Did paint thinner used by steamship operators become an exempt component part of watercraft?

Plain-English summary

Steamship operators argued that paint thinner became part of watercraft and should receive the component-part exemption.

California rejected that position because the thinner evaporated during the paint-drying process. It therefore did not become a component part of the vessel.

The letter says company counsel found no basis for the exemption theory and that the companies had withdrawn or would withdraw their objections to paying sales-tax reimbursement to vendors.

What this means for you

Vessel operators, paint suppliers, and ship-repair contractors

Track what remains in the finished vessel. A material consumed or evaporated during application may be taxable even when the coating left behind becomes part of the watercraft.

Common questions

Q: Did thinner remain in the finished paint?

A: No. The source says it evaporated in drying.

Q: Did it qualify as a vessel component?

A: No.

Q: What happened to the companies' objections?

A: The letter says they had been or would be withdrawn.

Citations and references

• California Revenue and Taxation Code § 6363, as printed in the source
• 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 600.0620
• Original supporting opinion: 600.0620 PDF

Original ruling text

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Pa int- thinner sold to watercraft operators.
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