Did fees from taking sportfishing parties out for hire count toward the former $5,000 commercial-fishing-receipts test?

Plain-English summary

Training participants asked whether fees charged by sportfishing party boats counted toward the former $5,000 annual-receipts presumption used to decide whether a person was regularly engaged in commercial deep-sea fishing.

California said yes. Taking fishing parties out for hire was a commercial fishing operation, so those fees entered the receipts calculation under section 6368 even though Regulation 1594 used the shorter phrase fish receipts.

The same memorandum separately told auditors to use the actual lease contract when deciding whether a mobile-transportation-equipment lessor separately stated tax or represented it as the lessee's obligation. Negotiation statements outside the final contract were not enough.

What this means for you

Sportfishing operators and maritime tax advisers

Classify all revenue generated by the fishing operation, including passenger fees, under the law applicable to the period. Historical dollar thresholds and presumptions may have changed, so confirm the current statute before relying on this 1980 memorandum.

Common questions

Q: Did party-boat passenger fees count as commercial fishing receipts?

A: Yes.

Q: What threshold did the memorandum discuss?

A: A historical $5,000 annual gross-receipts presumption.

Q: What controlled the separate lease-tax representation question?

A: The actual contract, not oral negotiations or other statements outside it.

Citations and references

• California Revenue and Taxation Code § 6368(b)
• California Sales and Use Tax Regulation 1594(a)(3)
• Senate Bill 1019

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 600.0130
• Original supporting opinion: 600.0130 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

600.0130

To

All Training Class Participants

Date: March 17, 1980

From Mary C. Armstrong
Legal

Subject: SB 1019

Two questions needing further clarification were raised during the recent training classes. Both of the questions were in reference to Senate Bill 1019. 1. Q. Are fees for sport "fishing includable in the computation of the $5,000 aggregate amount under Regulation 1594(a)(3) when determining whether or not a person “is regularly engaged in commercial deep sea fishing?” A. We note that although Regulation 1594(a)(3) as amended makes reference not to "commercial fishing operations" but to "fish receipts," Senate Bill 1019 which amended Revenue and Taxation Code Section 6368 provides: "(bl For purposes of this section, it shall be rebuttably presumed that a person is not regularly engaged in the business of commercial deep sea fishing if the person has gross receipts from commercial fishing operations of less than five thousand dollars ($5,000) a year." {Emphasis added) We have determined that receipts from fees from sport fishing are clearly within the meaning of the term "commercial fishing operations" as provided in Revenue and Taxation Code Section 6368. It has long been the position of the board that fishing party boat operators are engaged in "commercial fishing operations" when they take out fishing parties for hire. This view is expressed in Business Tax Annotations 600.0160 and 600.0180. As such, receipts from fees from party boat operations may properly be used to determine whether a given operator has reached the $5,000 aggregate amount imposed by Senate Bill 1019.

All Training Class Participants

-2-

2.
Q. With regard to the lease of mobile transportation equipment, if there are written or oral representations made in lease negotiations which raise the implication that the tax is the lessee's obligation, but the lease contract itself does not separately state the tax, should the lessor be considered to have had separately stated the tax and represented to the lessee that the tax was the lessee's obligation? A. No. We will look to the actual contract as the final embodiment of the terms of the contract to determine whether or not lessors of mobile transportation equipment have separately stated the tax or represented the tax as the lessee's obligation. To the extent Mr. Don Hennessy's letter of February 20, 1980 makes reference to "oral representations" or "statements in the lease documentation" as being enough to cause the Board's auditors to make a finding that the lessor has caused the lessee to believe the tax is imposed on the lessee, it should be disregarded. The intentionally strong language in Mr. Hennessy's letter was to alert lessors of mobile transportation equipment to some of the dangers involved, however, auditors should look only to the actual contract to determine whether such representations have been made.

MCA:ba

cc:

Mr. Don Brady.
Mr. R. Nunes
Mr. D. Hennessy
Mr. D. Craig
Mr. B. Henline
Mr. T. O’Brien