Were charges to clean commercial vessels and marine cargo containers taxable in Texas?

Plain-English summary

Charges for cleaning a vessel and its components, including the described marine cargo containers, were not taxable when the vessel exceeded eight tons displacement and was used exclusively for commercial purposes.

If the vessel displaced less than eight tons of fresh water before being loaded with fuel, supplies, or cargo, the cleaning charges were taxable.

Common questions

What vessel conditions made the cleaning nontaxable? The vessel had to exceed eight tons displacement and be used exclusively for commercial purposes.

Did the treatment extend to components such as marine cargo containers? Yes, under the described rule and vessel conditions.

What if the vessel displaced less than eight tons? The cleaning charges were taxable.

Citations and references

• 34 Tex. Admin. Code Rule 3.297(b) — cited for cleaning vessels and components such as the described marine cargo containers.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8507L0652B08

Original ruling text

July 17, 1985

Dear ***:

Thank you for your recent letter which is restated with response below.

Written advice is hereby requested concerning the applicability of
State Sales and Use Tax to the following situations.

Situation A

Taxpayer partnership is engaged in this state in the business of
providing service in the form of cleaning recyclable containers
transported on commercial vessels weighing eight tons or more.
The containers are shuttled between oil and gas platforms located
offshore this state and are used to carry wellbore cuttings that
result from the drilling of oil and gas wells. The taxpayer also
provides the service of cleaning permanent storage vessels located
within the hull of offshore workboats which are used to transport
drilling mud and other fluids.

Question I

Are the services provided in the above situation subject to sales or
use tax?

Response

Charges for cleaning vessels and their components such as marine
cargo containers described in rule 3.297(b) are not taxable if:

0 the vessel is in excess of eight tons displacement and

0 is used exclusively for commercial purposes

Would the answer to question 1 above change if the commercial
vessels weighed less than 8 tons?

Response

If the vessel displaces less than eight tons of fresh water before being loaded
with fuel, supplies or cargo, the charges for cleaning would be taxable.

This opinion is based upon the facts you presented. If there are additional
or different facts, this opinion may change.

Please feel free to contact us if you have additional questions. You may
write us, call toll free 1-800-252-5555 from anywhere in Texas.

Sincerely,

Tax Policy Section
Tax Administration Division