Did California use tax apply to a jet delivered in Oregon, used there for pilot certification, and based in Nevada for more than 90 days?

Plain-English summary

The purchaser took delivery of a jet in Oregon and planned to fly it to Nevada while making at least three out-of-state landings and takeoffs to obtain pilot certification. The aircraft would then be based in Reno and flown to non-California locations for 91 to 100 days.

The certification flights were functional use of the aircraft outside California. Because the aircraft also was not expected to enter California within 90 days of purchase, the letter did not regard it as bought for California use and concluded that use tax did not apply.

If the aircraft actually entered California within 90 days, tax would apply unless it was used or stored outside California at least half the time during the six months immediately following entry.

The requester also described two already-certified pilots accompanying the purchaser, a planned lease to a corporation for domestic and international transportation of corporate personnel, and a Reno base for 91 to 100 days. Counsel did not analyze a separate lease tax result; the response addressed the purchaser's acquisition and use.

The source supplies no purchaser identity, purchase price, exact purchase or entry dates, flight and certification records, maneuver locations, Nevada-base records, lease performance, applied tax computation, or later outcome. Counsel expressly said the already-completed, incompletely described transaction could not receive section 6596 reliance relief. The live annotation omits that refusal and adds later amendment markers and a temporary twelve-month rule without the later texts.

Common questions

What counted as the jet's first functional use?

Counsel treated the purchaser's flight maneuvers to obtain certification as use for the aircraft's designed purpose. That conclusion depended on the express assumption that at least three landings and takeoffs en route from Portland to Reno occurred outside California.

Why did the planned Reno period matter?

The requester said the jet would remain based in Reno and fly to non-California destinations for 91 to 100 days. Counsel understood that to mean no California entry during the first 90 days after purchase, excluding storage time for shipment to California, which the quoted historical regulation accepted as proof the property was not bought for California use.

What if the jet entered California within 90 days?

The letter said use tax measured by the aircraft's sales price would apply unless the aircraft was used or stored outside California at least half of the six months immediately after entry. It supplies no entry, location, flight-duration, or tax records applying that fallback.

Did the opinion decide tax on the planned corporate lease?

No separate lease analysis appears. The facts mention a planned lease for transporting corporate personnel inside and outside the United States, but the question and answer address tax on the unidentified purchaser's purchase and use.

Could the purchaser rely on this response for relief from tax?

Counsel said no under section 6596 because the transaction had already taken place, the taxpayer was not identified, and all relevant facts were not fully described. The source does not supply the request or any later audit or relief decision.

What later rules appear only in the live annotation?

It marks amendments “2006–1” and “2008–1” and notes that, from October 2, 2004 through June 30, 2007, Regulation 1620(b)(5) applied a conditional twelve-month presumption to certain vehicles, vessels, and aircraft. Those texts and their effect are not supplied.

Citations and references

• California Revenue and Taxation Code sections 6051, 6201, 6401, and 6202 — cited for California sales and use tax and the person liable; complete authorities, measures, exceptions, procedures, amendments, later history, and current law not supplied
• California Sales and Use Tax Regulation 1620(b)(3) — quoted for functional use, 90-day entry, half-time outside use or storage, and shipment-storage time; complete authority, counting and proof rules, amendments, later history, and current law not supplied
• California Revenue and Taxation Code section 6596 — cited and held unavailable for reliance relief because the taxpayer and full facts were not supplied and the transaction had occurred; complete authority, procedures, amendments, later history, and current law not supplied
• July 26 request and August 13 response — no request, transaction records, complete facts, applied tax decision, lease result, assessment, claim, appeal, or later outcome supplied
• Official Annotation 325.0010.750's historical conclusion, amendment markers, and temporary-law note — omits the reliance refusal, most facts, authority, records, later outcome, and limits and supplies no later-law texts or additional aircraft record

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 325.0010.750
• Original supporting opinion: 325.0010.750 PDF

Original ruling text

325.0010.750

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION (MIC:82)
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082)
Telephone: (916) 324-2637
FAX: (916) 323-3387

DEAN ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego
BRAD SHERMAN
Fourth District, Los Angeles
KATHLEEN CONNELL
Controller, Sacramento
────────

August 13, 1996

E. L. Sorensen, Jr.
Executive Director

Mr. J--- A. V-----, --- & --XXXXX --- --- Street, Suite XXX
---, California XXXXX
Re:

