Did sales and long-term leases of barges qualify for South Carolina's historical maximum tax as boats under RR 06-6?

Plain-English summary

South Carolina Revenue Ruling 06-6 treated a barge as a boat for the state's historical maximum sales-and-use-tax provision. A retail sale therefore qualified for the then-$300 cap when the barge was used as water transportation.

A retail lease received the same treatment only when it was in writing, expressly stated a term longer than 90 continuous days, and remained in force for that period. Every renewal was a separate taxable event and qualified for the cap only if the renewal independently satisfied those written-term requirements.

The ruling also classified a qualifying barge as a boat under the casual excise tax provisions. But a barge permanently affixed to a dock, the ocean, a lake or river bottom, or other realty was not used as a boat and did not receive the maximum-tax treatment.

RR 18-5 later superseded this ruling. It updated the cap and added discussion of the exemption for barges over 50 tons burden.

What this means for you

Barge buyers

The threshold classification was whether the barge functioned as movable watercraft. A permanently affixed structure did not qualify as a boat under the ruling.

Barge lessors and lessees

The lease had to be written, state a term exceeding 90 continuous days, and actually remain in force for that period. The same conditions applied separately to renewals.

Private-party transactions

The ruling also treated a qualifying barge as a boat for casual excise tax, subject to that tax's separate provisions.

Common questions

Q: Did a 90-day lease qualify?
A: No. The stated term had to be longer than 90 continuous days.

Q: Did a renewal automatically keep the cap?
A: No. Each renewal had to be written, state a term over 90 continuous days, and remain in force for that period.

Q: Did a permanently moored barge qualify?
A: No. The ruling excluded a barge permanently affixed to a dock, water bottom, or other realty.

Q: Is the $300 cap current?
A: No. RR 18-5 superseded this ruling and described the later 5% tax capped at $500, along with the over-50-ton exemption.

Citations and references

• S.C. Code Ann. § 12-36-2110 — historical maximum tax on boats
• S.C. Code Ann. § 12-36-100 — includes a lease within the definition of sale
• S.C. Code Ann. § 50-21-10 — boat and vessel definitions used by the Department
• S.C. Code Ann. §§ 12-36-1710 through 12-36-1740 — casual excise tax provisions
• SC Revenue Ruling #18-5 — superseding barge guidance

Source

• Landing page: SC Advisory Opinion Search
• Original PDF: RR06-6.pdf
• Superseding guidance: RR18-5.pdf

Original ruling text

State of South Carolina

Department of Revenue

301 Gervais Street, P. O. Box 125, Columbia, South Carolina 29214
Website Address: http://www.sctax.org
SC REVENUE RULING 06-6
SUBJECT:

Barges - Maximum Tax Provisions
(Sales and Use Tax)

EFFECTIVE DATE:

Applies to all periods open under the statute.

SUPERSEDES:

All previous documents and any oral directives in conflict herewith.

REFERENCES:

S. C. Code Ann. Section 12-36-2110 (2000; Supp. 2005)
S. C. Code Ann. Section 50-21-10 (Supp. 2005)

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2000)
S. C. Code Section 1-23-10(4) (Supp. 2005)
SC Revenue Procedure #05-2

SCOPE:

The purpose of a Revenue Ruling is to provide guidance to the public
and to Department personnel. It is an advisory opinion issued to apply
principles of tax law to a specific set of facts or general category of
taxpayers. It is the Department’s position and is binding on agency
personnel until superseded or modified by a change in statute,
regulations, court decision, or another Departmental advisory opinion.

Questions:

