RETAIL SALES TAX ‑- USE TAX ‑- CHARTER (SPORT) FISHING BOATS ‑- COMMERCIAL ENTERPRISE ‑- TAXABLE SALES ‑- LIMITATION ON ASSESSMENTS FOR PRIOR YEARS

RETAIL SALES TAX ‑- USE TAX ‑- CHARTER (SPORT) FISHING BOATS ‑- COMMERCIAL ENTERPRISE ‑- TAXABLE SALES ‑- LIMITATION ON ASSESSMENTS FOR PRIOR YEARS.

(1) Charter (sport) fishing boat operations constitute a commercial enterprise.

(2) The sales of charter (sport) fishing boats are subject to the retail sales tax (or alternatively the use tax) except where the sale is for resale, i.e., except where the boat is to be used exclusively for charter with no operator being supplied by the owner.

(3) Unless the provisions of RCW 82.30.100 are applicable the sales tax or the use tax cannot be assessed if more than four years have elapsed since the close of the year in which the taxable sale took place.

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                                                                 August 10, 1962

Honorable Harry Elway, Jr.
State Senator, 21st District
106 Karr Avenue
Hoquiam, Washington

                                                                                                              Cite as:  AGO 61-62 No. 153

Dear Sir:

            By a previously acknowledged letter you have requested our opinion on certain questions concerning the charter fishing boat industry, which we paraphrase as follows:

            (1) Do charter fishing boat operations constitute a commercial enterprise?

            (2) Are sales of charter fishing boats subject to the state sales or use tax?

            (3) If the answer to question 2 is in the affirmative, may a tax be assessed five years after the taxable sale or use?

            We answer the first two questions in the affirmative with the second being qualified hereinafter.  The third question is answered in the negative.

                                                                     ANALYSIS

            The charter fishing boats here discussed are those which are used for  [[Orig. Op. Page 2]] sport fishing as distinguished from commercial fishing.  The boats operate both within and without the territorial waters of the state, either with or without an operator being furnished by the boat owner.

            Question (1):  The term "commercial" means something made or done primarily for sale or profit.  Webster's New 20th Century Dictionary (2d ed.) (1957).  In either its broad or restricted sense it includes those enterprises which are engaged in buying and selling goods and services.  Reiser v. Meyer, Mo. App., 323 S.W. (2d) 514, 521; City of Sioux Falls v. Cleveland, 75 S.D. 548, 70 N.W. (2d) 62, 64.

            Charter fishing boats are employed by the owners with the object of making a profit.  The business of furnishing the boats and accommodations in connection therewith to sport fishermen for a fee is in our opinion a commercial enterprise.

            Question (2):  In answering your second question, it is necessary to discuss first several statutory provisions on the subject.  RCW 82.08.020 provides as follows:

            "There is levied and there shall be collected a tax on each retail sale in this state equal to three and one‑third percent of the selling price:  Provided, That from April 1, 1959 the tax imposed by this section shall be equal to four percent of the selling price.  The tax imposed under this chapter shall apply to successive retail sales of the same property and to the retail sale of intoxicating liquor by the Washington state liquor stores."

            RCW 82.04.050 defines the terms "sale at retail" and "retail sale" to mean among other things, ". . . every sale of tangible personal property . . . other than a sale to one who purchases for the purpose of resale as tangible personal property in the regular course of business . . ."  Also included in the definition of those terms is the following:  ". . . the sale of or charge made for personal, business or professional services . . ." in "amusement and recreation businesses. . . ."  RCW 82.04.040 defines the term "sale" as including renting or leasing.

            Consequently, under these statutes, the sale of a charter fishing boat is subject to the sales tax (or the use tax alternatively under chapter 82.12 RCW) unless the purchaser buys it for the purpose of "resale" as tangible personal property, or unless the sale or use is exempted by some other provision.

             [[Orig. Op. Page 3]]

            At this point in answering your question it becomes necessary to distinguish between types of operations.

            Fishermen for sport may charter a boat either with or without an operator.  If the boat is chartered without an operator the rental of it is a "retail sale" and the lessor must collect the retail sales tax on the charter fee.  If the boat was purchased exclusively for this type of use its purchase was for resale (renting or leasing) and is exempt from the retail sales tax and from the use tax as long as it is exclusively so used.

