Which empty, maintenance, and training flights could remain incidental to a corporate aircraft’s continuous interstate use?

Plain-English summary

The corporation would take delivery and title outside California, first enter the state during an interstate flight, and use the aircraft in interstate commerce while principally hangaring it at Van Nuys.

Flights carrying interstate passengers, returning empty after those flights, or positioning for a specific out-of-state passenger or cargo movement could remain interstate use. An empty California positioning flight without a specific later out-of-state destination was not part of an interstate journey and could create taxable use during the initial six-month period.

The January 2 clarification added that:

• A sale completed outside California was not subject to sales tax, though use tax could apply absent an exemption.
• Flights solely for aircraft maintenance were incidental to otherwise continuous interstate use.
• An empty return to the principal hangar after dropping off an interstate passenger remained part of the journey if included in the original flight plan and no new California passenger or cargo was taken aboard.
• Training flights were incidental when they trained personnel who would fly that particular aircraft, rather than merely that aircraft type.

The first letter's formal first page and continuation carry different dates, as do the second letter's first page and continuation. The live annotation uses November 7, 1990 and January 2, 1991 but does not explain the conflicts. Both requests, all aircraft and flight records, tax amounts, applied exemption determination, and later outcome are absent.

The live annotation publishes only the first-entry, empty-return, and maintenance-flight conclusions. It omits the four-part test and Annotation 570.0430, the sales-tax answer, training-flight reconsideration, request dates, most examples and assumptions, named counsel, and missing records.

Common questions

When did an empty California positioning flight remain interstate use?

When it was tied to a specific interstate journey. The first letter treated an empty San Francisco-to-Los Angeles leg as part of the journey when the aircraft was going to pick up identified passengers continuing to Chicago. An empty San Francisco-to-Van Nuys leg without a specific later out-of-state destination was not.

Could the aircraft return empty to its principal hangar after an interstate trip?

Yes, if the San Francisco-to-Van Nuys return was part of the continuous journey from outside California and included in the original flight plan. Loading any passenger or cargo in San Francisco made the leg intrastate under the response.

Which maintenance and training flights were treated as incidental?

Maintenance flights had to be solely for maintenance; carrying passengers or cargo added a disqualifying purpose. Training flights had to train personnel who would fly that particular aircraft, and the aircraft otherwise had to remain continuously in interstate commerce.

Did the letters establish the corporation's actual tax result?

No. The transaction was prospective, and the PDF supplies no requests, purchase documents, flight plans or logs, passenger or cargo records, tax amount, assessment, or final exemption determination.

What dates do the official sources provide?

The first letter's first page says January 2, 1991, while its continuation and the live annotation say November 7, 1990. The second first page says January 2, while its continuation says January 1. The official sources do not resolve the conflicts.

Citations and references

• California Sales and Use Tax Regulation 1620(b)(2)(B) — described for continuous interstate or foreign use; complete text, definitions, conditions, procedures, amendments, later history, and current law not supplied
• Business Taxes Law Guide Annotation 570.0430 — cited for the four-part vehicle test applied to aircraft; underlying opinion, complete text, qualifications, amendment history, and current status not supplied
• October 10 and November 27, 1990 requests and the two response letters — no requests, transaction and flight records, tax amount, applied determination, claim, appeal, or later outcome supplied; first- and continuation-page dates conflict
• Official Annotation 325.0003.200's first-entry, return, maintenance conclusions, and dates — omits the date conflicts, four-part test, sales-tax and training answers, correspondence provenance, most assumptions, named counsel, missing records, later outcome, and reliance status and supplies no additional aircraft record

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/325-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-0003-200.pdf

Original ruling text

325.0003.200

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-5550

January 2, 1991

Mr. T--- L. P--A--- & P--XXX South --- Street, Suite XXX
--- ---, California XXXXX
RE:

N--- M--- E---, Inc.
SY -- XX-XXXXXX

Dear Mr. P---:
This is in response to your letter dated October 10, 1990. N--- M--- E---, Inc. (the Company) intends to purchase an aircraft. You ask whether the Company’s use of the aircraft in California will be subject to use tax under the following facts: “The Company will receive delivery of and take title to the Aircraft outside of California. At the time of its first entry into California (which may be its first flight after acquisition), the Aircraft either will (a) be carrying at least one passenger who has a destination in a state (or country) other than the state (or country) of his departure, or (b) be flown into California empty to pick up at least one specific individual who will have a destination outside California. For at least six months following the Aircraft’s first entry into California, each flight segment within California (1) will have a least one passenger that ha a destination outside of California, (2) will be returning empty to California after a flight described in (1), or (3) will be flown empty to a location to prepare for a use described in (1). It is currently intended that the Aircraft will be principally hangared at Van Nuys Airport.” You note that subdivision (b)(2)(B) of Regulation 1620 provides that use tax does not apply to property purchased for use and used in interstate or foreign commerce prior to its first entry into this state and thereafter used continuously in interstate or foreign commerce both within and without California and not exclusively in California. You also cite Annotation 570.0430 which sets forth the following four-part test to determine whether the use of a vehicle purchased outside California is subject to California use tax (the same rules apply to use of aircraft): 1) If the first functional use is in California, the purchase price is subject to use tax; 2) if the vehicle is first functionally used outside California but brought into California within 90 days from the date of

