Could unattached spare engine parts qualify as watercraft components, and was vessel fuel oil treated the same way?

Plain-English summary

California said an item could qualify as a vessel component before it was physically installed if it was itself intended to become part of the watercraft before use. Spare engine parts therefore could fall within section 6368 when the exemption's other conditions were present.

Fuel oil was different. It did not become a vessel component.

The letter described a separate section 6385 rule for fuel oil: a vendor could claim exemption for the portion bought in California beyond the quantity needed to reach the first out-of-state port, if a bill of lading covered it and freight charges accrued.

What this means for you

Vessel operators, engine-parts sellers, fuel vendors, and tax advisers

Separate component inventory from consumable fuel. For pre-use spares, document their intended installation. For any fuel claim, preserve voyage calculations, the bill of lading, and freight-charge records.

Common questions

Q: Did spare parts need to be installed at the sale date?

A: No, if they were to become vessel components before use.

Q: Was fuel oil a component part?

A: No.

Q: Could some fuel still receive separate exemption treatment?

A: Yes, under the historical section 6385 conditions described in the letter.

Citations and references

• California Revenue and Taxation Code §§ 6368 and 6385
• 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 600.0680
• Original supporting opinion: 600.0680 PDF

Original ruling text

600.0680

January 10, 1950

Att

Gentlemen:
In answer to your letter of December 30, we are enclos­ ing a copy of Sales and Use Tax Ruling 51.5, adopted by the Board pursuant to Section 6368 of the Sales and Use Tax Law, exempting from the tax sales of certain watercraft and component parts thereof. It is our opinion that the sale of any articles becom­ ing a component part of a watercraft before being actually placed in use fall within the exemption if otherwise the essential con­ ditions are present, even though the articles in question are not immediately attached to or made a part of the vessel. Thus, spare parts for the engine of a watercraft would be regarded as

becoming a component part of the watercraft, within the meaning

of the law.
With regard to fuel oil, we do not consider that sales thereof fall within Section 6368. Under certain circumstances, however, sales of fuel oil may be regarded as exempt sales in interstate or foreign commerce. Under Section 6385 sales of fuel oil may be claimed as exempt by the vendor where all the conditions specified therein are complied with. We will recognize exemption in the case of fuel oil of that portion of the oil purchased in California in excess of the quantity required by the vessel to reach the first port of call outside this State where such quantity is covered by a bill of lading and freight charges are accrued, in accordance with Section 6385. We are enclosing a copy of the Sales and Use Tax Law so you will have for ready reference the two sections referred to herein. Very truly yours,

E. H. Stetson
Tax Counsel
EHS:ph