1. Is the sale at retail of a barge entitled to the maximum tax as a “boat” under Code Section 1236-2110?
2. Is the lease at retail of a barge entitled to the maximum tax as a “boat” under Code Section
   12-36-2110?
   Conclusions:
3. It is the Department’s opinion that the sale of a barge is entitled to the maximum tax under
   Code Section 12-36-2110 as a “boat.”
4. It is the Department’s opinion that the lease at retail of a barge is entitled to the maximum tax
   under Code Section 12-36-2110 as a “boat,” provided (1) the lease is in writing and (2) the
   lease specifically states a term of, and remains in force for, a period in excess of ninety
   continuous days.
   In addition, the sales or use tax applies to each renewal of the lease and the maximum tax for that
   renewal will only apply if (1) the lease renewal is in writing and (2) the lease renewal
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specifically states a term of, and remains in force for, a period in excess of ninety continuous
days.
Note: A barge that is permanently affixed to a (1) dock, (2) the ocean, lake or river bottom, or (3)
any other realty is not used as a “boat” and is not entitled to the maximum tax under Code
Section 12-36-2110.
Discussion:
The first issue concerns whether the sale of a barge qualifies for the maximum tax. Code Section
12-36-2110(A) reads in part:
(A) The maximum tax imposed by this chapter is three hundred dollars for each sale
made after June 30, 1984, or lease executed after August 31, 1985, of each:
(1) aircraft, including unassembled aircraft which is to be assembled by the purchaser,
but not items to be added to the unassembled aircraft;
(2) motor vehicle;
(3) motorcycle;
(4) boat;
(5) trailer or semitrailer, pulled by a truck tractor, as defined in Section 56-3-20, and
horse trailers but not including house trailers or campers as defined in Section
56-3-710 or a fire safety education trailer;
(6) recreational vehicle, including tent campers, travel trailer, park model, park trailer,
motor home, and fifth wheel; or
(7) self-propelled light construction equipment with compatible attachments limited
to a maximum of one hundred sixty net engine horsepower.
In the case of a lease, the total tax rate required by law applies on each payment until the
total tax paid equals three hundred dollars. Nothing in this section prohibits a taxpayer
from paying the total tax due at the time of execution of the lease, or with any payment
under the lease. To qualify for the tax limitation provided by this section, a lease must be
in writing and specifically state the term of, and remain in force for, a period in excess of
ninety continuous days.
It is an accepted practice in South Carolina to resort to the dictionary to determine the literal
meaning of words used in statutes. For cases where this has been done, see Hay v. South
Carolina Tax Commission, 273 S.C. 269, 255 S.E.2d 837 (1979); Fennell v. South Carolina Tax
Commission, 233 S.C. 43, 103 S.E.2d 424 (1958); Etiwan Fertilizer Co. v. South Carolina Tax
Commission, 217 S.C. 484, 60 S.E.2d 682 (1950).
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The Second College Edition of the American Heritage Dictionary defines the words “boat” and
“barge” as follows:
Boat

1. A relatively small, usually open craft. 2. A ship. …

Barge

1. A long, large, usually flat-bottomed boat that is unpowered and towed
   by other craft, used for transporting freight, 2. A large pleasure boat. 3. A
   powerboat reserved for the use of a flag officer.

Furthermore, even though Code Section 12-36-2110 does not refer to the definition of “boat” in
Code Section 50-21-10(2), it is proper to do so under the following rule of statutory construction
from 73 Am. Jur. 2d Statutes, Section 103:
Under the rule of statutory construction of statutes in pari materia, statutes are not to be
considered as isolated fragments of law, but as a whole, or as parts of a great, connected,
homogenous system. Such statutes are considered as if they constituted but one act, so
that sections of one act may be considered as though they were parts of the other act, as
far as this can reasonably be done. Indeed, as a general rule, where legislation dealing
with a particular subject consists of a system of related general provisions indicative of a
settled policy, new enactments of a fragmentary nature on that subject are to be taken as
intended to fit into the existing system and to be carried into effect conformably to it,
unless a different purpose is shown plainly.
Code Section 50-21-10(2) defines the word “boat” as follows:
“Boat” means a vessel:
(a) manufactured or used for recreational or commercial use;
(b) leased, rented, or chartered for recreational or commercial use; or
(c) used to carry any passengers either for recreational or commercial purposes.
Code Section 50-21-10(26) defines the word “vessel” as follows:
“Vessel” means every description of watercraft, other than a seaplane on the water, used
or capable of being used as a means of transportation on water.
Based on the above, the sale at retail of a barge is entitled to the maximum tax under Code
Section 12-36-2110 as a “boat.”
The second issues concerns the application of the maximum tax to the lease of a barge.
Code Section 12-36-100 defines the term “sale” to include “a rental, lease, or other form of
agreement.” In addition, as stated above, the maximum tax provisions of Code Section 12-362110(A), which includes boats, states in part:
In the case of a lease, the total tax rate required by law applies on each payment until the
total tax paid equals three hundred dollars. Nothing in this section prohibits a taxpayer
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from paying the total tax due at the time of execution of the lease, or with any payment
under the lease. To qualify for the tax limitation provided by this section, a lease must be
in writing and specifically state the term of, and remain in force for, a period in excess of
ninety continuous days.
Therefore, the lease at retail of a barge is entitled to the maximum tax under Code Section 12-362110 as a “boat,” provided (1) the lease is in writing and (2) the lease specifically states a term
of, and remains in force for, a period in excess of ninety continuous days.
In addition, the sales or use tax applies to each renewal of the lease and the maximum tax for that
renewal will only apply if (1) the lease renewal is in writing and (2) the lease renewal
specifically states a term of, and remains in force for, a period in excess of ninety continuous
days.
In addition, based on the above discussion, a barge is also considered a boat under the Casual
Excise Tax provisions found in Code Sections 12-36-1710 through 12-36-1740.
Note: A barge that is permanently affixed to a (1) dock, (2) the ocean, lake or river bottom, or (3)
any other realty is not used as a “boat” and is not entitled to the maximum tax under Code
Section 12-36-2110.
SOUTH CAROLINA DEPARTMENT OF REVENUE
s/Ray N. Stevens
Ray N. Stevens, Director
, 2006
September 6
Columbia, South Carolina

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