Was paint applied to qualifying watercraft exempt when a painting contractor, ordinarily treated as the paint's consumer, bought and applied it?

Plain-English summary

Board staff asked whether paint lost the watercraft exemption when a painting contractor bought and applied it. Under then-current Ruling 30, the contractor ordinarily would be treated as the paint's consumer.

California said the exemption followed the statutory treatment of property becoming part of qualifying watercraft. It would not add a restriction denying exemption merely because the buyer was the contractor performing the painting.

The standard certificate was designed for vessel operators, but that form problem did not change the transaction's tax status. The memorandum suggested adapting the certificate language for a painting contractor.

What this means for you

Shipyards, painting contractors, paint sellers, and tax advisers

Identify whether the paint becomes part of qualifying watercraft and preserve a certificate suited to the actual contracting chain. Do not assume that ordinary contractor-consumer rules necessarily override a specific property exemption.

Common questions

Q: Did contractor application defeat the exemption?

A: No.

Q: Did the paint need to become part of qualifying watercraft?

A: Yes.

Q: Could the watercraft certificate be adapted?

A: Yes. The memorandum proposed wording changes for contractor use.

Citations and references

• California Revenue and Taxation Code § 6363, as printed in the linked 1952 memorandum
• California Revenue and Taxation Code § 6368, as stated in CDTFA's current annotation
• California Sales and Use Tax Rulings 30 and 51.5, as cited in the source

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 600.0640
• Original supporting opinion: 600.0640 PDF

Original ruling text

Solo o f paint to be applied to watercraft by painting contra ctor.
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May 21, 1952

MAY Z 3 1952

Rnlj_nr, 30 - Ron;d.nUng & Tiefinishine Ruling 51 .5 - Watercraft

"1AST£R FILES

In answer to your m1~:.-:o of Aprll 14, 1 t is our opin1 on t:hq t th•J s~ le of t:'.l:l nt to be appl:1 '3 :1 to w.q tercraft

:is cxe:npt undor S ect1.on 6363 and Rnlinr, 51 . 5 r0ga-rdl0ss of the fact th1t tho pa1~t is np pli Ad by contractors who, unc10r Rnling 30, would be regArded as consur::';rs of the pa.int.

'I'h0 law provides that th12 Stile of property becomj_nR a compon8nt part of certai n wqtercraft 1s exempt and it does not ap pegr th~t we can read into th3 exemotion any qualifica ­ tion that the exemption doas not apply with respect to oaint s old to contrclctors who wj_ll apply the paint to the w:itcrcraft. The f~ct th~t a p~inting contractor could not execute a so-called wate~crnft certificate does not deprive th~ trans 1ction of its exe~pt stq tus. Whila th e certificate is adapted for use by the operator of watercr~ft, it could readily be modified for use by ~ pa i ntine contractor by :lnscrt:1.ng the words nrn painting w:1 tercraft which w 11.~ be used " after the word

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Line 1 of the certificate. In the third lino of the third paragraph th8 •.vord "watercraft" could be stricken out.

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