June 26, 2002 |
2002-R-0576 | |
SALES AND USE TAX ON SHIP CHANDLERY SERVICES | ||
By: Judith Lohman, Chief Analyst | ||
You asked what sales and use taxes Connecticut imposes on ship chandlery businesses that supply ocean-going ships, tankers, and freighters. A letter submitted with your request gave several examples of things ship chandlers provide, including food and mechanical devices, mechanical repairs, and ferry services for crews. You also asked if other states exempt from sales tax any services and supplies sold to ships.
SUMMARY
Unlike several other states, Connecticut has no blanket provision exempting otherwise taxable services and items provided to ocean-going vessels from sales and use taxes. Nevertheless, most of the items mentioned in a letter from Sea Support, Inc. of New Haven are not subject to Connecticut sales tax, including vessel repairs and maintenance, most food, and ferrying services for crews to visit doctors. On the other hand, Connecticut imposes sales tax on vessel repair and maintenance materials, supplies, and parts, and on many types of non-food supplies, such as paper goods, soft drinks, and candy.
A survey of 18 states that have sales taxes and that are either close to Connecticut, have busy ports, or both shows that 12 have broad exemptions for supplies and materials used to operate and repair ships engaged in interstate or foreign commerce. Of the 12, half are in the northeastern region of the United States, relatively close to Connecticut.
CONNECTICUT
Connecticut has no blanket sales and use tax exemption for supplies and services for ocean-going vessels. According to Michael Galliher of the Department of Revenue Services, none of the services mentioned in Sea Support's letter as examples of ship chandler's services are taxed, but the supplies mentioned, other than most types of food, are taxable when supplied to ships, just as they are in any other situation.
By law, Connecticut exempts the following services and supplies from the 6% sales and use tax:
· Vessel repair and maintenance services (CGS Sec. 12-408 (1)(D)).
· Sales and storage, use, or other consumption of bunker fuel oil, intermediate fuel, and marine diesel and gas oil for use in any vessel (1) with a displacement over 4,000 dead weight (dwt) tons or (2) used primarily in interstate commerce (CGS Sec. 12-412 (79)).
· Food other than take-out and other meals prepared for immediate consumption, liquor, soda, candy and confectionery (CGS Sec. 12-412(13).
According to Galliher, ferry service to take ships' crews to doctors is not taxable.
Connecticut does tax the following items, whether or not they are supplied to ocean-going ships:
· Materials, supplies, and parts used for vessel maintenance and repairs.
· Nonfood supplies, such as paper goods and soft drinks.
For your further information, we enclose a copy of DRS Special Notice 2000(2): "Application of Sales and Use Taxes to Vessels. " SN 2000(2) is also available online at http: //www. drs. state. ct. us/pubs/SN's/2000/sn00(2). html.
OTHER STATES
Table 1 shows sales tax rates and statutory exemptions for services and goods sold to commercial vessels in 18 states. The states are the seven northeastern states that have sales taxes plus the 11 other states with sales taxes identified by Lloyd's Maritime Information Services as having the 25 busiest U. S. ports for the year 2000. Lloyd's figures are based on number of port calls by vessels of at least 10,000 dwt tons. (A list of these ports is enclosed and available online at http: //www. marad. dot. gov/Marad_Statistics/Porcalls_us. htm. ) Since none of the states explicitly exempts ship chandlery services by that name, the table lists any tax exemptions for repair and provisioning services to ocean-going or commercial ships.
All the states have vessel-related sales tax exemptions. Twelve have broad exemptions for all services and supplies for vessels: Alabama, Georgia, Louisiana, Maine, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, South Carolina, Texas, and Virginia. These states include the following ports on Lloyd's list: Houston, New Orleans, New York, Philadelphia, Hampton Roads, Charleston, Savannah, Corpus Christi, Beaumont, Texas City (Galveston), Mobile, Lake Charles (Louisiana), and Freeport (Texas).
Five states have narrower exemptions. They are: California, Hawaii, Maryland, Vermont, and Washington. These states include the following ports on Lloyd's list: Los Angeles/Long Beach, San Francisco, Baltimore, Seattle, and Honolulu.
Florida's exemption is broad but the exemption is only partial, based on the ratio of miles a vessel covers within and outside Florida. The Florida ports on Lloyd's list are: Jacksonville, Miami, Port Everglades (Ft. Lauderdale), and Tampa.
Many of the states listed allow localities to charge sales taxes in addition to the state sales tax. This report does not address the applicability of those local taxes to vessels and services.
