Liquid sloshing has been an important problem in several areas. Consideration of slosh dynamic along with the vehicle dynamics results in coupled nonlinear underactuated system. Inherent characteristics of nonlinear system poses dificulties in state estimation and hence implementing the state feedback control strategies. This paper presents the development of sliding mode observer (SMO) using high gain observer (HGO) approach in a reduced subsystem for estimation of slosh states. A simple pendulum model is used to represent the lateral slosh. Simulation results demonstrate the performance.