Did replacement refrigerant gas in a system affixed to qualifying watercraft become an exempt component part?

Plain-English summary

A seller asked about refrigerant gas bought by vessel operators to replace refrigerant in systems affixed to their watercraft.

California treated the replacement gas as becoming a vessel component. The sale was exempt under section 6368 only if the vessel also satisfied the operational conditions.

Those conditions required transportation of persons or property for hire in interstate or foreign commerce or commercial deep-sea fishing outside California territorial waters.

What this means for you

Refrigeration suppliers, vessel operators, and tax advisers

Document both the installed system receiving the gas and the vessel's qualifying operations. Component status alone did not establish the complete exemption.

Common questions

Q: Did replacement refrigerant become a component?

A: Yes, in an affixed vessel system.

Q: Was every such sale automatically exempt?

A: No. The watercraft had to meet section 6368's other conditions.

Q: What vessel uses qualified in the letter?

A: Interstate or foreign transportation for hire, or commercial deep-sea fishing outside state waters.

Citations and references

• California Revenue and Taxation Code § 6368

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 600.0660
• Original supporting opinion: 600.0660 PDF

Original ruling text

600.0660

February 6, 1951
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Re: '

Gentlemen:
This is in reply to your letter of November 3, 1950, addressed to Mr. Harry L. Say, Sales Tax Administrator, regarding the applicability of section 6368 of the California Sales and Use Tax Law with respect to sales of refrigerant gas to operators of watercraft for the purpose of replacing regrigerants in systems affixed to the structure of the watercraft.

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We are of the opinion that refrigerant gas thus used may be regarded as becoming a component part of the watercraft so that the sale thereof is exempt from tax under section 6368 if the other conditions necessary for exemption are present. These are, as you know, that the watercraft shall be used in the trans­ portation of persons or property for hire in interstate or foreign commerce or in commercial deep sea fishing operations outside the territorial waters of this state. Very truly yours,

E. H. Stetson
Tax Counsel
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