Were self-propelled floating platforms that carried recreational vehicles mobile transportation equipment?

Plain-English summary

A manufacturer leased self-propelled floating platforms that carried customers' campers, trailers, motor homes, or other recreational vehicles on lakes and in California's Delta region. Audit staff asked whether the platforms were mobile transportation equipment.

California said no. The cruisers' length and tonnage could bring them within the source's interpretation of a "ship," but MTE also required design for carrying persons or property substantial distances.

The memorandum found that requirement unmet because each cruiser had only a 40-gallon gasoline tank and was typically used in confined areas. It compared the platforms to pilot boats, tugboats, and houseboats rather than substantial-distance transportation equipment.

Because the cruisers were not MTE, the source concluded that the taxpayer's existing practice of reporting tax measured by rental receipts appeared proper.

Reported design and evidence limits

The reported platform had two 40-foot reinforced aluminum pontoons joined by 30 steel beams, a one-inch epoxy-clad deck with 494 square feet, a stated five-ton weight and 32,000-pound displacement, and an 80-horsepower outboard engine. It carried a 40-gallon gasoline tank plus two 100-gallon tanks, one for fresh water and one for sewage. Customers supplied a camper, trailer, drive-away motor home, or other recreational vehicle, which the taxpayer attached to the platform with heavy chains before lowering it into the water.

Those details came from the October 26, 1979 audit memorandum and an attached taxpayer brochure. Neither is included in the official PDF, so the page does not add cruising speed, fuel consumption, actual range, trip logs, carrying limits, engineering records, or lease terms. The manufacturing site and sole California rental location are redacted.

Counsel said the cruisers “appear” to qualify as ships under prior interpretations because of length and net tonnage, yet “do not appear” designed for carrying people or property substantial distances. The conclusion relied on relatively small fuel capacity and typically confined areas of use and analogized the cruisers to pilot boats, tugboats, and houseboats. The source does not quantify the substantial-distance threshold or explain the factual basis for calling the operating areas confined.

The memorandum also says staff reviewed the taxpayer's returns and that the taxpayer appeared to be reporting and paying tax measured by rental receipts. Those returns are absent; no periods, receipts, tax amounts, filing dates, or audit adjustments are stated. The opinion says that method “would appear” proper given the non-MTE classification, not that every return was fully audited or approved.

The live annotation preserves the 40-gallon capacity and substantial-distance conclusion. It omits the construction details, water and sewage tanks, customer loading process, operating locations, cited prior annotations, and review of the taxpayer's returns.

Common questions

Was being long enough to qualify as a ship sufficient?

No. The platform also had to be designed to transport persons or property substantial distances.

What facts showed limited transportation range?

The memorandum relied on the 40-gallon fuel capacity and the cruisers' typically confined areas of use.

How was the lessor reporting tax?

The taxpayer reported tax measured by rental receipts, and the memorandum said that appeared proper because the cruisers were not MTE.

Did the source establish the cruisers' actual travel range?

No. It relied on the reported 40-gallon fuel capacity and typically confined use but supplied no speed, consumption, trip, or range evidence.

Citations and references

• California Revenue and Taxation Code section 6023
• California Sales and Use Tax Regulation 1661(b)(1)
• Business Taxes Law Guide Annotations 335.0040 and 335.0050
• October 26, 1979 audit memorandum and taxpayer brochure — referenced but not included

Verbatim support

From the official November 20, 1979 memorandum:

This conclusion is based both on the relatively small fuel capacity of the cruiser and the typically confined areas of usage.

Based on our conclusion with respect to the nature of the cruisers, it would appear that he is using the proper method of reporting the tax.

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/335-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/335-0045-300.pdf

Original ruling text

State of California

Memorandum

To:

Out of State – Auditing

From:

HQ – Legal (LS)

Board of Equalization

335.0045.300

Date: November 20, 1979

Subject:

This is written in response to your memorandum of October 26, 1979 concerning the subject taxpayer. That memorandum and the brochure attached to it indicate that the taxpayer manufactures and then leases certain self-propelled floating platforms which it calls cruisers. The cruisers are apparently manufactured at the taxpayer’s --- --- --- factory. Each cruiser is built on two 40 foot reinforced aluminum pontoons connected by 30 beams of steel which in turn support a one inch thick epoxy-clad deck. Total deck space is 494 square feet. Each five ton cruiser provides a total displacement of 32,000 pounds; is powered by an 80 horsepower outboard marine engine; contains a 40 gallon capacity gasoline tank, and two 100 gallon tanks one of which is used for fresh water and the other for sewage. The cruisers are leased to customers who wish to vacation on various lakes throughout the country as well as in California’s Delta Region located northeast of San Francisco. The customer provides a camper, trailer, drive away motor home, or other recreational vehicle which the taxpayer then attaches firmly to the cruiser platform with heavy chains. The cruiser is then lowered into the water ready for travel. The taxpayer’s sole rental facility in California is located
--- --- ---.
Your memorandum asked whether these cruisers should be treated as mobile transportation equipment for sales and use tax purposes. In our opinion the cruisers are not mobile transportation equipment. In order to qualify as such under Revenue and Taxation Code Section 6023, Regulation 1661, and our annotation legal opinions, it would have to qualify as a “ship” and be designed to carry persons or property substantial distances. The cruisers in question appear to fit our prior interpretation of the term “ship” due to their length and their net tonnage (see Annotation 335.0040 and 335.0050). However, they do not appear to be designed to carry persons or property substantial distances as

required by Regulation 1661 (b) (1). This conclusion is based both on the relatively small fuel capacity of the cruiser and the typically confined areas of usage. In our opinion the cruisers utilized in the taxpayer’s business should be treated as we treat pilot boats, tug boats, and house boats. That is to say, they should not be regarded as mobile transportation equipment. We have reviewed the taxpayer’s returns in our files and it appears that he is currently reporting and paying tax measured by rental receipts. Based on our conclusion with respect to the nature of the cruisers, it would appear that he is using the proper method of reporting the tax. We hope this has answered your questions. If it has not, or if you would like to discuss the matter further, please call.

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