When was a houseboat or floating home personal property taxable as a vessel rather than a permanent addition to real property?

Plain-English summary

Staff used a two-step test for a houseboat or floating home. First, determine whether it remained personal property or had become permanently annexed to real property. Second, if it was personal property, decide whether it was designed for navigation and therefore a vessel under section 6273.

Permanent annexation depended on intent that the property remain for its useful life. Ownership of the underlying real estate or a lease lasting as long as the floating home's life supported that intent. Lack of land ownership or a long-term lease strongly indicated that no permanent attachment was intended.

A floating residence could still be navigable. It did not need its own motor: design for movement over waterways, including normal towing or tug assistance, was enough to make it a vessel.

The memorandum said this approach was broader than two published annotations then scheduled for removal. Staff instructed that the older published rulings still be applied to pending matters predating their removal and that tax not be asserted on transfers previously classified as exempt.

What this means for you

Owners and buyers of floating homes

Residential use did not prevent vessel status. The key facts were permanent-annexation intent and whether the structure was designed to move over water.

Accountants and tax professionals

Review land ownership, lease duration, mooring and attachment method, useful-life intent, towing capability, and the law in effect for the transaction date.

Common questions

Q: Did a floating home need its own engine to be a vessel?

A: No. A structure suitable for towing or tug assistance could be navigable.

Q: What indicated permanent annexation?

A: Intent that the structure remain for its useful life, supported by land ownership or a comparably long lease.

Q: What indicated personal-property status?

A: Not owning the underlying real estate and lacking a long-term lease were strong evidence against permanent attachment.

Q: Did residential use prevent vessel classification?

A: No. A houseboat could be both a residence and a vessel.

Citations and references

• California Revenue and Taxation Code § 6273
• Historical Sales and Use Tax Annotations 150.0240 and 190.0440, discussed as slated for removal

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 585.0090
• Original supporting opinion: 585.0090 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

585.0090

To:

Petitions Unit (RMF)

From:

W. E. Burkett

Subject:

Application of Tax to Floating Homes

Date:

August 31, 1978

I have reviewed these files in light of J. E. Mahler's memo of December 15, 1977 and G. J. Jugum's summary dated February 7, 1978. We agree with the conclusion that a houseboat or floating home is personal property unless it is affixed in such a manner that it becomes permanently annexed to the real property and that the property may be classified as a vessel even though acquired for use as a residence. An item is permanently annexed if affixed in such a manner that the owner intended the property to remain there throughout its useful life. In this connection, it would be helpful in each case to inquire if the owner of the property also owns the real property or holds a lease for a term equal to the life of the houseboat or floating home. If he (or she) does not own the property or hold a long-term lease on the real property, then this is very strong evidence that a permanent attachment was not intended. If the property was affixed with the intention of making a permanent addition to real property, then the title to such property would pass to the owner of the real property when affixed except in the limited situation in which the property was a trade fixture used in a business activity. Very few people would relinquish their ownership interest in a houseboat or floating home by this method. Once it is determined that the property is personal property the sole remaining question is whether the property was designed for navigation in the waters within the meaning of Revenue and Taxation Code Section 6273. The cases set forth in Mr. Mahler’s memo, tell us that a houseboat or floating home is navigable even though it may be outfitted primarily for use as a residence. As stated in the ______ case, quoted at page 4 of the memo: A houseboat is nonetheless a boat because, as its name implies, it affords a waterborne place to live with the added advantage of at least some maritime mobility. That she has no motive power and must, as would the most lowly of dumb barges, be towed does not deprive her of the status of a vessel. (390 F.2d at 597.)

It follows that a houseboat or floating home must be regarded as designed for navigation and therefore a vessel within the meaning of Section 6273, if it is designed for movement over the waterways even though it must be towed or assisted by tugboats. This interpretation is somewhat broader than published Annotations 150.0240 and 190.0440, since they purport to classify certain types of stationary attachments as representing a permanent addition to the property without further qualification. We are initiating the action necessary to remove these rulings from the tax service and to republish a ruling in accordance with the views expressed in these memos. However, since these rulings have been published, they should be applied to all pending cases prior to the date of the removal from the tax service, including the case currently under consideration. We should not attempt to assert tax on a transfer that we have heretofore classified as exempt.

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