State of Rhode Island - Division of Taxation
Ruling Request No. 99-04
Re: Ruling Regarding the Tax Treatment of Paint Used on Commercial Fishing Vessels in Excess of Five (5) Tons
Request for Ruling
You request a ruling on behalf of your client, ("X"), a Rhode Island Corporation regarding the tax treatment of certain materials (paint) purchased by X.
The facts set forth herein are taken from the ruling request of X dated October 15, 1999.
X is a corporation whose primary business is the servicing and repair of marine vessels. X purchases marine paint for use on fishing vessels that are in excess of five (5) net tons and which are used exclusively for commercial fishing. The paint is typically (because of color and other considerations) ordered for a specific job and the paint is typically not ordered in bulk and not placed in a warehouse or storage area to await future needs.
When the paint is invoiced by X to the owner of a vessel a separate charge is stated on the invoice issued to the owner for the paint. The amount charged for the paint is marked up from the amount that X paid to acquire the paint. X can designate the vessel to which the paint will be applied at the time it is ordered.
X has in the past agreed to repair vessels using paint supplied by the customer and in those instances has merely charged an application fee to apply the paint. The paint that is used on a particular job requires no special preparation or mixing since it is specifically ordered for the job and after the can is opened and the suction hose inserted, the paint is applied directly to the vessel.
Paint used on qualifying fishing vessels repaired by X is exempt from the sales and use tax.
R.I.G.L. 44-18-30 reads in pertinent part as follows:
44-18-30. Gross receipts exempt from sales and use taxes.--There are exempted from the taxes imposed by this chapter the following gross receipts:
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(27) Commercial fishing vessels. From the sale and from storage, use, or other consumption in this state of vessels and other water craft which are in excess of five (5) net tons and which are used exclusively for commercial fishing as hereinafter defined, and the boat's nets, cables, tackle, and other fishing equipment appurtenant to or used in connection with the commercial fishing of said vessels. . .
Pursuant to R.I.G.L. 44-18-30(27) supra, the sale and storage, use or other consumption of qualifying commercial fishing vessels and certain enumerated fishing equipment is exempt from the sales and use tax. That statute does not exempt materials or supplies other than the enumerated fishing equipment.
Contrast that statute with R.I.G.L. 44-18-30(26) entitled "Commercial vessels" under which all supplies and materials (which would include paint) purchased for the maintenance and/or repair of qualifying commercial vessels are exempt.
(26) Commercial vessels. From sales made to a commercial ship, barge or other vessel of fifty (50) tons burden or over, primarily engaged in interstate or foreign commerce, and from the repair, alteration or conversion of such vessels, and from the sale of property purchased for the use of such vessels including provisions, supplies and materials for the maintenance and/or repair of same.
The only reference to "repair" as it relates to commercial fishing vessels in excess of five (5) tons is found in Regulation SU 89-23 entitled "Commercial Fishing Vessels in Excess of Five (5) Net Tons" which reads:
"The repair or replacement of any vessel, its engines or other qualifying equipment is also exempt."
The intent of that part of the regulation is to allow repairmen of qualifying commercial fishing vessels to be treated in the same manner as retailers of qualifying fishing vessels when parts are sold to the vessel owners as part of a repair contract. Nowhere does the regulation extend the exemption to supplies not otherwise qualifying under the statute.
When paint is used in providing repair services to a qualifying commercial fishing vessel, the repairer is treated as the consumer of the paint used in the repair of the vessel. As such, it must pay the tax upon its purchase of the paint.
Paint used on qualifying commercial fishing vessels repaired by X is subject to the sales/use tax.
This ruling may be relied upon by X and shall be valid until expressly revoked or until the applicable statutory provisions of law are amended in a manner that requires a different result or the underlying facts described herein change.
R. Gary Clark
October 25, 1999