How was an aircraft's out-of-state time counted under Regulation 1620's six-month use-or-storage test?

Plain-English summary

The hypothetical assumed an aircraft bought from an out-of-state retailer, first functionally used outside California, and brought into California within 90 days. The only issue was whether it was used or stored outside California at least half the time during the six months immediately after entry.

For that test, the letter said location and elapsed time controlled. When the aircraft was outside California, its time counted as out-of-state use or storage whether it was flying, under repair, waiting or taxiing on a runway, making a test flight, circling, sitting in a hangar, or engaged in another activity.

Breaking the time into flight, repair, and storage categories was therefore unnecessary for Regulation 1620(b)(3). Those distinctions could matter later if the aircraft failed that test and the purchaser pursued a separate exemption under Revenue and Taxation Code section 6366 or 6366.1 and Regulation 1593.

The absent log allegedly showed 303 flight hours, including 239 hours or 78.75 percent outside California; outside storage was calculated at 24.18 percent, with more than 150 flights on more than 90 dates. The requester said overnight airport parking was counted as a storage day based on Consumer Use Tax Section advice. Counsel did not reproduce or recompute the log.

The correspondence chain is incomplete and internally inconsistent. The August 12 letter quoted a missing June 30 letter; the response says a prior letter was dated July 30, 1990 and immediately introduces the same quotation as July 30, 1999. It also mentions an earlier letter, researched Decisions and Recommendations, and Pat Hart Jorgensen correspondence that are absent.

The live annotation adds 2000–2 and 2006–1/2008–1 markers and a temporary 2004–2007 twelve-month note without supplying those later texts. No actual taxpayer, aircraft record, accepted calculation, assessment, exemption result, claim, appeal, or later outcome is provided.

Common questions

Did flight hours and storage days have to be added separately?

No for the assumed Regulation 1620(b)(3) test. Counsel asked only how much elapsed time the aircraft was inside California and how much it was outside.

Did repair, runway, taxi or hangar time count outside California?

Yes. All were outside-state use or storage while the aircraft was physically outside California, regardless of the activity label.

Did counsel validate the requester's percentages?

No. The letter repeats the 303-hour, 239-hour, 78.75-percent and 24.18-percent claims but does not include the log or perform a final six-month calculation.

When could the activity category matter?

After the aircraft failed the purchase-for-California-use test and the purchaser sought a distinct exemption under sections 6366 or 6366.1 and Regulation 1593.

Was this written advice on which a taxpayer could rely?

No. The letter expressly characterizes the facts as hypothetical and denies section 6596 and Regulation 1705 treatment.

Which July 30 date is correct?

The source does not resolve it. One sentence says July 30, 1990, while the next introduces the quotation as from July 30, 1999; the underlying letter is absent.

Citations and references

• California Sales and Use Tax Regulation 1620(b)(3) — cited for the assumed functional-use, entry and half-of-six-month test; complete authority, counting and proof rules, amendments, later history, and current law not supplied
• California Revenue and Taxation Code section 6596 and Regulation 1705 — cited for written-advice status expressly unavailable to the hypothetical; complete authorities, conditions, procedures, amendments, later history, and current law not supplied
• Sections 6366 and 6366.1 and Regulation 1593 — cited for separate aircraft exemptions not decided here; complete authorities, conditions, procedures, amendments, later history, and current law not supplied
• July 9 and August 12 letters, log, prior counsel letters, Decisions and Recommendations, and Jorgensen correspondence — not reproduced; the July 30, 1990/1999 conflict is unresolved
• September 9 response — no actual taxpayer, calculation, tax measure, audit, assessment, claim, appeal, or later outcome supplied
• Official Annotation 325.0185's historical summary, date and later-rule markers — supplies no amendment text and omits the hypothetical posture, log figures, prior-letter conflict, missing records, applied outcome, and reliance status

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 325.0185
• Original supporting opinion: 325.0185 PDF

Original ruling text

325.0185

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) 324-2588
FAX: (916) 323-3387

DEAN F. ANDAL
Second District, Stockton
CLAUDE PARRISH
Third District, Torrance
JOHN CHIANG
Fourth District, Los Angeles
KATHLEEN CONNELL
Controller, Sacramento
_______
E. L. SORENSEN, JR.
Executive Director

September 9, 1999

Mr. T--- A. A--A--- Enterprises
XXXX --- Drive
--- ---, CA XXXXX
Re:

Unidentified Taxpayer
Regulation 1620, subsection (b)(3)

Dear Mr. A---:
This letter is in response to your letters of July 9, 1999 and August 12, 1999 in which you inquire about hypothetical situations. As you know from our previous correspondence, our letters to you commenting on hypothetical situations do not constitute written advice to a taxpayer under Revenue and Taxation Code section 6596, as interpreted by Regulation 1705. In your letter of July 9, 1999, you state: “I have a question about how the language in the above referenced regulation [1620], as it relates to storage or use, is applied. The section of the regulation in question states in pertinent part: “’Property 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 of 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.’ “The regulation clearly states ‘unless the property is used OR stored.’ Using the following example please give me your legal opinion of how the Board will decide in this case.

