Did showing and arranging financing for customer-owned airplanes make a tie-down operator the retailer?

Plain-English summary

An airplane business also provided tie-down storage for aircraft owned by customers. Some owners advertised those planes at the storage area, and prospective buyers asked the operator about their condition. The operator sometimes demonstrated the planes or arranged financing for the owner and buyer in exchange for a commission.

The letter applied the title-power test used for yacht brokers. Merely bringing the parties together, showing the airplane, answering condition questions, or arranging financing did not make the operator the retailer if it lacked power, by its own act, to vest title in the buyer.

If the operator did have that power and exercised it, the result reversed: it was liable for sales tax measured by the entire gross receipts from the transaction.

Common questions

Did earning a commission make the operator the retailer?

No. The source focused on title-transfer power, not the commission alone.

Did arranging financing make the operator the seller?

Not without authority to vest title in the buyer.

What happened if the operator could and did transfer title?

It owed sales tax on the entire gross receipts from that sale.

Citations and references

• California Attorney General yacht-broker opinion (as cited; number omitted)

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/185-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/185-0020.pdf

Original ruling text

185.0020

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

August 19, 1964

“G”
This is in reply to your letter of August 6.
It is our understanding, from your letter, that you are in the business of selling airplanes. You also furnish tie-down facilities for the storage of aircraft owned by others. You state that occasionally your tie-down customers advertise their planes for sale at the storage area. Prospective buyers make inquiries of you regarding the condition of these planes. Sometimes the buyer or owner may have you arrange for financing of the sale of one of such planes. You receive, or plan to receive, a commission for your demonstration and financing services. Pursuant to an opinion of the Attorney General rendered a number of years ago, yacht brokers are not regarded as retailers with respect to transactions in which they merely bring the buyer and seller together and do not have either the beneficial use of the boat or the power, by their own act, to vest title in another and exercised that power, he was a retailer and liable for sales tax with respect to the gross receipts from such transactions. We believe that the some considerations are applicable in determining the application of tax with respect to sales of aircraft. Accordingly, if your only connection with the sales of airplanes owned by your tie-down customers is to show the airplanes to buyers and answer their inquiries regarding their condition, or to arrange for financing, without your having or exercising the power by your own act to vest title in the buyer, you will not be liable for sales tax. On the other hand, if you have such power and exercise it, you will be liable for the sales tax with respect to the entire gross receipts from such transactions. Very truly yours,

George A. Trigueros
Associate Tax Counsel

GAT:md

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