Boat owners in Rhode Island haven’t paid sales tax or property taxes on their boats since 1993, when state legislators exempted boats from both property and sales taxes in order to boost the marine industry.
But Rep. John Lombardi, D-Providence, recently proposed a bill that would end the tax exemption for boats, slips, moorings, boat repairs and storage.
“Leadership has indicated all means of income are on the table for consideration,” Lombardi tells Realtor.com®. “Unless the boats are prohibited, the boats should at least be included in the conversation.”
In a state that’s already combating incredibly high property states, some see this as a lifeline for homeowners—while boat owners feel like their homes are about to be sinking ships.
Understanding Rhode Island’s real estate market
According to the Realtor.com February Hottest Housing Markets report, the Providence metro area of Rhode Island was the 11th hottest market in the country.
However, that’s down two slots from where it was in January—and a lot cooler than it was in February 2024, when it ranked seventh on the charts.
The decrease may be attributed to the state’s notably steep property taxes, which are among the highest in the nation. According to WalletHub, the state’s average effective property tax rate of 1.32% ranks as the 13th highest in the country.
Out of all 50 states, Rhode Island currently ranks lowest on the Realtor.com report card for homebuilding and affordability.
The median listing price for a home in Rhode Island is $537,521—and the median household income is $80,791.
As the smallest state, Rhode Island might suffer from a lack of available land to build on. Rhode Island covers an area of just 1,034 square miles—yet boasts over 400 miles of coastline. That’s why it’s nicknamed the “Ocean State.”
Why there is a push for property taxes on boats in Rhode Island
The primary argument for Lombardi’s proposed bill is generating more money for the state.
“It’s a revenue source and it’s a revenue generator,” Lombardi told WPRI.
In Rhode Island, there are 37,862 registered boats. But they’re not all megayachts owned by multimillionaires. According to data from the Association of Marina Industries, 61% of boat owners have a household income of $75,000 or less a year.
However, those who own a boat worth less than $50,000 would not pay any property tax under the proposed legislative changes.
Last year, the General Assembly passed a law to exempt the first $50,000 of “tangible property” (or everything that’s not real estate) from the property tax law.
It’s hard to pinpoint the number of people who actually live on their boats in Rhode Island, but one of those people is Stacy Rae Seminick, who told the Providence Journal that living on her houseboat year-round gives her the chance to have her own place at an affordable price. But this bill could make live-aboarding less economical for her and others like her.
At the May 6 hearing, Lombardi said that if the bill passes, “I would like to utilize those monies to fund our schools that are failing miserably, especially in the inner city.”
Property tax rates in Rhode Island are set by cities and towns, so they vary throughout the state.
According to the Providence Journal, here’s how much someone would pay annually in property taxes for a boat valued at $150,000 under the proposal, which is taxed on $100,000 in value:
- Bristol: $1,336
- Warwick: $1,447
- Newport: $1,488
- Providence: $5,340
- Westerly: $1,159
- Narragansett: $884
- North Kingstown: $1,785
To put these numbers into perspective, in South Carolina, the state with the highest property taxes on boats in the country, boat taxes generate around $4 million each year, according to Count on 2 News.
But a bill to slash South Carolina boat taxes by half passed this month in the House and will move on to the Senate next January.
Boat owners and associations fight back
House Speaker K. Joseph Shekarchi, D-Warwick, tells the Providence Journal that the House Finance Committee has been inundated with more than 1,500 letters, texts, and phone calls from Rhode Islanders who are opposed to the proposed bill ending tax exemptions for boats in the state.
One of those people who sent an letter in opposition was Robert Lehmann, a small business owner from Newport, RI, who’s been a boat owner in Rhode Island for the past four years.
Lehmann tells Realtor.com, “You don’t grow Rhode Island’s economy by sinking one of its strongest industries. This tax sounds like it targets the rich, but it’s the middle class and marine industry workers who will feel the hit.”
Boat owner Kevin Schwab of North Kingston, RI, who bought his first boat when was just 15 years old, calls this proposed bill a “rip-off money grab.”
“I pay my taxes on my house, pay my mortgage, and pay a large slip fee of $6,500 a year for my boat,” Schwab tells Realtor.com. “If the state added on property tax, I wouldn’t be able to afford the hobby anymore. Property taxes will just price boat owners out of ownership. After fuel costs, slip fees, maintenance, and winterizing, we can all barely afford boats as it is.”
Meanwhile, boat owner Jules Friedman sent legislators an email detailing his concerns that this bill would harm the housing industry in Rhode Island, since summer boating is an attraction for real estate buyers.
Friedman moved to Rhode Island for the opportunity to sail the bay and was incentivized by the opportunity to buy used and new boats in Rhode Island without taxes.
Hinckley Yachts vice president of marketing, Scott Bryant, wrote that the 7% sales tax would make Rhode Island less competitive and a less-desirable place to do business—jeopardizing the thousands of jobs, individuals, and families who rely on this industry for their livelihoods.
As of last week, the bill has been put on hold for further study—granting boat owners a temporary reprieve.
