Was a builder's sale of a floating dry dock exempt after the builder had used it commercially?

Plain-English summary

Texas treated a floating dry dock as a vessel. Its builder's sale was exempt because the law covered vessels of at least eight tons displacement that were used exclusively for commercial purposes and sold by the vessel's builder.

The builder's own commercial use of the dry dock before the sale did not destroy the exemption.

The letter did not make a final commitment on the proposed sale of leasehold improvements. It only noted generally that sales of real property and improvements were not taxable and that a sale of an entire business's operating assets could qualify as an occasional sale.

Common questions

Did Texas consider a floating dry dock a vessel? Yes.

Did the builder's prior commercial use make the later sale taxable? No.

Did the letter finally decide the leasehold-improvement issue? No. The Comptroller wanted further discussion before committing to an answer.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8906L0943C10

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

June 7, 1989

Dear *****:

I just want to take a minute to acknowledge your letter and our
phone conversation yesterday. As we discussed, your firm built
a floating dry dock some years ago. Since that time you have been
using it exclusively for commercial purposes. You asked what the
sales tax consequences would be in various sales situations.

Your sale of the dry dock would be exempt for the following reasons.

• The law exempts the sale of vessels of eight or more tons
  displacement, that are exclusively used for commercial purposes,
  and that are sold by the vessels builder.

• We consider floating dry docks to be vessels.

• The fact that you used the vessel for commercial purposes
  prior to the sale will not void the exemption.

I'd like to talk to you further about the sale of the leasehold
improvements before making a commitment. The sale of real
property and improvements are not subject to tax. In addition,
the sale of the entire operating assets of a business is exempt as
an occasional sale.

This opinion is rendered based on the facts you presented. Other
facts, though similar, may yield different results.

Feel free to call or write me if you have questions. You can
reach me by calling toll free 800-531-5441 or FAX (512) 475-0900.

Sincerely,
Al Van Allen
Taxability Section
Legal Services Division