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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
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600.0000 Watercraft—Regulation 1594
Annotation 600.0345
(e) Component Parts of Watercraft
600.0345 Component Parts for Tugboats. A company operates tugboats and barges inside and outside California. Many of the tugboats that are currently performing nonexempt work were principally engaged in interstate commerce (assisting ships) during their first year of operation. The company purchases tangible personal property which becomes a component part of the tugboats after the company begins using the tugboats for nonexempt work.
Whether the sale of property becoming a component part of watercraft is exempt depends upon the principal use of the watercraft after the sale of the component part. Even though the purchase of the tugboats had originally been exempt, the purchase of component parts are taxable if, within twelve months following the purchase of the component parts, the tugboats are not used principally in interstate or foreign commerce in the transportation for hire of persons or property. 3/12/92.