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Business Taxes Law Guide—Revision 2024
Sales And Use Tax Law
Revenue and Taxation Code
Division 2. Other Taxes
Part 1. Sales and Use Taxes
Chapter 4. Exemptions
Article 1. General Exemptions
Section 6368
6368. Watercraft. (a) There are exempted from the taxes imposed by this part the gross receipts from the sale of and the storage, use, or other consumption in this state of watercraft and any sales of tangible personal property becoming a component part of that watercraft in the course of constructing, repairing, cleaning, altering, or improving the same, and charges made for labor and services rendered in respect to that constructing, repairing, cleaning, altering, or improving, if any of the following conditions are met:
(1) The watercraft is for use in interstate or foreign commerce involving the transportation of property or persons for hire.
(2) The watercraft is for use in commercial deep sea fishing operations outside the territorial waters of this state by persons who are regularly engaged in commercial deep sea fishing.
(3) The watercraft is functionally used 80 percent or more of the time in the transporting for hire of property or persons to vessels or offshore drilling platforms located outside the territorial waters of this state.
(b) For purposes of this section, it shall be rebuttably presumed that a person is not regularly engaged in the business of commercial deep sea fishing if the person has gross receipts from commercial fishing operations of less than twenty thousand dollars ($20,000) a year.
(c) For purposes of this section, it shall be rebuttably presumed that the watercraft is not regularly used in interstate or foreign commerce involving the transportation for hire of property or persons, if the yearly gross receipts of the person using that watercraft in the transportation of property or persons do not exceed 10 percent of the cost of that watercraft to him or her, or twenty-five thousand dollars ($25,000), whichever is less.
History—Added by Stats. 1949, p. 2120, in effect October 1, 1949. Stats. 1979, Ch. 1161, operative January 1, 1980, added "by persons who are regularly engaged in commercial deep sea fishing" to first sentence and added (b). Stats. 1984, Ch, 1707, deleted "for use … deep sea fishing" after first "watercraft" in (a), substituted "that" for "such" before "constructing" in (a), added "if any … met" and (1), (2), and (3) before (b). Stats. 1986, Ch. 1361, effective January 1, 1987, added a rebuttable presumption regarding watercraft not regularly used in interstate or foreign commerce. Stats. 1991, Ch. 236, in effect July 29, 1991, substituted "twenty thousand dollars ($20,000)" for "five thousand dollars ($5,000)" after "of less than" in subdivision (b).
Note.—Sec. 41, Stats. 1986, Ch. 1361 required that:
(a) On January 15, of each year from 1988 to 1992, inclusive, the State Board of Equalization and the Franchise Tax Board shall submit a report to the Legislature on implementation of the provisions of this act, with the exception of Section 40 of this act (for which separate reporting requirements are set out).
(b) The revenue and taxation policy committees of each house of the Legislature shall hold a public hearing no later than June 30 of each year from 1988 to 1992, inclusive, on the reports submitted pursuant to subdivision (a).
(c) The intent of this section is to assure the Legislature the opportunity to oversee the implementation of this act. The intent of the Legislature in enacting this act is to improve enforcement and voluntary compliance with the tax system and cash-pay reporting rules. The intent of the Legislature in enacting this act is not to cause harassment of or undue burden on innocent taxpayers.
Sec. 41 applies to the following Revenue and Taxation Code Sections: 6069, 6071, 6366, 6366.1, 6368, 6368.1, 6452, 6455, 6776, 6777, 7154, 8404, 9355, 30481, 32556, 40188, 41143, and 44186.
Primary Use of Watercraft-Interstate Commerce.—Taxpayer did not meet burden of showing the primary use of ferry boats was transportation of interstate passengers. Campbell Industries v. State Board of Equalization (1985) 167 Cal.App.3d 863.