Mr. Terry L. Polley

-2-

November 7, 1990
325.0003.200

purchase, it is presumed that it was purchased for use in California and use tax applies unless tests 3 or 4 call for a different result; 3) tax applies if within the first six months after the vehicle’s entry into California it is used more than one-half of the time within California unless test 4 calls for a different result; and 4) if the vehicle first enters California while being functionally used in interstate commerce and is used continuously in interstate commerce while in California, then use tax does not apply as set forth in subdivision (b) of Regulation 1620. As described in the fourth paragraph of the annotation, we agree that under the facts you present the aircraft will first enter California while being functionally used in interstate commerce. We also will agree that if the aircraft is used as described in your scenarios (1) and (2), that use will be regarded as interstate use. However, the use described in your scenario (3) may or may not be regarded as use in interstate commerce. For example, if the aircraft is located at San Francisco International Airport and is dispatched to Los Angeles International Airport to pick up specific passengers who will then proceed on to Chicago, we would regard the SFO/LAX leg as part of the interstate journey. On the other hand, if the aircraft is dispatched from SFO to Van Nuys Airport without a specific out-of-state destination thereafter, that leg would not be part of an interstate journey. If the aircraft first enters California as you have described in (a) or (b) and thereafter is used as you have described in (1) and (2) during the first six months after its entry into California, California use tax will not apply to the use of the aircraft in California. As discussed above, use as you have described in (3) may or may not be regarded as interstate use. If the aircraft is used in a manner not regarded as interstate use during the first six months after the aircraft’s entry into California, the use of the aircraft in California may be subject to use tax. If you have further questions, feel free to write again. Sincerely,

David H. Levine
Senior Tax Counsel
DHL:wk
2561C

325.0003.200

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-5550

January 2, 1991

Mr. T--- L. P--A--- & P--XXX South --- Street, Suite XXX
--- ---, California XXXXX
RE:

N--- M--- E---, Inc.
SY -- XX-XXXXXX

Dear Mr. Polley:
In response to a previous inquiry, I analyzed whether your client’s use of an aircraft in California would be regarded as continuous use in interstate commerce making your client’s purchase exempt from use tax. In a letter dated November 27, 1990, you have additional questions and also ask for certain clarification and reconsideration. Each of your questions is quoted below followed by our response. “1. Does the California sales tax apply to the purchase of the aircraft as described in the Ruling Request?” I did not address this question in my previous letter since I know that you understand the sales tax does not apply to this transaction. However, your client would like to see that in writing from us. Sales tax applies only to sales that occur inside California Territorial limits. When the sale of the subject tangible personal property occurs outside California territorial limits, the applicable tax, if any, is the use tax and not the sales tax. Since the sale of the aircraft in question will occur outside California, no sales tax will apply to the sale. N--- M--- will owe use tax on its purchase if it purchases the aircraft for use in California unless that use is exempt from use tax. “2. Gulfstream maintains a maintenance facility at Long Beach Airport. Would flights to and from Long Beach, California (or other locations in California) solely for the purpose of maintenance be considered an intrastate use so as to subject the aircraft to the California use tax?” We regard such flights as incidental to interstate use provided the aircraft is otherwise used continuously in interstate commerce both inside and outside California and not

Mr. T--- L. P---

-2-

January 1, 1991
325.0003.200

exclusively in California. Of course, if any such flight has an additional purpose, such as carrying cargo or passengers, that flight would not be regarded as incidental to interstate use. 3. “With respect to scenario (3) in the Ruling Request, you indicated in your Ruling that if the aircraft was located at San Francisco International Airport and was dispatched empty to Van Nuys Airport without a specific out-of-state destination thereafter, the San Francisco to Van Nuys leg would be considered an intrastate use, subjecting the aircraft to use tax if occurring within six months of the aircraft’s entry into California. If a passenger, having an out-of-state origin, is dropped off in San Francisco, would the trip from San Francisco to Van Nuys (the aircraft’s place of principal hanger), with the aircraft empty, be considered a part of the just completed interstate trip?” Yes, provided that trip is part of the continuous journey from outside California and was part of the original flight plan. Of course, if any passengers or cargo are loaded in San Francisco, the trip will be regarded as an intrastate use. “4. You indicated flights wholly within California conducted solely for training pilots and other personnel would be considered to be an intrastate use. Would training flights having a non-California destination be considered an interstate use?” After further consideration, we have concluded that training flights are incidental to interstate use provided the aircraft is otherwise used continuously in interstate commerce. Training flights qualifying as incidental are those that are for the purpose of training those personnel who will fly that particular aircraft (not personnel who will fly that type of aircraft). If you have any further questions, feel free to write me again. Sincerely,

David H. Levine
Senior Tax Counsel
DHL:cs
0051E