Did assigning aircraft to a holding company and leasing them back to customers while still in California preserve the nonresident removal exemption?

Plain-English summary

An aircraft seller had previously been advised that brief California use to train a customer's personnel might not defeat the nonresident aircraft exemption if the transaction otherwise qualified.

The seller then proposed assigning aircraft to a holding company and leasing them back to customers while the aircraft remained in California.

Tax counsel said those added steps were not merely part of removing the aircraft from California. The assignment and leaseback were California use “otherwise than in the removal,” so they excluded the transaction from section 6366's nonresident exemption.

Citations and references

• California Revenue and Taxation Code section 6366 (as cited)
• Staff letters dated June 26 and July 29, 1954 (described but not included)

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/105-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/105-0180.pdf

Original ruling text

105.0180

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

August 3, 1954

--- --- ----- --- ----- --- --Gentlemen:
This will confirm our telephone conversation in reply to your letter of July 29, 1954. Since Mr. Stetson is on vacation, I discussed your letter with Mr. Harry L. Say. It was his opinion that while the brief use of aircraft in this state for the purpose of indoctrinating your customer's personnel under the circumstances set forth in Mr. Stetson's letter to you dated June 26, 1954, may not exclude the transaction from the scope of Section 6366 of the Sales and Use Tax Law if otherwise applicable, the additional factors mentioned in your letter of July 29, 1954, may well result in a taxable transaction. As you know, Section 6366 exempts from tax aircraft "sold to persons who are not residents of this State and who will not use such aircraft in this state otherwise than in the removal of such aircraft from this State”. The assignment of the aircraft to a holding company and the leasing of them back to your customers while the aircraft are in this State would appear to be a use "otherwise than in the removal" and hence would exclude the transaction from the exemption in Section 6366. Very truly yours,

John H. Murray
Associate Tax Counsel
JHM:tj
cc:
Los Angeles - Tax Administrator