Did diesel bought for a sportfishing trip that began and ended in California qualify for the carrier exemption?

Plain-English summary

A sportfishing vessel carrying members of the public for hire could meet the regulation's common-carrier definition, but that status alone did not exempt its diesel purchases.

Fuel consumed on a trip that began and ended in California was not shipped by the seller through the purchasing carrier under a bill of lading to a specified out-of-state destination. The section 6385(a) exemption therefore did not apply.

The memorandum also concluded that diesel was not an exempt component part of the vessel under Regulation 1594. Like oil and grease, it was a consumable supply rather than property substantially affixed to the watercraft.

Common questions

Could a sportfishing boat be a common carrier?

Yes, where it carried any member of the public for compensation, but all exemption conditions still had to be met.

Why did a California round trip fail?

There was no shipment to a specified destination outside California under the required bill of lading.

Was diesel an exempt vessel component?

No. The memorandum classified it as a consumable supply.

Citations and references

• California Revenue and Taxation Code section 6385(a) — historical common-carrier exemption quoted
• California Code of Regulations, title 18, section 1621 — bill-of-lading and out-of-state-destination requirements applied
• California Code of Regulations, title 18, section 1594(c)(2) — watercraft component-part rule applied to diesel

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/500-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/500-0056.pdf

Original ruling text

State of California

Board of Equalization
Legal Division

Memorandum
To

: Audit Review & Refunds

From

: Legal (RLD)

500.0056
Date :

December 14, 1982

Subject : Commercial Passenger Fishing Vessel

This is in reply to your October 6, 1982 memorandum regarding a letter you received from the __. Specifically, you asked: "Can the commercial fishing vessels as described in the attached letter also be considered common carriers as defined in Regulation 1621?" The letter from the association states that the vessels are used in the business of carrying any member of the public for hire. Although we agree that the members who so use their vessels are "common carriers" as defined in the regulation, we do not think that the exemption provided in the regulation would generally apply to the sportfishing vessels. The exemption is based on Section 6385(a), Revenue and Taxation Code, which provides: "There are exempted from the computation of the amount of the sales tax the gross receipts from sales of tangible personal property to a common carrier, shipped by the seller via the purchasing carrier under a bill of lading whether the freight is paid in advance, or the shipment is made freight charges collect, to a point outside this State and the property is actually transported to the out-of-state destination for use by the carrier in the conduct of its business as a common carrier. The term "common carrier," as used in this section, with respect to water transportation, shall be deemed to include any vessel engaged, for compensation, in transporting persons or property in interstate or foreign commerce." It is obvious that fuel consumed in a sportfishing trip that commences and ends in California would not be “shipped by the seller via the purchasing carrier…to a point outside this state". As provided at Regulation 1621 (d) (1) (A.), "The bill of lading must show the seller as consignor. It must indicate that the described goods are consigned to the common carrier at a specified destination outside this state”. (Emphasis added.) "Regulation 1594 specifically states that oil and grease are not considered component parts of watercraft. Can Diesel fuel be included as not being a component part under this Regulation?"

500.0056

It is our opinion that diesel fuel is not a component part of a vessel. Regulation 1594(c) (2) lists the excluded items: "Property is not considered a component part of a watercraft for purposes of the exemption if it is a kind commonly treated as expense items and is not affixed or attached to the watercraft in a substantial manner when in use. The following examples are illustrative only, and do not constitute a complete list: "Portable equipment,… oil, grease, soap, cleaning materials and other consumable supplies." Diesel fuel is clearly a consumable supply. We hope this answers your questions; however, if you need further information feel free to write again.

RLD: jw