Tax Type
Retail Sales and Use Tax
Description
Transportation equipment; Vehicles, Vessels
Topic
Taxability of Persons and Transactions
Date Issued
03-05-1993
March 5, 1993
Re: §58.1-1821 Application: Retail Sales & Use Tax
Dear*************
This will reply to your letter of September 9, 1992 in which you seek reconsideration of the department's August 10, 1992 determination letter (P.D. 92-140) to ***************(the "Taxpayer").
You maintain that fuels and supplies used on the Taxpayer's dredges qualify for exemption from the sales tax under Va. Code §58.1608(A)(3)(d) since the dredges travel beyond intrastate waterways and into interstate waterways and are used in interstate commerce. You argue that the definition of "plying the high seas" in the department's prior determination to the Taxpayer goes beyond the scope of the exempting statute.
You are correct in stating that the term "plying the high seas" does not require vessels to engage in both intercoastal and international trade in order to qualify for the exemption. However, contrary to your contention that the application of Black's Law Dictionary definition of the term "high seas" requires both intercoastal and international trade, it does not - it merely requires that a vessel sail over the open waters of an ocean beyond the limits of the territorial jurisdiction of a country.
Furthermore, the law specifically provides that fuels and supplies are exempt to the extent that they are used or consumed aboard vessels or ships which ply the high seas, either in:
-
- - intercoastal trade between ports in the Commonwealth and ports in other states of the United States or its territories or possessions, or
- foreign commerce between ports in the Commonwealth and ports in foreign countries.
- - intercoastal trade between ports in the Commonwealth and ports in other states of the United States or its territories or possessions, or
Thus, for fuels and supplies to be exempt, they must be used in a vessel that sails over the open waters of an ocean beyond the limits of the territorial jurisdiction of the United States and be engaged in intercoastal trade or foreign commerce.
While you argue that the term "high seas" is subject to many interpretations, as indicated by your discussion of various federal statutes that use the term, it is well settled that words used in statutes are given their plain and ordinary meaning unless the General Assembly manifests some different intent. Thus, in determining what constitutes "plying the high seas" the department looked to the ordinary dictionary definitions of the terms. Black's Law Dictionary and the American Heritage Dictionary (1345 (2d College Ed. 1976)) both define "high seas" as that portion of ocean that is "beyond the territorial jurisdiction of any country." Further, the word "ply," defined in the American Heritage Dictionary as traversing over or sailing over regularly or performing or working diligently or regularly, connotes a requirement of regularity.
In addition, words in a tax statute must be given their ordinary meaning and tax exemptions must be strictly construed with all reasonable doubts resolved against the exemption. (See, e.g., Commonwealth v. Community Motor Bus Co., 214 Va. 155, 157, 198 S.E. 2d 619, 620 (1973)). Thus, the exemption is available only to those ships and vessels which regularly sail over that portion of the ocean beyond the territorial jurisdiction of the United States.
In attempting to distinguish the instant case from a prior determination of the Commissioner dated April 25, 1983, in which the department held that fishing trawlers were not plying the high seas because the vessels left and returned to the same Virginia port with only intermediate stops being an infrequent service call in another state, you contend that the activities of the barges in constitute much more than "infrequent servicing calls" and thus qualify for the exemption. However, even if the Taxpayer's barges routinely stop at various ports of other states, no documentation has been provided to show that they actually ply the high seas.
While you request prospective application of the department's "new interpretation" of the term "plying the high seas," the department's interpretation of the term is not "new." Further, we have not reversed our position in recent years. Instead, we have attempted to clarify the proper tax treatment of fuels and supplies used in ships and vessels. While you mention that your competitors are not paying use tax on their purchases of fuels and supplies used in similar dredging operations, the department has attempted to ensure uniform and appropriate tax treatment of fuels and supplies purchased for use on ships and vessels. However, we would gladly follow up on this matter with your competitors if you supply us with a list.
After reviewing the information provided, I am unconvinced that the dredges ply the high seas as required in Va. Code §58.1608(A)(3)(c) for exemption and thus find no basis for revising my original determination. However, I will agree to remove from the assessment the tax assessed on fuel used for propulsion of the dredges if the Taxpayer can provide documentation illustrating a breakdown between fuel used for propulsion and fuel used to operate the dredging equipment. Such information and any additional information that you deem pertinent should be provided to the********** District Office 30 days. If the necessary information is not provided with the allotted time period, the assessment will become due and payable immediately.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6422H
Rulings of the Tax Commissioner