• The Commonwealth of Virginia requires boats and motors be both titled and registered. At the time you apply to the Department of Game and Inland Fisheries for the title to the boat, you are required to provide proof that you paid the Watercraft Sales and Use Tax on the boat. Section 58.1-1407 of the Virginia Code requires sellers and dealers to retain copies of the invoice for a boat sale for three years.
  
  

Boats and Motors

• The Watercraft Sales and Use Tax in Virginia is 2 percent of the gross sale price of any vessel sold within the Commonwealth of Virginia. Motors, when sold separately from boats, are subject to this tax as well.
  
  

Two Percent

• For boats not sold in Virginia that require Virginia title, the sales and use tax is also 2 percent of the gross sale price, with a maximum of $2,000--unless the boat gets its first Virginia title six months or more after you bought it. The tax is then 2 percent of the current market value of the boat at the time you apply for the title. This "current market value" assessment also applies to boats where an invoice is not available, like a home-built boat, and in circumstances where the tax commissioner believes that the boat has been undervalued, meaning the invoice doesn't reflect the true price of the boat in an effort to avoid taxes.
  
  

Dealer Leases

• If a dealer leases, charters or otherwise uses a boat to provide an income without selling the boat, the dealer owes the state a use tax equal to 2 percent of the gross receipts from that charter, lease or use. This use tax is capped at $2,000 for each lease, charter or other use.
  
  

Watermen, Government Exempt

• Sales to the U.S. government are tax exempt, as are sales to insurance companies, when the boat is a total insurance loss. Boats that didn't require a title before January 1, 1998, are eligible for titling without payment of the sales and use tax. Boats that commercial watermen, such as fishermen, crabbers or oystermen, build for themselves are also exempt from taxation.
  
  

Volunteer Organizations and Inheritances Exempt

• Dealers are exempt from paying sales taxes imposed by Section 58.1-1402 of the Virginia Code, but are liable for the use tax under that section. Volunteer rescue squads and fire departments are exempt from paying sales taxes as well. Boats acquired by way of inheritance, when given "for love" or other reasons that clearly indicate no tangible consideration was given for the boat, are tax exempt, and the beneficiaries in either case shall be exempt from the tax imposed under this chapter.