Which equipment and supplies could commercial trawlers buy exempt from Texas sales tax?

Plain-English summary

For vessels over eight tons displacement, the Comptroller allowed an exemption for items that entered into and became component parts. Navigation equipment and rigging qualified on that basis; fuel, lubricants, ice or preservatives, groceries, and special-use clothing did not.

A vessel operating exclusively in foreign or interstate coastwise commerce could buy the listed items tax-free if it met all Rule 3.297(b)(4) criteria. The same analysis applied to commercial trawlers over sixty tons. A non-interstate commercial trawler under eight tons had no exemption.

For the interstate or foreign commerce exemption, the owner or operator's certificate needed the issuer's title or position, vessel name, and foreign or interstate destination. A Texas port as the vessel's next stop defeated the exemption.

What this means for you

The component-part exemption and the exclusive-commerce exemption were separate paths. Tonnage, whether an item became part of the vessel, the vessel's operations, and the next destination all affected the result.

Common questions

Which listed items qualified as component parts? Navigation equipment and rigging.

Were fuel, oil, ice, groceries, and special clothing component parts? No.

Could those other supplies ever be exempt? Yes, for a vessel operating exclusively in qualifying interstate or foreign coastwise commerce and meeting Rule 3.297(b)(4).

Did a non-interstate trawler under eight tons qualify? No.

What had to appear on the exemption certificate? The issuer's title, vessel name, and foreign or interstate destination.

Citations and references

• Comptroller Rule 3.297(b)(4) — criteria for vessels operating exclusively in foreign or interstate coastwise commerce.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8706L0819B10

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller June 19, 1987

Dear ***:

Thank you for your letter concerning exemptions provided for certain
ships and ship equipment.

1. Sale of following items to commercial trawler over eight ton to
   interstate boats by retailers:

a. fuel
b. oil and other lubricants
c. navigation equipment
d. rigging
e. ice and other preservatives
f. groceries
g. special use clothing (e.g. rubber, boots, slickers, etc.)

Answer: Vessels in excess of eight tons displacement may only purchase
items tax free that enter into and become a component part. Items such
as navigation equipment (c) and rigging (d) would qualify for exemption;
all others would be taxable.

If the vessels operate exclusively in foreign or interstate coastwise
commerce, then they may purchase these items tax free provided they
meet all the criteria found in Rule 3.297 (b)(4).

2. Sale of items listed above to commercial trawlers over sixty tons:

Answer: Same as above.

3. Sales of items listed above to commercial trawlers less than eight
   tons to non-interstate boats:

Answer: No exemption available.

4. Please clarify "supplies" as it can be widely interpreted:

Answer: Supplies usually covers items such as:

1. Sea stones - necessary for the sustenance and maintenance of its
   passengers and crew during the voyage.

2. Ship's stores -- necessary for the maintenance of the ship during
   its voyage.

3. Ships equipment - necessary for the navigation or operation of the
   vessels or for the accommodation of the cargo and passengers aboard.

Again, this exemption is only available to vessels operating exclusively
in interstate or foreign coastwise commerce. Your clients should obtain
an exemption certificate from the owner or operator. The certificate
should contain the title or position of the person issuing the
certificate, the name of the vessel and the foreign or interstate
destination of such vessel. If the vessel shows a Texas port as its
next stop the exemption is lost.

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,
F. Wayne McDonald
Tax Policy Section
Tax Administration Division