How were boat rentals taxed when a purchaser acquired a marina and its boats in an exempt transaction?

Plain-English summary

The memorandum considered a person who acquired a marina, including boats, in a transaction assumed exempt under section 6281. It supplies no purchase agreement, asset list, exemption support, amount or completed tax proceeding.

Boat-rental receipts were taxable. Because the acquisition was exempt by law, the purchaser could not choose to pay sales tax on that transaction instead of rental-receipts tax.

Two nonexempt-acquisition paths differed. If the buyer paid use tax to the Board, it could rent the boats without sales/use tax. If the buyer instead held a seller's permit, it could elect rental-receipts reporting and had to declare that choice to the Board when otherwise required to pay use tax.

Seller facts controlled the resale document. The memorandum says a resale certificate would be meaningless under unidentified AB 1 if the boat seller had no duty to report/pay tax. If the seller was liable as a boat dealer, the buyer could give a resale certificate or reimburse that seller for tax.

The page's source is broader than the annotation. The same memorandum separately discusses aircraft flight instruction, pilot/charter charges and aircraft entering California before or after 90 days. It cites former Ruling 70 and section 6275. Later notes add that the analysis predates mobile-transportation-equipment rules, that Annotation 330.1840 was revised/moved to 335.0003, that a true charter would make the aircraft owner consumer under Entremont v. Whitsell, and that section 6248 changed temporarily in 2004–2006. This page does not turn those separate issues into a boat holding.

The live Annotation 330.1900 publishes all four basic boat outcomes. It omits the declaration condition, seller/resale-certificate analysis, later general-property warning and missing source records.

Common questions

Could the purchaser voluntarily pay tax on the exempt marina acquisition?

No. The memorandum said a taxpayer could not elect tax on a transaction exempt by law.

What happened if use tax was paid on a nonexempt boat acquisition?

The boats could then be rented without sales or use tax on the rental receipts under the memorandum's historical general-property analysis.

Could a seller's-permit holder use the rental-receipts method?

Yes for a nonexempt acquisition, with the required Board declaration when acquisition use tax otherwise applied.

Did a resale certificate always protect the boat buyer?

No. The memorandum says it was meaningless if the seller had no tax-reporting duty. If the seller was liable as a boat dealer, the buyer could provide one or reimburse the seller.

Did the PDF prove the section 6281 exemption?

No. It states the exemption as a premise and supplies no purchase or exemption record.

Did special mobile-transportation-equipment rules govern this 1965 analysis?

Not according to the later source note. It says those provisions came later and the memo treated all property as general tangible personal property.

Why does the source discuss aircraft?

The same memorandum answered separate aircraft instruction, charter and out-of-state purchase questions. They are provenance for the preserved source, not part of the marina-boat holding.

Is a completed tax outcome shown?

No. There is no actual boat transaction, return, audit, assessment, payment, claim or appeal.

Citations and references

• Revenue and Taxation Code section 6281 — assumed marina acquisition exemption; underlying proof absent
• AB 1 — incomplete reference governing whether a resale certificate to the boat seller had effect
• Revenue and Taxation Code sections 6006(g)(4), 6010(e)(4) and 6023 — later mobile-transportation-equipment rules identified by DHL
• Revenue and Taxation Code section 6275 and former Ruling 70(3)(C) — authorities in the separate aircraft discussion; ruling copy absent
• Entremont v. Whitsell, 13 Cal. 2d 290 (1939) — cited in a later charter note; citation independently resolved
• Revenue and Taxation Code section 6248 — temporary 2004–2006 aircraft changes identified by a later SPJ note
• September 15, 1965 Marysville request — referenced but not reproduced
• October 5, 1965 RHA memorandum — boat and separate aircraft advice; transaction records/outcomes absent
• Later DHL/CLD/SPJ notes — MTE timing, Annotation 330.1840/335.0003 history, charter and section 6248 points; support records absent
• Official Annotation 330.1900 — publishes four boat outcomes without the declaration/resale/source limits

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.1900
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/330-1900.pdf
• Citation verification: Entremont v. Whitsell

Original ruling text

State of California

Board of Equalization

Memorandum
To:

Marysville – Dist. Admin.

