Does a new boat qualify for Washington's electric-vessel sales-tax exemption when the buyer adds the electric motor after purchase?

Plain-English summary

The Washington Department of Revenue denied a sales-tax refund for a boat that was sold without a motor and later fitted with a qualifying battery-powered electric motor. RCW 82.08.996 separately exempts qualifying new electric marine propulsion systems and new vessels already equipped with those systems. The boat did not satisfy the vessel provision when sold.

The buyer purchased a 25kW electric motor in August 2022 without paying sales tax, then bought a new boat without a motor in October and paid sales tax on the boat. After the motor was installed, the buyer argued that the boat had never used fossil fuel, was not complete until the electric installation, and that no ready-made exempt boat met the buyer's needs.

The determination treated the sales as the statute describes them. The motor qualified for its own exemption, and the record did not show tax on its installation. But the boat was sold without any propulsion system, so it was not a "new vessel equipped with" a qualifying system at the time of sale. The Department could not extend the narrowly drawn exemption on fairness grounds, and the refund was denied.

What this means for you

Boat buyers

The exemption depends on what is being sold in the particular transaction. Buying a bare boat and adding an exempt electric motor later does not necessarily make the earlier boat purchase exempt.

Boat dealers and installers

Document the boat, motor, battery, and installation transactions separately. RCW 82.08.996 provides distinct exemptions, and eligibility for one component does not automatically exempt the others.

Tax professionals

Exemptions are narrowly construed, and the taxpayer bears the burden of proving each statutory condition. Practical unavailability of a preferred factory-equipped boat did not change the text of the exemption.

Common questions

Q: Was the separately purchased 25kW motor exempt?

A: Yes. The decision states that the buyer received the benefit of the exemption for the qualifying motor, and the record did not show sales tax on installation.

Q: Why was the boat itself taxable?

A: The boat was sold without a propulsion system. The vessel exemption applies to a new vessel equipped with a qualifying electric system, not a vessel that the consumer equips after purchase.

Q: Did waiting to use the boat until after installation matter?

A: No. The determination found no basis for postponing the sales-tax analysis until the buyer first used the boat or completed an aftermarket installation.

Q: Could fairness justify a refund because no suitable factory-equipped boat was available?

A: No. The Department said it was bound by the exemption as written and lacked a legal basis to disregard its requirements.

Citations and references

• RCW 82.04.050(1) and RCW 82.08.020(1) (retail sales and sales tax)
• RCW 82.08.996(1) (electric marine propulsion, vessel, battery, and installation exemptions)
• Budget Rent-A-Car, Inc. v. Department of Revenue, 81 Wn.2d 171, 500 P.2d 764 (1972)
• Evergreen-Washelli Memorial Park Co. v. Department of Revenue, 89 Wn.2d 660, 574 P.2d 735 (1978)
• Stroh Brewing Co. v. Department of Revenue, 104 Wn. App. 235, 15 P.3d 692 (2001)

Source

• Landing page: Washington Tax Decisions ZIP files
• Original PDF: 45WTD029.pdf
• Source archive: Volume 45 ZIP (member wtdvol45/45WTD029.pdf)

Original ruling text

Det. No. 23-0022, 45 WTD 029 (March 6, 2026)

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Cite as Det. No. 23-0022, 45 WTD 029 (2026)
BEFORE THE ADMINISTRATIVE REVIEW AND HEARINGS DIVISION
DEPARTMENT OF REVENUE
STATE OF WASHINGTON
In the Matter of the Petition for Correction of )
Assessment of
)
)
)
...
)
)

DETERMINATION
No. 23-0022
Registration No. . . .

RCW 82.08.996: RETAIL SALES TAX – EXEMPTIONS FOR BATTERYPOWERED ELECTRIC MARINE PROPULSION SYSTEMS AND VESSELS. Exemptions for battery-powered marine propulsion systems and vessels are narrowly drawn. A consumer having a battery-powered propulsion system installed in a new vessel does not qualify as a new vessel equipped with such a propulsion system. Headnotes are provided as a convenience for the reader and are not in any way a part of the decision or in any way to be used in construing or interpreting this Determination. Kelly, T.R.O. – Taxpayer petitions for a refund of retail sales tax paid on the purchase of a boat without a motor which was subsequently equipped with an electric motor. Taxpayer makes two arguments. First, the boat was not completed until an electric motor was installed as they did not use it prior to that point. Second, a boat matching the law’s requirements and Taxpayer’s needs did not exist. . . . We deny Taxpayer’s petition. 1 ISSUE Does Taxpayer’s purchase of a boat without a motor qualify for a retail sales tax exemption under RCW 82.08.996, if Taxpayer subsequently installed a separately purchased electric motor that was exempt under RCW 82.08.996? FINDINGS OF FACT Taxpayer is an individual from . . . , Washington. Taxpayer asserts that they spent considerable time researching electric boats over a period of years in a quest to find one which fit their needs. Taxpayer sought a full electric boat that would comfortably fit eight to ten people for day cruising on various lakes in Washington. Taxpayer had difficulty finding such a boat. Taxpayer found a number of boats that were too small and had motors less than 10kW. Taxpayer found one speedboat with a motor larger than 15kW, but it did 1

Identifying details regarding the taxpayer and the assessment have been redacted pursuant to RCW 82.32.410.