Mr. T--- A. A---

-2-

September 9, 1999
325.0185

“In this scenario you should presume the following:
“A.
This busy executive must travel to clients locations
around the country on an irregular but urgent basis and then return to her office in California. “B. Possession of the Citation Jet occurred outside California. “C.

First functional use occurred outside California.

“D.
That we are dealing with a claim for a use tax
exemption by supporting the out-of-state use or storage portion of the six-month test period. “The attached aircraft log summary represents a pattern of use and storage for your review. I presumed a storage day if the aircraft was parked ‘overnight’ at an airport as I was advised by the Consumer Use Tax Section. The log summary is intended to show the actual day-to-day use of the aircraft as opposed to merely giving you a narration of a pattern. “The key points about this aircraft are as follows: “A. During the six month test period, the aircraft was used constantly on out-of-state flights. The total amount of hours flown was 303, and 78.75% of the flight hours (239 hours) were out-of-state. “B. The aircraft was purchased for out-of-state use and was flown primarily out-of-state, however, the storage time outside California was only 24.18%. (See paragraph above about how storage was calculated.) “C. The aircraft was not casually used, making in excess of 150 flights on more than 90 different dates.”

In your letter of August 12, 1999, you quote a portion of my letter to you of June 30, 1999, as follows:

Mr. T--- A. A---

-3-

September 9, 1999
325.0185

“‘In other words, the six-months test is satisfied if (1) the aircraft is used, but never stored outside of the state of California one-half or more of the time during the six-months period; (2) the aircraft is stored, but never otherwise used outside the state of California one-half or more of the time during the six-month period: or (3) the aircraft is both used and stored outside of the state of California one-half or more of the time during the six-month period.’ You then further state: “If you substituted ten percent for ‘never,’ would this also satisfy the sixmonth test? “Or, are you saying that storage and use are all the same thing when evaluated for the six-month test? If this is true, does this mean ‘storage’ and ‘use’ are not separate issues? Your letter seems to be leading me to the conclusion that ‘time’ is all that matters and it makes no difference whether the activity is flight time, repair time or hangar time. “Additionally, when researching the Decision and Recommendations, I find instances where storage days are evaluated separate from flight hours when the taxpayer was claiming the aircraft was purchased for out of state use. If my understanding of what you are communicating to me about ‘time’ is correct, why was the staff wasting its efforts evaluating flight hours? Please help me understand this most critical aspect of the principal use test.” Assumption: In commenting on the hypothetical situations in your two letters, we assume that the purchaser purchased the aircraft from a retailer outside of California, and the aircraft was first functionally used outside of California and brought into California within 90 days after its purchase. The only issue addressed in this letter is whether the property was 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. Furthermore, we assume that you are inquiring as to whether California use tax may properly be imposed, not as to whether there is an exemption from use tax if the Aircraft is regarded as purchased for use in California.

Mr. T--- A. A---

-4-

September 9, 1999
325.0185

Response:
I believe my letter of July 30, 1990 responds to the questions in your letter of July 9, 1999. As noted in my letter of July 30, 1999: “In applying this six-month test, all of the activities of the aircraft during this six-month period may be subsumed under the terms, ‘use or storage.’ If the aircraft is outside the borders of California, it is being used or stored outside of California regardless of whether the use or storage is broken down into time of flight, repair, waiting on the runway, taxiing down the runway, test flights, circling the airport, sitting in a hanger, or any other uses or storage. As noted in an earlier letter, since use or storage counts for purposes of this six-month test period, both the use and the storage of the property during that six-month period are important and relevant. It is unimportant for this test whether the time is time of use or time of storage; it may be one, or the other, or both.” In response to your letter of August 12, 1999, time is all that matters for the purpose of applying the six-month test under Regulation 1620(b)(3) to determine whether an aircraft purchased from a retailer outside this state was purchased for use in California. The only question is: in the six-month period following the aircraft’s entry into California, what period of time was the aircraft in California and what period of time was the aircraft outside the state? In making this determination, the issue of flight time vs. repair time vs. hangar time is irrelevant. These issues may become relevant if the aircraft fails the test to determine whether it was purchased for use in California, and the purchaser then seeks an exemption from use tax under Revenue and Taxation Code section 6366 or 6366.1, as further explained in Regulation 1593. I note that Senior Tax Counsel Pat Hart Jorgensen has already written to you discussing both Regulations 1620 and 1593. I trust that this fully responds to your inquiries. Very truly yours,

Janice L. Thurston
Senior Tax Counsel
JLT/cmm
cc:

--- District Administrator (---)