Did California-only flights for aircraft service and maintenance destroy an interstate-commerce use-tax exemption?

Plain-English summary

Earlier letters had concluded that use tax did not apply because the corporate aircraft was first functionally used in interstate commerce outside California, entered the state in that use, and then remained continuously in interstate commerce while here. Those letters also assumed training related to the particular aircraft and test flights checked its operating condition.

After delivery, the aircraft made several crew-only trips from San Jose to Long Beach for maintenance and small "glitch" items. The writer said the requester had not defined those items, but confirmed that flights whose sole purpose was transporting the aircraft for service and maintenance did not defeat the exemption.

The three earlier letters, aircraft and flight records, definition of the “glitch” items, applied tax determination, and later outcome are not reproduced. The response cites no statute or regulation. The live annotation publishes the aircraft-use facts and sole-purpose maintenance conclusion but omits the earlier correspondence, training- and test-flight assumptions, undefined items, named counsel, missing records, and conditional posture.

Common questions

What had the two earlier Board letters concluded?

The March response says the September 23 and October 4, 1991 letters found no use tax when the aircraft was first functionally used in interstate commerce outside California, entered California in that use, and then remained continuously in interstate commerce here. Those opinions and their full analysis are absent.

What assumptions supported that earlier conclusion?

The referenced training flights had to train personnel who would fly the particular aircraft, and the test flights had to determine whether the aircraft was in proper operating condition. The training and test-flight records are not supplied.

When were the California-only maintenance flights permitted?

The March 17 response said they did not prevent the exemption if their sole purpose was transporting the aircraft from San Jose to Long Beach for service and maintenance and only the crew was aboard.

Did counsel decide whether the “glitch” trips qualified?

Only conditionally. The requester did not explain the small “glitch” items, and the PDF supplies no maintenance work orders, flight logs, or other facts that would establish the trips' sole purpose.

Citations and references

• September 23 and October 4, 1991 Board letters — described for the original exemption conclusion and flight assumptions; letters, aircraft records, analysis, and applied findings not supplied
• December 11, 1991 request and March 17, 1992 response — no request, flight and maintenance records, “glitch” definition, cited statute or regulation, tax amount, applied determination, claim, appeal, or later outcome supplied
• Official Annotation 325.0003's aircraft-use facts, maintenance flights, sole-purpose condition, and date — omits the earlier correspondence, training- and test-flight assumptions, undefined items, named counsel, missing records, absence of cited authority, 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.pdf

Original ruling text

325.0003

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

WILLIAM K. BENNETT
First District, Kentfield

1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6450

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles

March 17, 1992

GRAY DAVIS
Controller, Sacramento

BURTON W. OLIVER
Executive Director

Mr. J--- A. V---, Esq.
B---, L--- & M--Attorneys at Law
Suite XXX --- Square
XXXXX East --- Street
---, CA XXXXX
Re:

V--- A---, Inc.
SY -- XX-XXXXXX

Dear Mr. V---:
This is in reply to your December 11, 1991 letter regarding our letters of September 23, 1991 and October 4, 1991. The letters concern the purchase of a corporate aircraft by V--- A---, Inc. Our letters concluded that use tax would not apply to the use of the aircraft by V---, because the aircraft is first functionally used in interstate commerce outside California, enters California in the course of such use, and is then used continuously in interstate commerce while in California. Our conclusion was predicated on the assumption that certain training flights to which you referred were conducted for the purpose of training personnel who will fly the particular aircraft which is the subject of the opinion and that the test flights to which your referred were made for the purpose of determining that the aircraft is in proper operating condition. You note that, V--- has accepted delivery of its corporate aircraft, and there have been several trips from San Jose to Long Beach Airport for purposes of maintenance and small “glitch” type items. You note that, when the aircraft goes to Long Beach for service and maintenance, only the crew is on board for the trip. You note that, since there have been several of such intrastate trips, you wish to confirm that the trips do not disqualify V---’s exemption from use tax.

Mr. J--- A. V---

-2-

March 17, 1992
325.0003

You did not explain what you mean by “glitch type items.” However, if the sole purpose of the intrastate flights is to transport the aircraft to Long Beach for service and maintenance, the flights do not prevent the application of the exemption. Very truly yours,

Ronald L. Dick
Senior Tax Counsel

RLD:sr