Det. No. 23-0022, 45 WTD 029 (March 6, 2026)

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not meet Taxpayer’s other criteria. As a speedboat it would not provide the kind of relaxing experience Taxpayer desired. Additionally, it was priced at $. . . and therefore, too expensive. On August 22, 2022, Taxpayer purchased a 25kW battery powered electric motor from . . . for $.
. . . Taxpayer did not pay sales tax on the purchase of the electric motor at the time of sale. On October 5, 2022, Taxpayer purchased a 2023 Bennington LS 22 BST boat (the “Boat”) from
. . . without a motor for $. . . . Taxpayer paid $. . . in sales tax on the Boat. Taxpayer subsequently had the motor installed on the Boat. On October 17, 2022, the Department received a refund request for retail sales tax paid on the Boat. The Department denied that request on October 24, 2022. Taxpayer timely filed a petition for review on November 11, 2022. Taxpayer’s petition raises two core arguments. First, Taxpayer contends that the Boat was never powered by fossil fuels and was therefore not converted to electric, but rather was a custom designed and built vessel initially equipped with an electric motor. Second, Taxpayer contends that no new boat, purchasable at retail, exists that meets both Taxpayer’s needs as well as the requirements of the exemption under RCW 82.08.996. Cumulatively, Taxpayer contends it would be unfair for the Department to deny a tax refund based on Taxpayer’s non-compliance with the technical refund requirements. ANALYSIS The retail sales tax is imposed on every retail sale occurring in Washington. RCW 82.08.020(1). A “retail sale” is “every sale of tangible personal property . . . to all persons irrespective of the nature of their business . . . .” RCW 82.04.050(1). The sales of watercraft and motor vehicles are subject to retail sales tax under RCW 82.08.020(1) unless an exemption applies. See, e.g., Det. No. 20-0061, 41 WTD 337 (2002). RCW 82.08.996 provides that retail sales tax shall not apply to certain battery-powered electric marine propulsion systems and vessels. Specifically, sales tax under RCW 82.08.020 does not apply to: (a) The sale of new battery-powered electric marine propulsion systems with continuous power greater than fifteen kilowatts; (b) The sale of new vessels equipped with propulsion systems that qualify under (a) of this subsection; (c)(i) The sale of batteries and battery packs used to exclusively power electric marine propulsion systems or hybrid electric marine propulsion systems, if such systems operate with a continuous power greater than fifteen kilowatts; (ii) The sale of or charge made for labor and services rendered in respect to installing, repairing, altering, or improving batteries or battery packs that qualify under (c)(i) of this subsection;
...

Det. No. 23-0022, 45 WTD 029 (March 6, 2026)

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RCW 82.08.996(1) (emphasis added).
As a retail sales tax exemption is at issue here, we note that exemptions from a taxing statute must be narrowly construed. Budget Rent-A-Car, Inc. v. Dep’t. of Revenue, 81 Wn.2d 171, 174, 500 P.2d 764 (1972); Evergreen-Washelli Memorial Park Co. v. Dep’t. of Revenue, 89 Wn.2d 660, 663, 574 P.2d 735 (1978). Since Taxpayer is arguing that a retail sales tax exemption applies, we also note that the taxpayer has the burden of establishing eligibility for an exemption. Stroh Brewing Co. v. Dep’t of Revenue, 104 Wn. App. 235, 240, 15 P.3d 692 (2001). Thus, Taxpayer has the burden to show that the Boat qualifies for the exemption under RCW 82.08.996. Taxpayer bought the Boat on October 5, 2022, without any propulsion system equipped. As such it does not qualify for the exemption as it does not meet the definition under RCW 82.08.996(1)(b) which only applies to, “new vessels equipped with propulsion systems that qualify . . . .” Id. We do not find Taxpayer’s argument that the Boat was not used until an electric propulsion system was installed relevant. Taxpayer has not shown, and we do not see[,] a basis for providing . . . a tax refund [based on the RCW 82.08.996 exemption,] for purchasing a boat without a motor. Nor has Taxpayer shown that a Boat is not considered sold for sales tax purposes until the installation of an aftermarket propulsion system. Taxpayer bought the electric motor on August 22, 2022. Taxpayer did not pay sales tax on that purchase as it qualified under RCW 82.08.996(1)(a). Additionally, there is no indication in the record that Taxpayer paid sales tax for the installation of the electric propulsion system onto the Boat, and Taxpayer does not ask for any corresponding refund. For the purchase and installation of the electric motor, Taxpayer received the benefit of the law as written. 2 For the above reasons we deny Taxpayer’s petition for refund. DECISION AND DISPOSITION We deny Taxpayer’s petition for refund Dated this 31st day of January 2023.

2

While we appreciate Taxpayer’s arguments on fairness and equity, the Department is bound by the law. Taxpayer has not shown, nor do we see any legal basis for [ignoring the plain] meaning of the law to grant a refund. Equity, to the extent possible, is inherent in our ruling on the merits of this case. See, e.g., Det. No 97-181, 17 WTD 87 (1998).