Did California use tax apply when an aircraft was flown here only for a long interior refurbishment and then returned for sole use outside the state?

Plain-English summary

An out-of-state company would buy and take possession of a used commercial aircraft outside California, use it functionally there, and then fly it here within 90 days for a refurbishment lasting more than six months. The project would install a new interior converting the aircraft to noncommercial use, after which it would leave California and be used solely elsewhere.

The opinion concluded that section 6009.1 excluded the interior work from taxable storage or use because it incorporated tangible personal property into the aircraft for immediate out-of-state transport and sole later use outside California.

Flying the aircraft into California under its own power was also excluded. The no-tax conclusion depended on the aircraft having no California utilization other than the stated interior installation.

The February 6 request, aircraft and refurbishment records, amounts, applied exemption finding, and later outcome are not reproduced. The transaction remained prospective in the letter. The live annotation recasts the more-than-six-month work and later use as completed facts, adds Regulation 1620(b)(6), and identifies an amendment as 2004–2, but supplies none of that later authority's text or effect.

Common questions

Why was the interior installation excluded from taxable use?

Counsel treated installing a new interior as incorporating tangible personal property into other tangible personal property. Under the quoted part of section 6009.1, that was excluded when the aircraft would be immediately transported outside California and thereafter used solely outside the state.

Did the length of the California refurbishment itself create use tax?

Not under the conditional answer. The request anticipated more than six months of work, but counsel focused on the aircraft's sole California utilization, immediate transport after installation, and later sole outside use. The actual project and completion records are absent.

Did flying the aircraft into California under its own power count as use?

Counsel said no under the described facts. The requester had cited Stockton Kenworth for that position, but the official PDF does not reproduce the opinion or its complete holding.

Was this an applied exemption decision?

No. The request described what the company would do, and counsel's result was expressly based on an assumption about sole California utilization. No audit, return, assessment, exemption finding, or later outcome is supplied.

What later authority appears only on the live annotation?

The annotation cites Regulation 1620(b)(6) and marks the entry “Am. 2004–2.” It does not reproduce the regulation or amendment, identify the effective date, or explain their application to the 1986 prospective facts.

Citations and references

• California Revenue and Taxation Code sections 6201 and 6009.1 — described and partly quoted for use tax and the processing or incorporation exclusion; complete texts, definitions, conditions, procedures, amendments, later history, and current law not supplied
• Stockton Kenworth, Inc. v. State Board of Equalization, 157 Cal.App.3d 334 — cited for self-powered transport; opinion, facts, complete holding, procedural history, and later treatment not supplied
• California Sales and Use Tax Regulation 1620(b)(6) and “Am. 2004–2” — supplied only by the live annotation; regulation and amendment texts, effective date, relationship to the 1986 authorities and facts, later history, and current law not supplied
• February 6 request and May 7, 1986 response — no request, aircraft and refurbishment records, prices, tax amount, applied determination, claim, appeal, or later outcome supplied
• Official Annotation 325.0004's facts, conclusion, later regulation, date, and amendment notation — recasts prospective facts as completed and omits other authority, correspondence provenance, 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/325-0004.pdf

Original ruling text

325.0004

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
916/323-0823

May 7, 1986

Mr. B--- A. D----- --XXX --- -----, CA XXXXX
Dear Mr. D---:
Your letter of February 6, 1986 has been directed to me for a response. Your letter states as follows: “We are reviewing the use tax provisions of the California Revenue and Taxation Code and Regulations to determine whether an aircraft will be subject to California use tax under the following facts: “An out-of-state company purchases a used commercial aircraft. The aircraft is delivered outside California with title and possession transferring out-of-state. Shortly after the purchase, there is functional use of the aircraft transporting representatives of the purchaser to another location outside California. Prior to ninety days from the date of purchase, the aircraft is flown to California for refurbishing which includes the installation of a new interior to modify the aircraft for noncommercial use. The refurbishing in California will take greater than six months to complete. Upon completion of the refurbishing, the aircraft will be delivered to the purchaser outside California. Thereafter, the aircraft will be used noncommercially, solely outside the state. “It is our understanding, the period the aircraft is located in California for refurbishing will qualify under the storage and use exclusion of Revenue and Taxation Code 6009.1. This statute excludes for taxable storage and use tangible personal property present in the state “… for the purpose of being processed, fabricated, or manufactured into, attached to or incorporated into, other tangible personal property to be transported outside the state and thereafter used solely outside the state.” Given the refurbishing of the aircraft will result in the fabrication and incorporation of other tangible personal property which will be ultimately transported outside the state and used solely thereafter outside the state, the plane should qualify for this exemption. Additionally, transporting the aircraft under its own power to the California refurbisher, should not affect the aircraft’s qualification under Section 6009.1 pursuant to the Court’s decision in Stockton Kenworth, Inc. v. State Board of Equalization, 157 Cal.App.3rd. 334.

Mr. B--- A. D---

-2-

May 7, 1986
325.0004

“We would appreciate the State Board of Equalization’s opinion on our findings. “Your prompt response to this inquiry would be greatly appreciated. If you have any questions regarding the above, please do not hesitate to call.” Use tax is imposed on the storage, use, or other consumption in California of tangible personal property purchased from any retailer for storage, use, or other consumption in this State. (Revenue and Taxation Code Section 6201.) In relevant part, Section 6009.1 provides as follows: “‘Storage’ and ‘use’ do not include the keeping, retaining or exercising any right or power over tangible personal property…for the purpose of being processed, fabricated, or manufactured into, attached to or incorporated into, other tangible personal property to be transported outside the state and thereafter used solely outside the state.” The installation of an interior in an aircraft is the incorporating of tangible personal property into other tangible personal property. Accordingly, it is our conclusion that the act of installing the interior does not constitute the “storage” or “use” of the aircraft when the aircraft is to be immediately transported outside California and thereafter used solely outside this State. Assuming that the sole utilization of the subject aircraft in California will be that of installing a new interior, the use tax will not be applicable. (Section 6009.1.) The transportation of the aircraft into California under its own power will also be excluded from the term “use.” Should you have additional inquiries, do not hesitate to write again. Very truly yours,

John B. Adamo
Tax Counsel

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