Unidentified Taxpayer;
Sale/Use of a Jet Aircraft

Dear Mr. V---:
This is in response to your letter dated July 26, 1996 regarding the application of tax on your client’s purchase and use of a jet aircraft. You state: “[M]y client intends to take delivery of an Astra jet aircraft in Portland, Oregon, on Friday, July 26th. With him will be his two pilots who have been previously certified on the aircraft. “When he takes delivery in Portland, the aircraft will be flown to Reno, Nevada. However, on the trip to Reno, Nevada, my client will perform at least three landings and takeoffs for purposes of his certification as a pilot on the aircraft. The aircraft will be based in Reno for 91 - 100 days and flown to non-California locations during this time. “My client will lease the aircraft to a corporation which will utilize the aircraft in its transportation of corporate personnel. It is anticipated that the aircraft will be used both inside and outside the United States in ferrying corporate personnel.” We understand your letter to ask whether tax applies to your client’s purchase and use of the aircraft.

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

-2-

August 13, 1996
325.0010.750

Discussion
California imposes a sales tax on a retailer’s gross receipts from the retail sale of tangible personal property inside this state unless the sale is specifically exempt from taxation by statute. (Rev. & Tax. Code § 6051.) When sales tax does not apply, use tax is imposed on the sales price of property purchased from a retailer for storage, use, or other consumption of that property in California. (Rev. & Tax. Code §§ 6201, 6401.)1 Regulation 1620(b)(3) explains when property purchased outside California is regarded as purchased for use inside this state: “[P]roperty purchased outside of California which is brought into California is regarded as having been purchased for use in this state if the first functional use of the property is in California. When the property is first functionally used outside California, the property will nevertheless be presumed to have been purchased for use in this state if it is brought into California within 90 days after its purchase, unless the property is used or stored outside of California one-half or more of the time during the six month period immediately following its entry into this state. Prior out-of-state use not exceeding 90 days from the date of purchase to the date of entry into California is of a temporary nature and is not proof of an intent that the property was purchased for use elsewhere. Prior out-of-state use in excess of 90 days from the date of purchase to the date of entry into California, exclusive of any time of storage for shipment to California, will be accepted as proof of an intent that the property was not purchased for use in California. “For purposes of this subparagraph ‘functional use’ means use for the purposes for which the property was designed.” That is, property purchased outside California is regarded as purchased for use in this state (and subject to use tax) where the property is first functionally used inside this state, or where the property is brought into this state within 90 days after its purchase unless the property is used or stored outside California one-half or more of the time during the six-month period immediately following its entry into this state. We assume in this case that the sale of the aircraft to your client occurred outside this state. This means that your client owes use tax measured by the sales price of the aircraft only if your client first functionally used the aircraft in California or the aircraft is regarded as having been purchased for use inside this state. You state that the aircraft will be flown from Portland, Oregon to Reno, Nevada during which your client will perform at least three landings and take-offs2 for purposes of obtaining certification as a pilot for the aircraft. Under these facts, we regard the aircraft as first 1

This tax is imposed on the person actually storing, using, or otherwise consuming the property within the state. (Rev.
& Tax. Code § 6202.)
2
We assume that these “landings and take-offs” will occur outside California.

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

-3-

August 13, 1996
325.0010.750

functionally used outside California when your client flies it in order to obtain pilot certification. You also state that the aircraft will be based in Reno for 91 - 100 days and flown to nonCalifornia locations during that time. We understand this to mean that the aircraft will not be brought into California within 90 days after its purchase exclusive of any time of storage for shipment to California. Under these facts, we do not regard the aircraft as purchased for use inside this state. This means that use tax does not apply to your client’s transaction provided the aircraft does not in fact enter into California within 90 days of its purchase. If the aircraft does enter California within 90 days after its purchase, use tax will apply measured by the sales price of the aircraft unless the aircraft is stored or used outside California one-half or more of the time during the six-month period immediately following its entry into this state. Please note that Revenue and Taxation Code section 6596 sets forth the circumstances under which a taxpayer may be relieved of liability for taxes when reasonably relying on a written response to a written request for opinion. To come within that section, the request for opinion must identify the taxpayer as well as all relevant facts relating to the particular transaction. Our opinion above does not come within section 6596 since the transaction has already taken place and since you have not identified and have not fully described all relevant facts regarding your client's transaction. If you have any additional questions, please write again. Sincerely,

Warren L. Astleford
Tax Counsel
WLA:rz

cc:

Norwalk District Administrator - (AA)