Table 1: Sales Tax Exemptions for Ship Supplies and Services in 18 States
STATE |
TAX RATE |
EXEMPTION(S) |
STATUTE |
Alabama |
4% |
Fuel and supplies for use or consumption aboard ships, towing vessels, barges, drilling ships, rigs, seismic or geophysical vessels, and other watercraft engaged in foreign or international commerce. The exemption covers (1) vessels transporting cargo for hire between Alabama ports and ports in other states or foreign countries and (2) vessels carrying passengers for hire but no cargo between Alabama ports and ports in other states or foreign countries if they are at least 100 gross tons and have a valid inspection certificate from the U. S. Coast Guard or, if a foreign vessel, a valid certificate from the relevant authority of the foreign country. Material and supplies used in fulfilling contracts to paint, repair, or recondition vessels, barges, ships, other watercraft, and commercial fishing vessels over five tons load displacement are taxable. |
Alabama Code, Sec. 20-23-62 |
California |
6% |
Property that becomes part of a vessel in the course of repairing or cleaning it and the labor and service rendered in the repairing or cleaning, if the vessel is used in interstate or foreign commerce to carry people or property for hire. |
Cal. Taxation and Revenue Code, Sec. 6368 (a). |
Florida |
6% |
Partial tax exemption for vessels used to transport people or property in interstate or foreign commerce. The exemption applies to items appropriate to carry out the purposes for which the vessel is designed, equipped, or used and that the owner buys for use on board. The exemption is based on the ratio of the vessel's Florida mileage to its interstate mileage. |
Fla. Stats, Sec. 212. 08 (8) |
Georgia |
4% |
Fuel and supplies for use or consumption aboard ships plying the high seas in interstate or foreign commerce. |
Ga. Code, Sec. 48-8-3(17) |
Hawaii |
4% |
Ship repairs rendered to surface vessels engaged in interstate commerce or international trade. |
Hawaii Rev. Stats, Sec. 237-28. 1 |
Louisiana |
4% |
1. Materials and supplies bought by owners or operators of ships operating exclusively in foreign or interstate commerce that are loaded onto the ships for use in operating and maintaining them. 2. Repair services for such ships and materials and supplies used in the repairs that become part of the ships. 3. Laundry services for such ships, if the laundered articles are used in the course of operating the ships. |
La. Rev. Stats, Sec. 305. 1B |
Maine |
5% |
Cabin, deck, engine supplies and bunkering oil for ships engaged in transporting cargo or passengers for hire in interstate or foreign commerce. |
Me. Rev. Stat, Sec. 36-1760(4) |
Maryland |
5% |
Fuel or repair parts for vessels used for commercial purposes. |
Md. Rev. Stats. , Sec. 11-218(c) |
Massachusetts |
5% |
1. Fuel or fuel substitutes, supplies, and repairs to vessels engaged in foreign and interstate commerce. 2. Machinery and equipment for vessels used directly and exclusively in commercial fishing and replacement parts for the vessels, machinery, and equipment. |
Gen. Laws of Mass. , Chap. 64H, Sec. 6(o) |
New Jersey |
6% |
1. Repairs, alterations, or conversions of commercial ships or their components, barges, and other vessels of 50-ton burden or over primarily engaged in interstate or foreign commerce. 2. Property used by, or bought for the use of, such vessels. 3. Machinery, apparatus, and equipment for fuel, provisions, supplies, maintenance, and repairs (other than articles purchased for the original equipping of a new ship). |
NJSA, Sec. 54: 32B-8. 12 |
New York |
4% |
Property used by, or purchased for, fuel, provisions, supplies, maintenance, and repairs for commercial vessels primarily engaged in interstate or foreign commerce (other than articles purchased for the original equipping of a new ship). |
McKinney's Consol. Laws of N. Y. , Tax Laws, Ch. 60, Art. 28, Part II, Sec. 1115 (8) |
Pennsylvania |
6% |
1. Retail sale of tangible personal property or services used or consumed in building, rebuilding, repairing, and adding to or replacing parts in commercial vessels of 50 or more tons by the purchaser's special order; when rebuilt repaired or enlarged; or when replacements are made on the owner's order or for his account. 2. Retail sale or use of tangible personal property or services used or consumed for ship cleaning or maintenance or as fuel, supplies, ships' equipment, ships' stores, or sea stores on commercial vessels with at least 50 tons operated principally outside Pennsylvania. |
Purdon's Pa. Stats. , Ch. 72, Sec. 7204 (15), (16) |
Rhode Island |
7% |
1. Sales to a commercial ship, barge, or other vessel of 50 tons burden or over, primarily engaged in interstate or foreign commerce. 2. Repair, alteration, or conversion of such vessels. 3. Sale of property purchased for the use of the vessels including provisions, supplies, and material for their maintenance or repair. |
RI Gen. Laws, Sec. 44-18-30(26) |
South Carolina |
5% |
Fuel, lubricants, and supplies for use or consumption aboard ships in interstate or foreign commerce. No exemption for materials and supplies used in fulfilling a contract to paint, repair, or recondition ships and other watercraft. |
S. C. Code, Sec. 12-36-2120(13) |
Texas |
6. 25% |
1. Materials and supplies purchased by the owner or operator of a ship or vessel operating exclusively in foreign or interstate coastal commerce if the materials and supplies (a) are loaded on the ship and used to maintain and operate it or (b) enter into and become its component parts. 2. Materials and supplies purchased by a person providing stevedoring services for a ship operating exclusively in foreign or interstate coastal commerce, if the materials and supplies are loaded aboard the ship and not removed before its departure. |
Tex. Rev. Stats. , Sec. 151. 329(4) and (5) |
Vermont |
5% |
Depreciable parts, machinery, and equipment to be installed as a capital asset in a ferryboat, sold to a person who holds himself out to the general public as engaging in water commerce, for use primarily in carrying people or property for compensation or hire. |
Vt. Stats, Chap 233, Sec. 9741 (31) |
Virginia |
3. 5% |
1. Repair and alteration of ships, used or to be used exclusively or principally in interstate or foreign commerce. 2. Fuel and supplies for use or consumption aboard ships plying the high seas, either in intercoastal trade or foreign commerce, when delivered directly to such ships. 3. Tangible personal property used directly in building, converting or repairing such ships or vessels. Exemptions include dredges, their supporting equipment and attendant vessels, and fuel and supplies for use or consumption aboard such vessels, provided the dredges are used exclusively or principally in interstate or foreign commerce. |
Va. Code, Sec. 58. 1-609. 3(4) |
Washington |
6. 5% |
1. Tangible personal property that, in the course of repairing, cleaning, altering, or improving, becomes a component part of watercraft used in interstate or foreign commerce. 2. Labor and service connected to repairing, cleaning, altering, and improving such watercraft. |
Rev. Code of Wash. , 82. 08. 0262 |
JL: ro