Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2017
Sales and Use Tax Annotations
600.0000 WATERCRAFT—Regulation 1594
(b) USE IN INTERSTATE OR FOREIGN COMMERCE
600.0124 Watercraft Used in Foreign Commerce. A shipping line acquired a vessel from a foreign affiliate and refurbished it to comply with United States Coast Guard standards. After the vessel was refurbished, it was to be registered and documented under the United States flag and then be time chartered to the United States Navy. The vessel will operate in what is called the Combined Services Management Service. It will provide transportation and storage of general breakbulk cargo, vehicles, ammunition, etc., for the Department of Defense from the west coast of the United States to far east ports.
The purchase of the vessel and the parts becoming a component part of the vessel in the course of refurbishing the vessel qualifies for exemption under section 6368 as a watercraft for use in interstate and foreign commerce involving the transportation of property for hire.
Likewise, the time charter agreement is not subject to tax. It is a service contract, not a contract for the lease of the vessel. Even if this was a bare boat charter (a lease of tangible personal property), it would remain without tax consequence since the vessel constitutes mobile transportation equipment (section 6023) and a lease of mobile transportation equipment is not a sale. 6/8/88.