Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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600.0000 WATERCRAFT—Regulation 1594

Annotation 600.0123.125


600.0123.125 Vessel Used to Clean Oil Spills. A California taxpayer is purchasing a 48 foot vessel from an out-of-state retailer which is scheduled to be delivered to taxpayer in California. The vessel will be moored in a California port in stand-by condition ready for quick response to assist in oil spill cleanup. The taxpayer believes the vessel will be involved in interstate commerce because it will be used in aiding vessels delivering Alaskan crude oil into California. The vessel will be hired by subscription member companies for oil spill response.

Although a vessel that carries oil from Alaska to California is involved in interstate commerce when the spill occurs, the oil loses its character as property being transported for hire in interstate commerce when it is lost from the vessel at sea. The taxpayer is hired to clean up the oil spill, not for hire in interstate commerce. Thus, the taxpayer's use of the vessel does not satisfy the requirements for the watercraft exemption and is subject to use tax. 11/5/96.