Publication 40, Watercraft Industry
Fabrication, Repair, and Installation Labor
Charges for labor may be subject to tax, as explained below. For more information, please see Regulation 1546, Installing, Repairing, Reconditioning in General; Regulation 1526, Production, Fabrication and Processing Property Furnished by Consumers—General Rules; and publication 108, Labor Charges. These are also available by calling our Customer Service Center at 1-800-400-7115 (TTY:711).
Fabrication labor
If you charge for labor to create or produce a new item for a customer, the labor charges are taxable, whether you supply materials or use materials provided by the customer. Some examples include:
- Fabricating sails or dodgers
- Converting a fishing boat to a pleasure craft
- Making custom fishing nets
Labor charges for fabricating an exempt watercraft or a qualifying component or affixed part of an exempt vessel are not taxable.
Repair labor
If you make a separately stated charge for labor to repair or recondition an item to restore its original use, the labor charge is not taxable. Some examples include:
- Repairing a boat’s engines
- Repairing fishing nets
- Rebuilding a pleasure boat’s cabin and enlarging its galley, as long as the boat remains a pleasure craft
Installation of parts and equipment
Labor for installation of parts and equipment is not taxable. However, if installation occurs as part of fabricating an item in place, the whole labor charge is taxable (unless the item is affixed to a tax-exempt vessel). You should state installation charges separately from the other charges on your invoice or other sales document.
Revision July 2026