Did vessels that caught live bait for sportfishing boats engage in commercial deep-sea fishing for California's watercraft exemption?

Plain-English summary

A fleet of 10 to 15 vessels caught live bait for commercial passenger-fishing boats and the public for financial consideration. When sportfishing slowed, the vessels also caught fish for human consumption.

California said fishing operations included catching live bait used by commercial passenger-fishing vessels. The activity was commercial because the operator conducted it for profit; the label bait hauler did not reduce it to transportation alone.

That classification alone did not establish the exemption. Each vessel still had to meet all section 6368 and Regulation 1594 conditions, including the statute's then-current gross-receipts presumption and use outside state territorial waters.

What this means for you

Bait-boat operators, sportfishing fleets, and maritime tax advisers

Document the actual catching activity, profit motive, fishing receipts, operating area, and each vessel's use. A favorable activity label is only one part of the exemption.

Common questions

Q: Was catching live bait a fishing operation?

A: Yes.

Q: Was it commercial?

A: Yes, when conducted for profit.

Q: Did the letter automatically exempt every vessel?

A: No.

Citations and references

• California Revenue and Taxation Code § 6368(a)(2) and (b)
• California Sales and Use Tax Regulation 1594

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 600.0563
• Original supporting opinion: 600.0563 PDF

Original ruling text

600-0563

STATE Of CALIFORNIA

~-

) rATE BOARD OF EQUALIZATION

WILLIAM M. B ENNETT
Fir•t Oiattict. k.entfM:ld

1020 N smEET. SACRAMENTO. CALIFORNIA
(P.O. BOX 942879, SACRAMENTO. CALIFORNIA 94279-000t I (916) 324-8208

BRAD Sl1EIIMAN

Second District, Loe Al,g.les

ERNEST J.ORONENBURG, JR.

Third District. S.n Oieoo
MATTHEW IC FONG

Fourth Disutct, Los Anoelcs
GRAY DAVIS

C ontroll.r, S-eetemento

August 14, 1992

-

BURTONW.OLIVER

b - •Oiro<:tor

·· -----. .

J

• \

• ,

Re:
Dear
This is in response to your letter dated May 22, 1992, in which you state: "This fleet of vessels has traditionally operated off the coast of California, catching live bait for my fleet of commercial passenger fishing vessels, as well as providing this service to the general public. When sportfishing is slow this fleet, which number 1 0-15 vessels, will augment their income by catching and landing various fish species for human consumption. They are commercial deep-sea fishing vessels in every sense of the word, as they lay out their nets, encircle the various bait species so critical to the continued operation of my sportfishing fleet, and then provide that catch to us in return for financial consideration. The phrase, 'bait-hauler', is a common way to describe the vessel, but it is in no way accurate in that they are limited to only transporting bait from one location to another." Revenue and Taxation Code section 6368(a) (2) and (b) reads: "(a) There are exempted from the taxes imposed by this part the gross receipts from the sale of and the storage, use, or other consumption in this state of watercraft and any sales of tangible personal property becoming a component part of that watercraft in the course of constructing, repairing, cleaning, altering, or improving the same, and charges made for labor and

-2-

August 14, 1992

services rendered in respect to that constructing, repairing, cleaning, altering, or improving, if any of the following conditions are met:

"(2) The watercraft is for use in commercial deep sea fishing operations outside the territorial waters of this state by persons who are regularly engaged in commercial deep sea fishing. "(b) 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 twenty thousand dollars ($20,000) a year." One of the requirements for the exemption is that the watercraft be used for fishing operations. Fishing operations include catching live bait which is used for commercial passenger fishing vessels. The fishing operations must be "commercial" which means that the operator is engaged in the fishing operations for a profit. Whether the sales of the watercraft you name in your letter are exempt under section 6368 depends upon whether all of the requirements of this statute and Regulation 1594 are met. We are enclosing a copy of that regulation for your information. If you have questions with regard to any particular requirement in this regulation, please do not hesitate to write to us again. Sincerely,

Elizabeth Abreu
Tax Counsel

.

EA:cl
'

Enclosure
be:

)

San Diego District Administrator