Publication 40, Watercraft Industry

This publication outlines how California’s sales and use tax laws apply to various watercraft transactions, including the sale, purchase, lease, and repair of vessels. It explains tax‑exempt categories of watercraft based on their qualifying principal or functional use, such as interstate commerce, commercial deep‑sea fishing, and offshore transport. It also summarizes tax responsibilities for sellers, brokers, operators and purchasers of both documented and undocumented vessels.

More specifically, the publication details qualification standards for exemptions, including gross‑income thresholds, usage tests during the vessel’s first 12 months, and recordkeeping expectations. It further distinguishes between taxable and nontaxable parts, materials, and labor, noting when component parts of exempt vessels remain exempt. The publication also analyzes rules for sales to water common carriers, fuel‑related exemptions, district tax considerations, and provides an extensive appendix listing examples of taxable and exempt vessel‑related items.

If you need help

If you need assistance with topics in this publication, call our Customer Service Center at 1-800-400-7115 (TTY:711) or chat with us. Customer service representatives are available to assist you Monday through Friday from 7:30 a.m. to 5:00 p.m. (Pacific time), except state holidays. You may also email us.

Please note: This publication summarizes the law and applicable regulations in effect when the publication was written. However, changes in the law or in regulations may have occurred since that time. If there is a conflict between the information in this publication and the law or regulations, decisions will be based on the law or regulations and not on this publication.

Revision July 2026