Was a purchased barge taxable as a vessel even though the buyers later attached it to real property with piling rings and pilings?

Plain-English summary

Buyers purchased a barge, had it towed to its location, and later connected it to real property using piling rings and pilings. An audit assessed $8,112.51 of tax, and the time to petition for redetermination had expired.

The buyers argued that the barge was not a vessel. Counsel disagreed. Section 6273 defined a vessel to include a barge or floating thing designed for navigation, and the fact that this barge had been towed showed it met that definition when acquired.

Its later attachment to real property did not change the tax treatment at the time of purchase. Counsel also found no basis for compromising the assessed tax.

What this means for you

Buyers of barges and floating structures

Tax classification was determined at acquisition. Later fixing the structure to land did not retroactively change a navigable barge into nontaxable real property.

Accountants and tax professionals

Document the object's design, ability to navigate or be towed, condition at purchase, and procedural deadlines. Later use and attachment may not control the acquisition tax.

Common questions

Q: How did the barge reach its location?

A: It was towed there.

Q: Why was it a vessel?

A: Section 6273 included barges and floating things designed for navigation.

Q: Did attaching it with pilings change the result?

A: No. That occurred after purchase and did not alter its status when acquired.

Q: How much tax had the audit determined?

A: $8,112.51.

Q: Did counsel support a compromise?

A: No. The letter said there was no basis to compromise the amount due.

Citations and references

• California Revenue and Taxation Code § 6273
• Sales and Use Tax Annotation 585.0090, as quoted in the letter

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 585.0003.500
• Original supporting opinion: 585.0003.500 PDF

Original ruling text

585.0003.500

STATE OF CALIFORNIA

JOHAN KLEHS
First District, Hayward

STATE BOARD OF EQUALIZATION
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-3723

DEAN F. ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego
BRAD SHERMAN
Fourth District, Los Angeles

December 14, 1995

KATHLEEN CONNELL
Controller, Sacramento

BURTON W. OLIVER
Executive Director

Re: __
Dear _,
Gary Jugum has requested that I respond to your letter to him dated September 25, 1995, concerning the above taxpayer. In your letter, you state that your clients, the purchased a barge which was towed to where it is currently located. The Board has conducted an audit and concluded that the purchase of this barge is subject to tax. Tax was determined in the amount of $8,112.51. Your office has been notified by the Board that, as of July 2, 1995, the time to petition for redetermination of the assessment had expired. You state that it is your clients' position that the barge cannot be classified as a vessel and therefore no tax is due. California Revenue and Taxation Code section 6273 defines ''vessel'' as "any boat, ship, barge, craft, or floating thing designed for navigation in the water" with the exceptions not relevant to your clients. Sales and Use Tax Annotation 585.0090, 8/31/78, 2/26/81 provides, in part: "The term 'vessel' includes houseboats and those floating homes capable of navigation under their own power or suitable for normal towing." Since the purchased the barge and towed it to , the barge constitutes a "vessel" within the meaning of Revenue and Taxation Code section 6273 and is subject to tax. We do not believe that it is relevant that, after the purchase of the barge, the "connected" it to real property by piling rings and pilings." At the time of the purchase, the barge constituted a "vessel" within the meaning of Revenue and Taxation Code section 6273. ’s subsequent use of the barge does not alter our opinion that, at the time of its acquisition, the purchase of the barge was subject to tax. You state in your letter that the are willing to pay a compromised amount in settlement of their liability. We believe that there is no basis for the Board to compromise the amount of the tax due by the ___. Very truly yours, Thomas J. Cooke Staff Counsel