Tax Type
Retail Sales and Use Tax
Watercraft Sales and Use Tax
Description
Purse boats; Watercraft purchased by commercial waterman
Topic
Taxability of Persons and Transactions
Date Issued
12-05-1990
December 5, 1990
Dear ****
This is in reply to your letter of April 27, 1990, in which you request a ruling as to the application of the retail sales and use tax and watercraft sales and use tax commercial fishing vessels purchased by your client, * * * (the Taxpayer).
FACTS
The Taxpayer is in the business of commercial fishing. The Taxpayer has entered into a contract with an out-of-state boat yard for the construction of four "purse boats". A "purse boat" is a small fishing vessel approximately 38 feet in length which is lowered from the side of a larger fishing vessel for the purpose of deploying and retrieving commercial fishing nets. After the fish are spotted, the "purse boats" are launched to encircle the fish with the nets. The nets are then retracted, drawing the fish close to the larger fishing vessel, where the fish are extracted from the water. The "purse boats" are used solely and exclusively for extracting fish for commercial purposes. Approximately 50% of the time, these boats will be operated within Virginia waters.
The Taxpayer is requesting a ruling as to whether or not the "purse boats" will be exempt from the watercraft sales and use tax and also the retail sales and use tax.
RULING
Fishing vessels used by commercial watermen are exempt from the retail sales and use tax. Instead, such vessels are generally subject to the watercraft sales and use tax. For purposes of the watercraft sales and use tax, Va. Code§ 58.1-1401 defines watercraft as follows:
- "Watercraft" means any contrivance (i) used or which is capable of being used as a means of transportation on water, (ii) which is fifteen feet or more in overall length measured along the centerline and (iii) which is powered by a motor in excess of twenty-five horsepower. The term shall also include any sail-powered vessel (i) used or which is capable of being used as a means of transportation on water and (ii) which is in excess of eighteen feet in length measured along the centerline. The term shall not include a seaplane on the water or a watercraft which has a valid marine titling document issued by the United States Coast Guard.
It is apparent form the description of the "purse boats" in question that they would qualify as a watercraft for purposes of the watercraft sales and use tax.
Va. Code§ 58.1-1404 sets forth the exemptions applicable to the watercraft sales and use tax. Subsection C provides that "any watercraft constructed by a commercial waterman for his own use shall be exempt from the tax imposed under this chapter." The exemption, as it pertains to commercial watermen, is only applicable when the actual vessel is constructed by the waterman for his own use. There is no exemption from the watercraft tax for watercraft purchased by or constructed by a boat yard on behalf of a commercial waterman.
Based upon the information presented, the "purse boats" will be subject to the watercraft sales and use tax.
It should be noted that legislation enacted by the 1990 General Assembly has raised the watercraft tax cap from $1,000 to $2,000 effective July 1, 1990.
If you should have any further questions, please feel free to contact the Department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner