Could travel time count toward the principal-use test when some sea-urchin and coral fishing occurred outside California waters?

Plain-English summary

A vessel owner dove for sea urchins and coral. Most fishing occurred within three miles of California's coast, but 29 of 128 trips went to international waters and included fishing outside state territorial waters.

Section 6368 covered watercraft used in commercial deep-sea fishing operations outside California waters. An earlier case had excluded a vessel that merely crossed international waters on the way to fishing grounds still inside California waters.

Here, actual fishing occurred outside state waters. California therefore said travel time could be included when determining whether the vessel's qualifying operations were its principal use. The short memorandum did not perform or resolve that final calculation.

What this means for you

Commercial divers, fishing-vessel owners, and tax advisers

Separate transit from actual fishing locations in the vessel log. Travel time may support the test when connected to genuine out-of-state-waters fishing, but crossing those waters only to reach California fishing grounds is different.

Common questions

Q: Did some actual fishing occur outside California waters?

A: Yes.

Q: Could the vessel's travel time be counted?

A: Yes, in determining whether the principal-use test was met.

Q: Did the memorandum hold that the vessel was exempt?

A: No. It resolved how to treat travel time, not the completed principal-use calculation.

Citations and references

• California Revenue and Taxation Code § 6368

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 600.0205
• Original supporting opinion: 600.0205 PDF

Original ruling text

600.0205
November 2, 1987

Gary J. Jugum

This is in response to your memorandum of July 29, 1987. Taxpayer has filed a petition for redetermination of use tax assessed on his purchase of the vessel
. We understand that
dives for sea
urchins and does some coral diving. The majority of his fishing is done within three miles of the California coast, but some fishing is done outside the territorial waters of this state. Revenue and Taxation Code section 6368 provides an exemption for watercraft for use in "commercial deep sea fishing operations outside the territorial waters of this state." You suggest that the circumstances of this case are similar to and The Board held in that case that taxpayer did not qualify for exemption. You suggest that case and the case is that all of the the difference between the fishing done by was within California waters, while 29 of 128 trips were to international waters. case that taxpayer did not qualify for The Board concluded in the exemption because taxpayer did no fishing at all "outside the territorial waters of this state." It was true in that case that taxpayer transited international waters to arrive at California territorial fishing grounds. There was no need, however, to take into consideration travel time since there were no qualifying fishing operations outside the territorial waters of this state. In the case, it appears that taxpayer does engage in deep sea fishing operations outside the territorial waters of this state. Accordingly, it is appropriate to include travel time in determining whether the principal use test is met. GJJ:sr

cc:

Mr. Donald J. Hennessy
Mr. W. E. Burkett