Were direction finders, radiotelephones, automatic pilots, and depth sounders exempt components of qualifying fishing vessels?

Plain-English summary

Two letters addressed marine navigation and communication equipment sold for vessels used in commercial deep-sea fishing outside California territorial waters.

California treated radiotelephones, direction finders, marine depth sounders, radio transmitters and receivers, and automatic pilots as component parts when substantially affixed or attached to the vessel during use.

Portable navigation, communication, or other equipment did not become a component part and remained taxable. One letter also clarified that in-state delivery from the seller generally presented a sales-tax question rather than a use-tax question.

What this means for you

Marine-electronics dealers, fishers, and tax advisers

Document the installation method and the qualifying use of the vessel. The same device category may receive different treatment depending on whether it is substantially installed or remains portable.

Common questions

Q: Were automatic direction finders exempt?

A: Yes, when substantially affixed or attached in use.

Q: Were portable radios treated the same way?

A: No.

Q: Did the underlying vessel also need to qualify?

A: Yes. The letters assumed qualifying commercial deep-sea fishing use outside state waters.

Citations and references

• California Revenue and Taxation Code § 6368
• 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 600.0380
• Original supporting opinion: 600.0380 PDF

Original ruling text

600.0380

November 21, 1950

Gentlemen:
This is in answer to your letter of October 16 regarding t he taxability under the Sales and Use Tax Law of your sales of such items as radiotelephones, direction finders, marine depth sounders, and "component parts and repairs" to corrmercial fisher ­ men engaged in deep sea fishing operations outside the territorial waters of this State . Enclosed is a copy of Sales and Use Tax Ruling 51 . S. We believe you have confused the use tax with the sales tax in your letter inasmuch as the applicable tax, if any, would be the sales tax where del i veries are made to your customers from your place of business or other point in this State . On the assumption that the watercraft upon which the equipment is to be used is a watercraft "used in commercial deep sea fishing operations outside the territorial waters of this State", the remaining question is whether the equipment sold by you becomes a component part of such watercraft, within the meaning of Section 6368 of the Sales and Use Tax Law and Ruling 51 . S. The ruling indicates in general what will be regarded as becoming a component part of watercraft and what will not be so regarded. Assuming that they are affixed or attached to the watercraft in a substantial manner when in use, radiotelephones, direction finders, and marine depth sounders are regarded as becoming i ngredient or component parts of the watercraft. All navigation and communication equipment of a portable na tune , however, would not be so regarded. Very truly yours,

E. H. Stetson
Tax Counsel
EHS:r

cc:

600.0380

November 21, 1950

Dear Sir:
This is in answer to your letter of October 10
which accompanied your sales and use tax return for the third quarter. Enclosed is a copy of Sales and Use Tax Ruling 51.5 dealing with the exemption from the sales tax of receipts from sales of certain watercraft and property becoming a component part thereof. You will note that if the watercraft is a fishing vessel, i t must be used in commercial deep sea fishing operations outside the territorial waters of this State.

1

J

For property to be regarded as becoming a
component part of watercraft i t must be affixed or attached to the structure of the watercraft in a substantial manner when in use. Thus, if the items mentioned in your letter, namely, radio transmitters and receive rs, automatic direction finders, and automatic pilots are thus affixed or attached while in use, they will b e r e garded as component parts. On the other hand , nav igation or communication equipment or any other equipment of a portable nature are not regarded as becoming a component part of the watercraft and the sale thereof is taxable. Very truly y ours.

E. H. Stetson
Tax Counsel
EHS:ph
cc :

.,

Mr.

son