            On the other hand, if the boat were purchased for the purpose of being furnished to sport fishermen with an operator supplied by the owner the boat itself is not being leased or rented.  The owner maintains a measure of control over it.  A lease gives to the lessee exclusive possession of the property which may be asserted even against the lessor.  Conaway v. Time Oil Company, 34 Wn. (2d) 884, 210 P. (2d) 1012 (1949).  The owner under such an arrangement is not a lessor but one who contracts to furnish a service and accommodations to the fishermen.  The owner must still collect sales taxes on the fees paid by the fishermen.  However, the tax in such cases is collected not on the basis of a boat rental but on the basis that the service and accommodations he sells fall within the definition of "amusements and recreation businesses"1/ which are retail sales under RCW 82.04.050.  Thus, the sale of a boat which will be used by the purchaser as a charter boat with an operator is not a sale for resale as tangible personal property and is subject either to the retail sales or to the use tax.

            The foregoing is expressed in Tax Commission Rule 211 [[TCR 211]], promulgated under authority of RCW 82.32.300, and reading in material part:

            "The terms 'leasing' and 'renting' are used interchangeably and refer generally to the act of granting to another the exclusive right of possession to and use of tangible personal property for a consideration. . . .

            "The Retail Sales Tax does not apply upon sales of tangible personal property to persons who purchase the same solely for the purpose of renting or leasing such property.  However, the Retail Sales Tax applies upon sales to persons who rent such property with operator or who intend to make some use of the property other than  [[Orig. Op. Page 4]] or in addition to renting or leasing."

            In this concluding, we have not overlooked the possible application of RCW 82.08.030, providing in pertinent part as follows:

            "The tax hereby levied shall not apply to the following sales:

            ". . .

            "(11) Sales of . . . watercraft for use in conducting interstate or foreign commerce by transporting therein or therewith property and persons for hire or for use in conducting commercial deep sea fishing operations outside the territorial waters of the state; . . ."

            An identical exemption from the use tax is provided by RCW 82.12.030 (4).

            Some question might arise concerning the applicability of this exemption, on account of several meanings attributable to the word "commercial."  We have set forth its definition in the broad sense, above, as including charter fishing boat operations.  In the industry, however, there is a well-known and established usage of the term "commercial fishing," with reference to taking fish for market, as distinguished from "sport fishing," which involves the chartering of boats with or without operators, to individuals or groups fishing as a form of recreation.

            In so far as the term in question is ambiguous, the statute is subject to construction, the entire purpose of construction being to ascertain the legislature's intention.  Cory v. Nethery, 19 Wn. (2d) 326, 142 P. (2d) 488 (1943).  Such intent is to be found, if possible, in the language of the statute, and primary resort should be to the context and subject matter of the legislation.  Graffell v. Honeysuckle, 30 Wn. (2d) 390, 191 P. (2d) 858 (1948).

            Reading the statute as a whole, it is clear that the legislature was using the term "commercial deep sea fishing operations" in the sense of "commercial fishing," and as distinguished from "sport fishing."  Furthermore, since 1949, the tax commission has continuously and uniformly held the above exemption not applicable to the charter fishing boat operations now under discussion.  In cases where there is ambiguity in a statute, and the legislature has failed to act, the construction placed upon it by the body charged with administering it is entitled to considerable weight in determining legislative  [[Orig. Op. Page 5]] intent.  Buffelen Lbr. & Mfg. Co. v. State, 32 Wn. (2d) 40, 200 P. (2d) 509 (1948).

            Finally, to dispel any remaining doubt on the subject, any ambiguity must be resolved against the exemption.  Yakima Fruit Growers Ass'n v. Henneford, 187 Wash. 252, 60 P. (2d) 62 (1936).

            We conclude, therefore, that the legislature has made no specific exemption from the sales or use taxes, on the sales of charter fishing boats.  Consequently such sales are subject to the sales tax (or alternatively the use tax) except where the sale is for resale; i.e., except where the boat is to be used exclusively for charter with no operator being supplied by the owner.

            Question (3):  The third question concerns the statute of limitations on assessing the use tax on a nonexempt sale (the sales tax not having been paid at the time of sale).  RCW 82.32.100 provides in part:

            "No assessment or correction of an assessment may be made by the commission more than four years after the close of the tax year, except (1) against a taxpayer who has not registered as required by this chapter, (2) upon a showing of fraud or of misrepresentation of a material fact by the taxpayer, or (3) where a taxpayer has executed a written waiver of such limitation."

            Unless the charter boat owner would come within one of the exceptions contained in the statute the use tax could not be assessed if more than four years had elapsed since the close of the year in which the taxable sale took place.  "Year" refers either to the calendar year or to the taxpayer's fiscal year, whichever is used by the taxpayer for tax purposes.