Were repair parts and operating items for kelp-harvesting watercraft exempt under California's watercraft exemption?

Plain-English summary

A kelp-harvesting operator asked about repair parts and other items used aboard its watercraft.

Ruling 51.5 covered components of watercraft used for interstate or foreign transportation of persons or property for hire or for commercial deep-sea fishing outside California territorial waters.

California said kelp-harvesting vessels performed neither qualifying use. Repair parts and other operating items sold for those vessels were taxable.

What this means for you

Kelp harvesters, marine suppliers, and tax advisers

The fact that equipment is used on the ocean does not establish the watercraft exemption. Identify the vessel's actual operation and match it to a stated qualifying category.

Common questions

Q: Was kelp harvesting treated as commercial deep-sea fishing?

A: No, in this opinion.

Q: Did the vessels transport persons or property for hire?

A: No qualifying transportation was identified.

Q: Were repair parts taxable?

A: Yes.

Citations and references

• California Sales and Use Tax Ruling 51.5, as cited in the source

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 600.0100
• Original supporting opinion: 600.0100 PDF

Original ruling text

600.0100

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

August 31, 1950

--- --- ----- --- ----- --- --Gentlemen:
This is in answer to your letter of August 25 with respect to the application of the State sales tax to sales of repair parts and other items for use on watercraft operated by you for harvesting kelp. The exemption relating to sales of tangible personal property becoming a component part of certain watercraft is governed by Sales and Use Tax Ruling 51.5, copy enclosed. As therein indicated, the tax does not apply with respect to sales of tangible personal property becoming a component part of watercraft for use in interstate or foreign commerce involving the transportation of persons or property for hire, or for use in deep sea fishing operations outside the territorial waters of this State. As the watercraft which you use in harvesting kelp is not engaged in interstate or foreign commerce involving the transportation of persons or property for hire or for use in commercial deep sea fishing operations, it appears that the sale of repair parts and other items used in the operation of such watercraft to you is subject to the tax. Very truly yours,

R. G. Hamlin
Associate Tax Counsel

RGH:HB
cc:

W. R. Thomson