Is repair work on a pleasure yacht taxable in Texas, and when does the commercial-vessel exemption apply?

Plain-English summary

A business that performs services on boats asked the Comptroller for specific guidelines on when its work is taxable. The answer turns on what kind of vessel is being worked on.

Pleasure yachts are tangible personal property and are covered by Rule 3.292. Under that rule, a repairman is a retailer who must obtain a tax permit and collect tax on the entire charge — materials, parts, labor, consumable supplies, equipment, and any charge incidental to the transportation of a repair, remodeling, restoration, or maintenance service. So the full charge to repair a pleasure yacht is taxable.

The repair or restoration of a vessel is exempt only if the vessel meets the definition of a commercial vessel. The Comptroller also cautioned that the residential exemption applies only to real property — it does not reach boats, so there is no "residential" carve-out for a personal or pleasure vessel.

What this means for you

Boat and yacht repair shops

If you repair pleasure yachts, treat yourself as a retailer: register for a permit and charge tax on the whole job, not just the parts. Labor, supplies, equipment, and incidental transportation are all part of the taxable charge.

The commercial-vessel line

Only work on a vessel that qualifies as a commercial vessel is exempt. Before treating a repair as tax-free, confirm the vessel actually meets the commercial-vessel definition; a pleasure boat or yacht does not.

No residential exemption for boats

Do not try to apply a residential-property exemption to a vessel. That exemption is limited to real property and has no application to boats, which are tangible personal property.

Common questions

Q: Is repairing a pleasure yacht taxable in Texas?
A: Yes. A pleasure yacht is tangible personal property under Rule 3.292, and the repairman must collect tax on the entire charge for the work.

Q: What is included in the taxable charge?
A: Materials, parts, labor, consumable supplies, equipment, and any charge incidental to transportation for the repair, remodeling, restoration, or maintenance service.

Q: When is vessel repair exempt?
A: Only when the vessel meets the definition of a commercial vessel. Repairs to noncommercial vessels like pleasure boats and yachts are taxable.

Q: Does the residential exemption apply to my boat?
A: No. The residential exemption applies only to real property, not to boats.

Q: Can I rely on this 1988 letter today?
A: Treat it as guidance only. It is based on the facts presented and can change with different facts; on the STAR system it binds the Comptroller only as to the taxpayer it was issued to and may no longer reflect current policy.

Citations and references

Rule cited: 34 Tex. Admin. Code § 3.292 — repair, remodeling, maintenance, and restoration of tangible personal property; section (c)(1) makes the repairman a retailer who must collect tax on the entire repair charge. The letter also refers to the commercial-vessel definition as the sole basis for exempting vessel repair.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8809L0894B11

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller September 2, 1988

Dear ***:

Thank you for your letter asking for specific guidelines on the
taxability of
the services you perform on boats.

Pleasure yachts are classified as tangible personal property and are
covered
under Rule 3.292. Section (c)(1) states "repairmen are retailers and
must
obtain a tax permit and collect tax on the entire charge for materials,
parts,
labor, consumable supplies, equipment and any charge incidental to the
transportation of a repair, remodeling, restoration or maintenance
service.

The repair or restoration of a vessel is only exempted from sales and use
tax
if the vessel meets the definition of a commercial vessel The
residential
exemption applies only to real property.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, please call our toll
free number 1-800-531-5441. The regular number is 512/463-4600. You may write
me
at Tax Correspondence, Comptroller of Public Accounts.

Sincerely,
Julie Pesl
Tax Correspondence Division