Virginia Administrative Code › Title 23 - TAXATION › Agency 10 - DEPARTMENT OF TAXATION › Chapter 210 - RETAIL SALES AND USE TAX › Section 23VAC10-210-4050 - Ships or vessels used or to be used exclusively or principally in interstate or foreign commerce

Current through Register Vol. 40, No. 24, July 15, 2024
A.
				Definitions. The following words and terms, when used in this section, shall
				have the following meanings unless the context clearly indicates otherwise:
"Foreign commerce" means a business venture between persons
				  in the United States and those in a foreign country.
"High seas" means that portion of the ocean which is beyond
				  the territorial jurisdiction of the United States. It does not include the
				  Chesapeake Bay, intercoastal waterways, or inland rivers or waterways.
"Intercoastal trade" means the exchange of goods or
				  commodities between ports.
"Interstate commerce" means a business venture between the
				  people of two states.
"Principally" means more than 50%.
"Used directly" means those items that are both
				  indispensable to the building, conversion, or repair process and which are used
				  as an immediate part of such process. See
				  23VAC10-210-920 for further
				  explanation of this term.
B. Ships and vessels used in interstate or
				foreign commerce; dredges and attendant vessels. Ships or vessels used or to be
				used exclusively or principally in interstate or foreign commerce or the charge
				for repairs and alterations of them are exempt from the tax. Ships or vessels
				which are not principally used in interstate or foreign commerce are subject to
				the tax. This includes charter party boats, fishing vessels, and other vessels
				which leave a point in one state and return to the same point without docking
				in another state.
Dredges and attendant vessels, such as barges upon which
				  silt from the dredging process is loaded, are entitled to the exemption set
				  forth in this subsection and subsection C provided they are principally used in
				  the dredging of interstate waterways. Vessels not physically involved in the
				  dredging of an interstate waterway, such as crew boats, survey boats, and
				  barges used to move equipment, materials, and employees from the dredging site,
				  are subject to the tax.
C.
				Shipbuilding, conversion, and repair. Tangible personal property used directly
				in the building, conversion, or repair of ships or vessels (i) used or to be
				used exclusively or principally in interstate or foreign commerce, or (ii)
				plying the high seas, either in intercoastal trade between ports in the
				Commonwealth and ports in other states of the United States, its territories or
				possessions, or in foreign commerce between ports in the Commonwealth and ports
				in foreign countries, is exempt from the tax. Persons engaged in the building,
				conversion, or repair of such ships or vessels may be eligible for the
				manufacturing exemption set forth in
				23VAC10-210-920. Items of tangible
				personal property which are used directly in the building, conversion, or
				repair process, such as machinery, tools, fuel, power, energy, and supplies,
				may be purchased exempt from the tax. Items of tangible personal property used
				indirectly in shipbuilding, conversion, or repair activities are subject to the
				tax. For example, tangible personal property purchased for use in providing
				shipboard or support services, including, but not limited to crew berthing, and
				power, water, steam, and refrigeration services for the crew's facilities, in
				connection with the repair of vessels, is deemed to be used indirectly in the
				process and subject to the tax.
See
				  23VAC10-210-920 for further
				  description of the manufacturing/processing exemption.
For repairs to ships or vessels not meeting the interstate
				  or foreign commerce or plying the high seas requirements, see
				  23VAC10-210-3050.
D. Fuel and supplies; vessels and
				ships plying the high seas. Fuel used for propulsion of ships or vessels,
				including dredges, is exempt from the tax pursuant to subdivision 6 of §
				58.1-609.1 of the Code of Virginia. However, except as provided in this
				subsection, fuel used to operate equipment which is not an integral part of a
				ship, boat, or vessel, generally is taxable.
Fuel for the propulsion or operation of equipment and
				  supplies for use aboard ships or vessels plying the high seas, either (i) in
				  intercoastal trade between ports in this state and ports in other states of the
				  United States or its territories or possessions, or (ii) in foreign commerce
				  between Virginia ports in this state and ports in foreign countries are exempt
				  from the tax when delivered directly to such ships or vessels.
Fuel used to operate machinery and equipment which is not an
				  integral part of and supplies purchased for use on ships or vessels which do
				  not ply the high seas in intercoastal trade or foreign commerce, such as
				  dredges or barges, is taxable. When fuel is used in both taxable and exempt
				  activities, the tax due is prorated between the percentage of use in taxable
				  and exempt activities. For example, fuel used in engines to both propel a
				  dredge and to operate equipment on such is taxable based upon the percentage of
				  usage in operating the equipment.
Statutory Authority
§§ 58.1-203 and 58.1-609.3(4) of the Code of
					 Virginia.