From:

Tax Counsel (RHA)

Subject:

Classification of Recreational Vehicles and Vans

Sales or Use Tax on Boats and Airplanes
Your Memorandum of September 15, 1965

330.1900
Date:

October 5, 1965

Note: this memo written before special
rules adopted for MTE (§6006 (g) (4),
6010 (e) (4), 6023) That is, all
properly discussed here treated as
general TPP. DHL
330.1840 revised 10-25-89 and moved
to new annotation # 335.0003.
CLD #460 1-8-90

1. A person purchases a marina including boats and the transaction is exempt under
   Section 6281.
   (a) Tax will apply to receipts from rentals of the boats. (b) Taxpayer has no election to pay sales tax in lieu of tax on the rental receipts since he cannot elect to pay tax on a transaction that is exempt under the law. (c) If the transaction is not exempt under Section 6281 and the purchaser pays use tax to the Board, he may rent the boats without sales or use tax liability. (d) If the transaction is not exempt under Section 6281, but the purchaser has a seller's permit, he may elect to report and pay tax on the receipts from boat rentals. Of course, he would have to make the declaration to the Board if he were required to pay use tax to the Board. Giving a resale certificate to the seller would be meaningless under AB 1 if the seller of the boats is not required to report and pay tax on the sale. If the seller is liable for tax on the sale of the boats (as a boat dealer), the purchaser may give him a resale certificate or reimburse the seller for the tax.
2. An airplane is rented and a charge is added to rental price for: (a) flight instruction; (b)
   services of a pilot to fly the plane.
   (a) A student pilot who secures the services of a pilot for flight instruction is not renting a plane as such, but is buying flight instruction. Tax will apply to specific charges made for rental of the plane even though flight instruction is a business activity of the firm owning the plane. A separate charge for flight instruction is not subject to tax. If billed on a lump sum, the total charge is exempt as the primary purpose of the transaction is flight instruction (a service) and not renting a plane.

Marysville – Dist. Admin.

-2-

October 5, 1965
330.1900

(b) Charter service rentals that include charges for a pilot to fly the plane, billed separately, are receipts from renting the plane and furnishing a pilot to fly it. Separately stated charges for the pilot (if services of the pilot are optional) are not subject to tax. Charges for the rental of the plane are taxable. If billed on a lump sum, the total charge is taxable since the primary purpose of the transaction is a rental and the pilot services are comparable to services connected with a sale. Note: This is based on premise that transaction is a lease. If truly a character, aircraft owner is consumer, tax due on purchase price of aircraft. (see, generally, Entremont Whitsell (1939) 13 cal. 2d.290.) DHL

3. A person purchases an airplane out of state from an airplane dealer or private party and enters
   California in less than 90 days from the date of delivery of the plane. (a) It is presumed that the purchase was made for use in California, and use tax applies to the purchase price of the plane. (b) Tax will not apply to receipts from rental of the plane if use tax has been paid. (c) Taxpayer may elect to pay the use tax on the rental receipts if he is in a bona fide business of renting airplanes. If rental is only incidental to his private ownership and use of the plane, he may not elect to pay tax on rental receipts in lieu of paying the use tax. Reference is made to Ruling 70, subparagraph 3(C) (d) In the case of purchases from private parties, use tax applies to the purchase price of the plane since, under Section 6275 of the Sales and Use Tax Law, every person making any retail sale of an airplane is a retailer.
4. A person purchases an airplane from an out-of-state dealer or a private party and enters
   California with the airplane over 90 days from the date of delivery of the plane. (a) It is presumed that he did not purchase the plane for use in California, and use tax will not be applicable. (b) Tax will apply to receipts from renting the plane. (c) Taxpayer may elect to pay the use tax on the airplane in lieu of paying tax on rental receipts on the theory that in so doing, he admits he purchased the plane for use in California.

RHA:md [lb]
Note: Changes to Rev. & Tax. Code § 6248 for aircraft purchases between 10/1/04 and 6/30/06. SPJ 1/27/05