Were custom fishing nets attached by cable and winch exempt when used in commercial deep-sea fishing operations?

Plain-English summary

A custom fishing-net type was attached to a boat by cable handled on a permanently installed winch. The nets were made to order according to the particular boat's size and horsepower.

California had initially said the nets were not sufficiently integral and substantially attached to fall within the watercraft exemption. On reconsideration, it found that their construction, attachment, and use did not materially differ from purse-seine nets or dragnets already treated as exempt.

Sales of the nets for qualifying commercial deep-sea fishing operations were therefore exempt under section 6368. Purchasers had to give retailers watercraft certificates. For past tax reimbursement, the retailer—not the consumer—had to apply to the Board for a refund.

What this means for you

Commercial fishers, net makers, and marine suppliers

Document how a custom net is designed for, attached to, and operated with the vessel, and obtain the required certificate before treating a sale as exempt. Refund procedure may run through the retailer rather than the vessel operator.

Common questions

Q: Had California previously reached the opposite result?

A: Yes. This letter expressly reconsidered an October 28, 1974 position.

Q: Why were the nets treated as exempt?

A: Their construction, attachment, and use were materially similar to exempt purse-seine nets and dragnets.

Q: Could a consumer directly claim the historical refund described?

A: No. The retailer had to apply after receiving the certification.

Citations and references

• California Revenue and Taxation Code §§ 6051, 6052, and 6368
• California Sales and Use Tax Regulation 1595, as cited in the source

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 600.0430
• Original supporting opinion: 600.0430 PDF

Original ruling text

600.0430
December 2, 1974

This is in reply to your letter dated October 31, 1974, concerning the application of sales tax to sales of REDACTED TEXT nets. We understand that REDACTED TEXT nets, like purse seine nets, are attached to the boat by means of a cable held by turns on a winch drum. The winch is sued to pay out and take in the cables. The winch is secured to the deck and is a permanent part of the boat’s structure. REDACTED TEXT nets, like purse seine nets, are not purchased ready to use. Rather they are made to order and are of a size dependent on the size and horsepower of the particular boat. We took the position in our letter to you dated October 28, 1974, that a REDACTED TEXT net does not become an integral part of a commercial deepsea fishing vessel, affixed or attached thereto in a substantial manner when in use, within the scope of this test as set forth in our Regulation 1595 “Watercraft” and that, accordingly, the exemption provided by Revenue and Taxation Code sections 6368 was inapplicable. We have reconsidered our position at your request and are now of the opinion that sales of REDACTED TEXT nets for use in conjunction with commercial deepsea operations are exempt from tax under the “Watercraft” exemption provided under section 6368.

REDACTED TEXT

-2-

December 2, 1974

Purse seine nets have been exempt from tax under section 6368. Based on similarity to purse seine nets, dragnets have been considered exempt from tax. The construction, attachment and use of REDACTED TEXT nets do not differ materially from purse seine nets or dragnets, and are therefore also considered to fall within the “Watercraft” exemption. Note that the California sales tax is a tax upon the retailer, and not the consumer, of tangible personal property (Section 6051). The retailer is permitted to collect reimbursement for the tax from the consumer (Section 6052). In order to avoid payment of tax reimbursement, purchasers of REDACTED TEXT nets will have to provide their retailers with watercraft certifications. In order to obtain refunds on tax reimbursement paid in the past, certifications would have to be provided and the retailer will have to apply to the Board for a refund. There is no provision in the code for a consumer to apply directly to the Board for a refund. If you have any further questions, please contact us again. Very truly yours,

H. L. Cohen
Legal Counsel
HLC:rl