How did Texas tax boat repair and installation work in 1987, and what vessels did the Comptroller treat as commercial?

Plain-English summary

The Texas Comptroller treated work on qualifying commercial vessels more favorably than work on pleasure or other noncommercial boats. The letter generally defined a commercial vessel as one used to produce income and profit, not for pleasure, and exceeding eight tons displacement. It said pleasure and sports-fishing vessels did not qualify regardless of size.

For charter fishing, however, the answer said a vessel "of 8 tons displacement" used exclusively for that activity qualified. That wording differs from the letter's otherwise repeated "exceed 8 tons" test.

Repair, renovation, and remodeling labor and materials for items such as stairs, ladders, transoms, and swim platforms were taxable unless performed on a commercial vessel. Equipment installation was nontaxable on a commercial vessel; on a noncommercial vessel it was taxable when part of repair, remodeling, maintenance, or restoration service.

For a noncommercial vessel, separately stated battery-installation labor was nontaxable, but combining it with the battery charge made the entire charge taxable. New or repaired fishing-equipment installation was also nontaxable when separately stated unless it was part of the repair operation. The letter applied the same commercial-versus-noncommercial treatment to towing, haul-out and launch, and drydocking labor.

What this means for you

The vessel's actual use, tonnage, and pleasure-versus-income-producing character controlled the classification. For noncommercial vessels, whether installation labor was separately stated and whether it formed part of a broader repair operation affected the result.

Common questions

Did commercial documentation alone establish the exemption? No. The Comptroller asked to review any documentation and focused on tonnage and actual use.

Did a pleasure boat qualify merely because it exceeded eight tons? No.

Did an exclusively charter-fishing vessel qualify? The letter said a vessel of eight tons displacement used exclusively for charter fishing qualified as commercial.

Were repairs to a noncommercial vessel taxable? The letter generally said yes.

Could installation labor on a noncommercial vessel be nontaxable? Yes in the stated battery and fishing-equipment situations when separately stated and not part of a taxable repair operation.

Citations and references

• The letter stated the vessel classification and service rules without citing a numbered statute or Comptroller rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8703L0807G11

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller March 11, 1987

Dear *:

Thank you for your letter asking for specific guidelines on the
taxability
of the services you perform on boats.

Your last questions ask for guidelines in classifying boats as
commercial,
which I will answer first. Your first question involves specific
services
and will be answered last since some of the answers will depend on the
classification of the vessel.

Question 1: Are vessels 8 tons or over that are privately owned, but
are documented as commercial, tax exempt?

Answer. In order to qualify as a commercial vessel the vessel must
exceed 8 tons and may not be used for pleasure. I am not certain what
you mean by "documented as commercial," but will give you our opinion
on any documentation you may wish to submit. Vessels used for pleasure
or sports fishing do not qualify as "commercial" regardless of size.

Question 2: Are vessels that are chartered for fishing, tax exempt?

Answer: A vessel that is of 8 tons displacement and is used exclu-
sively for charter fishing, is qualified as a commercial vessel.

Question 3: What does constitute "Commercial."

Answer: In order to be "commercial" the vessel must be used or engaged
in work for the purpose of producing income and profit, and must exceed
8 tons displacement.

Question 4: We would appreciate a specific ruling as to what is taxable
and what is tax exempt on the work we perform.

Answer (a): All labor and material used to repair, make or make over
the interior and exterior of a vessel, such as stairs, ladders, transoms
and swim platforms; taxable unless performed on a commercial vessel.

(b): Install new or reinstall equipment such as washing machines, dryers,
refrigerators, air conditioners, carpets, drapes and blinds; not taxable
on a commercial vessel. Taxable on a non-commercial vessel if part of a
repair, remodeling, maintenance or restoration service.

Installation of electrical equipment new or repaired; not taxable on a
commercial vessel, same as Answer B.

(c): Installation of batteries; not taxable if a commercial vessel; not
taxable on a non-commercial vessel if installation charges are
separately stated
from the charge for the battery. Otherwise the entire charge is taxable.

(d): Installation of new or repaired fishing equipment, such as rod
holders, tackle boxes; not taxable on a commercial vessel; not taxable
on a non-commercial vessel if installation charges are separately stated
unless
part of the repair operation.

(e): Labor to tow a vessel from its berth to our repair facility same as
answer (b).

(f): Labor to haul out and launch a vessel; same as Answer B.

(g): Labor to haul out and drydock a vessel; same as Answer B.

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

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Administration Division.

Sincerely,
Tom Soto
Tax Policy Section
Tax Administration Division