial waters.

If the time you conducted fishing operations outside the state’s territorial waters exceeds the time operated within them, your boat would meet the basic principal use standard for the commercial deep-sea fishing exemption. We do not consider the time the craft is idle or stored in the state during the initial 12-month period for this determination.

Vessels of more than 1,000 tons burden

Shipbuilders’ sales of vessels of more than 1,000 tons burden are exempt from sales tax. However, unless the vessel qualifies under one of the watercraft principal or functional use exemptions, the purchaser may be liable for use tax, and sales of component parts for the ship are taxable.

Leases of taxable watercraft

Lease payments you receive for taxable watercraft are generally subject to tax, unless you paid tax on the cost of the vessel. Different leasing rules apply to vessels that are at least 30 feet long, which are considered "mobile transportation equipment."

For more information, please see Regulation 1660, Leases of Tangible Personal Property—in General, or Regulation 1661, Leases of Mobile Transportation Equipment.

Reporting district taxes

When you sell an undocumented vessel, you must report district tax if the vessel is registered or licensed at an address within a special tax district. When you sell a documented vessel, you must report the appropriate district tax if the boat will usually be moored or berthed at an address in a special tax district and you are engaged in business in that district.

In either case, if the applicable address is outside a special tax district, you should not report district tax on the sale. California City and County Sales and Use Tax Rates lists special tax districts and rates and is available online. For more information on applying district tax, you may wish to obtain a copy of publication 44, District Taxes (Sales and Use Taxes), or by calling our Customer Service Center at 1-800-400-7115 (TTY:711).

Note to sellers located within a special tax district: If you sell an undocumented vessel that is exempt from the district tax in effect at your sales location, you must obtain a declaration from the purchaser and keep it in your records. The purchaser must certify, under penalty of perjury, that the vessel’s licensing or registration address is the purchaser’s principal place of residence, or in the case of a corporation, its principal place of business. Sample declaration certificates can be found in Regulation 1823.5, Place of Delivery of Certain Vehicles, Aircraft and Undocumented Vessels.

Brokerage sales

In a brokerage transaction where the seller/broker acts as an agent without authority to bind the parties or transfer title to the watercraft, the broker is generally not considered a retailer. The broker is not required to collect sales or use tax. Although the purchaser is liable for the use tax due, the broker may collect it, as described below.

If the broker collects the use tax from the purchaser and provides a receipt, the broker, not the purchaser, is liable for the use tax amount paid and must pay that amount to CDTFA (for documented vessels) or to DMV (for undocumented vessels). If we determine that additional use tax is due, the purchaser is liable for the additional tax.

Please note: the purchaser should keep the receipt for any use tax paid to a broker.

For more information, please see Regulation 1610, Vehicles, Vessels, and Aircraft. You may also call our Consumer Use Tax Section at 1-916-445-9524.

Purchaser’s responsibility to report tax

In some cases, the buyer of a watercraft is responsible for paying sales or use tax directly to CDTFA or to DMV. This section addresses your obligations as the purchaser of a vessel.

Purchasing a documented vessel

If you buy a documented vessel from a person who does not hold a seller’s permit, or from a broker who does not collect and submit the tax on your behalf, you must pay use tax to us. Use tax is also due on watercraft purchased from a seller located outside the state if the seller does not collect California use tax from you.

The tax due is based on the effective rate in the county where you usually moor or berth the vessel. If you customarily moor or berth your vessel within a special tax district, but you did not pay district tax on the vessel’s purchase, you may be liable for the district use tax. For information on the correct tax rate, refer to publication 44, available on our website or by calling our Customer Service Center at 1-800-400-7115 (TTY:711).

Purchasers with a valid seller’s permit or consumer’s use tax number

If you hold a valid seller’s permit or a consumer’s use tax number, you must report the tax on your return for the reporting period in which the purchase took place, unless you have purchased the vessel for resale. If you are a registered seller who purchased the vessel for personal or business use, you would list the amount of the purchase under Purchases Subject to Use Tax on your sales and use tax return.

Purchasers without a seller’s permit or consumer’s use tax number

If you do not have a valid seller’s permit or consumer’s use tax number, you must pay use tax directly to us. By using publication 79, Documented Vessels and California Tax, you can file your payment directly with the Consumer Use Tax Section or any CDTFA office. You must include a brief statement giving the date of purchase, purchase price, the county in which the vessel is moored, berthed, or stored, and a description of the vessel. The description should include:

  • Year of manufacture and name of builder
  • Length of the vessel
  • Name, documentation, or permanent registration number (CF number)

Please note: Your payment is due on the earlier of:

  • The month following the month you were mailed a copy of a return by us; or
  • The month following the twelfth month in which you purchased the vessel, if you do not receive a CDTFA return.

Purchasing an undocumented vessel

If you buy an undocumented vessel from a person who does not hold a seller’s permit or from a broker who does not collect and pay the use tax, you must pay the tax yourself. When you register the craft with DMV, they will collect the use tax due, based on the vessel’s purchase price. If you purchased the craft through a broker who submitted your application and fees to DMV without submitting the use tax, DMV will contact you regarding payment of the tax.

Purchasing a watercraft with an exemption certificate

When you purchase a watercraft for one of the exempt uses described in the first section or purchase qualifying component parts for an exempt watercraft, you must provide a watercraft exemption certificate to the seller. On the certificate, you must certify that the watercraft is to be used for one of the three exempt purposes allowed by law. This certificate is provided in Regulation 1594, Watercraft.

You may be required to provide us with additional information regarding the watercraft, such as:

  • Date of purchase
  • Home port
  • Serial number
  • Fish and Game registration number
  • Vessel I.D. number
  • Number of nautical miles traveled during the first six months
  • Type of fish caught
  • Name and address of customers (including commercial fish receipts from those customers)
  • Name and suppliers of bait and gear
  • Blocks of areas fished
  • List of reports made to Fish and Game and where they may be examined
  • Ship’s log
  • Name of insurance company and type of coverage (commercial marine)
  • Photo of vessel which clearly shows the rigging, California "CF" registration number, documented name, or Fish and Game number of the vessel
  • Other information that may be needed to verify the exemption status of your vessel

Registering a vessel outside of California

If you register a watercraft outside the state to avoid paying state sales or use tax, you may be liable for a penalty of 50 percent of any tax determined to be due on your vessel, plus interest and the original tax due.

Using an exempt watercraft in a nonexempt manner

If you use a watercraft exemption certificate to purchase a watercraft without tax and use the watercraft in a manner not described on the certificate, you are liable for the tax based on the purchase price of the watercraft. You must report and pay the tax directly to us at the time of such use. If you do not report and pay tax at that time, we may later bill you for tax on the watercraft’s purchase, including applicable penalties and interest.

Revision July 2026