Ezel / Tax Rulings / CA

What did principal use mean when a commercial fishing boat operated both inside and outside California territorial waters?

Short answer It meant actual operating time. To qualify, fishing operations outside California territorial waters had to exceed 50 percent of the boat's total operating time. Principal operation inside state waters made the exemption unavailable.
State
CA
Ruling
Annotation 600.0240
Tax type
Sales and Use Tax
Issued
1951-01-31
Issued by
California State Board of Equalization
Requested by
A redacted inquirer about a mixed-location commercial fishing boat
Topics
commercial deep sea fishing principal use territorial waters
Source
View Original PDF

Apply this to your situation

This page answers the general question as of 1951. Ask about yours and see what current California tax law says, with citations.

Currency note: this ruling is from 1951
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is a January 31, 1951 California State Board of Equalization tax-counsel letter published by CDTFA as support for a sales and use tax annotation. It gives a high-level operating-time test under then-current section 6368 and Ruling 51.5. The later correction incorporated into Annotation 600.0260 further explains treatment of sailing, storage, and idle time. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

A commercial fishing boat operated part of the time outside California territorial waters and part of the time inside them.

California read "principal use" as actual operations. Fishing outside state territorial waters had to account for more than 50 percent of total operating time for the exemption to apply.

If principal use occurred inside California territorial waters, tax applied.

What this means for you

Commercial fishers, vessel dealers, and tax advisers

Maintain contemporaneous operating logs that identify where fishing operations occurred. A bare statement that a boat sometimes fishes offshore does not establish principal use.

Common questions

Q: What did principal use measure?

A: Actual operations.

Q: What threshold applied?

A: More than 50 percent of total operating time outside California territorial waters.

Q: What if most operations occurred inside state waters?

A: The exemption did not apply.

Citations and references

  • California Revenue and Taxation Code § 6368
  • California Sales and Use Tax Ruling 51.5, as cited in the source

Source

Original ruling text

600.0240
January 31, 1951

Gentlemen:
This is in reply to your letter of January 15 regarding the applica­ tion of Section 6368 of the Sales and Use Tax Law where a corrnnercial fishing boat operates a portion of the time outside the territorial waters of the State. Pursuant to Sales and Use Tax Ruling 51.5, adopted pursuant to Section 6368, "The tax does not apply ••• if the principal use of the watercraft occurs outside the territorial waters of this State. The tax applies ••• if the princi­ pal use occurs within the territorial waters of this State." A copy of the ruling is enclosed. We think that "principal use" refers to the actual opera­ tions and, therefore, for the exemption to be applicable these operations must involve fishing outside the territorial waters of this State over fifty per­ cent of the time spent in total operations. Very truly yours,

E. H. Stetson

Tax Counsel
EHS:ph
cc:

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