Did a yacht's arrival in California 102 days after purchase automatically prove enough out-of-state use to avoid use tax?

Plain-English summary

The Phoenix owners bought yacht XY in South Carolina on October 28, 1994 intending travel outside U.S. waters. They said it was kept and used there until a major refit was needed for safe extended voyages, then moved it to Long Beach because that port was convenient to Phoenix. The owners said Long Beach Coast Guard documentation merely reflected the regional office for Phoenix residents, not where the boat would be kept.

The yacht reached Long Beach Marina Shipyard on February 7, 1995, 102 calendar days after purchase. On February 13, a neighboring powerboat burned to the waterline, causing $45,000 in damage and allegedly preventing the refit and departure from U.S. waters.

The calendar gap of 102 days did not by itself establish the required pre-entry use. The owner needed to prove more than 90 days of actual functional use outside California, excluding shipment time and storage for shipment. Because the submitted facts did not describe that use, the letter could not determine whether the yacht escaped the California-use presumption.

If the owner could not prove the pre-entry use, the owner could still use the six-month test after California entry. The unexpected fire and resulting repair delay were not relevant to whether the yacht had been purchased for California use.

The owner supplied a repair invoice for work completed February 8, South Carolina mooring invoices for November through January, and an August 2 Coast Guard documentation certificate. Those documents are summarized but not reproduced. The source does not explain how the February 8 completed repair related to the stated major refit that had not started before the February 13 fire.

The supporting letter remains conditional: it says use tax would be owed unless the owner established either qualifying pre-entry use or at least half outside use or storage after entry. It does not make a final factual finding or supply an amount, calculation, agency disposition, payment, claim, appeal, or later outcome.

CDTFA's live annotation goes further. It states that the yacht was outside California for ninety days but lacked functional-use evidence, and that it was in California for at least half of the following six months, so it would be regarded as purchased for California use. The supporting letter itself does not make those conclusive findings. The live annotation also adds 2006–1, 2008–1 and temporary 2004–2007 markers, while an embedded source note flags 2001 and 2003 Regulation 1620 changes; none of those later texts is supplied.

Common questions

Did 102 calendar days outside California satisfy the historical test?

Not automatically. The rule required more than 90 days of qualifying use and excluded shipment and storage-for-shipment time.

What evidence of South Carolina activity was supplied?

The owner said the yacht was kept and used there and supplied three months of marina-space invoices, but did not describe the actual functional use needed for counsel to decide the test.

Did the fire excuse time spent in California?

No under the letter. Counsel said an unexpectedly long repair stay caused by the neighboring-boat fire was irrelevant to purchase intent.

Did the supporting letter finally find use tax due?

No. It stated conditional alternatives and requested documentation. CDTFA's live annotation later presents a conclusive failure of both tests.

Was the February 8 invoice for the planned major refit?

The source does not say. It calls it an invoice for repairs completed February 8 but separately says the major refit had not begun before the February 13 fire.

Is a final determination or tax amount available?

No. The PDF supplies no assessment amount, final disposition, payment, claim, appeal, or later result.

Citations and references

• California Revenue and Taxation Code sections 6201 and 6401 — cited for California use tax; complete statutes, definitions, rate, measure, amendments, later history, and current law not supplied
• California Sales and Use Tax Regulation 1620(b)(3) — quoted for the historical functional-use, entry and six-month tests; complete regulation, calculation, proof, amendments, later history, and current law not supplied
• March 21 request, repair and marina invoices, Coast Guard certificate, and enclosed regulation — summarized but not reproduced; transaction and actual-use proof remain incomplete
• July 2 response — gives no determination amount, final agency action or later outcome
• Embedded 2001/2003 note and official Annotation 325.0220's 2006/2008 and temporary-rule markers — later texts not supplied
• Official Annotation 325.0220 — conclusively states the evidence and taxable outcome beyond the supporting letter's unresolved factual posture

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 325.0220
• Original supporting opinion: 325.0220 PDF

Original ruling text

325.0220

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

July 2, 1996

Re:

Use Tax Determination
Boat Name:
Accoun t No.
U.S. Coast Guard Documentation No.

Dear Mr.
This is in response to your letter of March 21, 1996, in which you inquire of the application of use tax to your purchase of a yacht, now named XY. The facts surrounding the purchase and subsequent events following that purchase of XY are listed in your letter as follows:

1. Boat was purchased in South Carolina on October 28, 1994, with
   intent to travel outside U.S. waters.
2. Boat was kept and used in South Carolina until it was determined
   that a refit was necessary to make the boat seaworthy and safe for extended sea voyages.
3. A major refit was needed to· prepare boat for safe ocean travel, so
   boat was moved to a more convenient port at which to perform the work (Long Beach, California) in proximity to Phoenix, Arizona.
4. The boat was documented in Long Beach, California because that
   is the U.S. Coast Guard Regional Office for residents of Phoenix, Arizona. This has no bearing upon where boat would be kept.
5. Owners are residents of Phoenix, Arizona and intend to remain so.
6. Boat arrived in California at Long Beach Marina Shipyard on
   February 7, 1995 - 102 days after the purchase date.
7. On February 13, 1995, before the refit work could be started, a
   power boat next to XY burned to the waterline and XY suffered

$45,000 in damage. The refit could not be performed and the boat could not leave U.S. waters." You provided a copy of an invoice for repairs to XY which were completed in Long Beach California on February 8, 1995. You also included a copy of an invoice for marine space rental which indicates the yacht was moored at --- South Carolina for the months of November and December 1994 and January 1995. Lastly, you included a certificate of documentation issued by the United States Coast Guard on the vessel at Los Angeles-Long Beach, California on August 2, 1995. Use tax applies to the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for use in California. (Rev. & Tax. Code §§ 6201, 6401.) Subdivision (b) (3) of Regulation 1620, a copy of which is enclosed, explains when property is regarded as .having been purchased for use in California as follows: "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 and 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 shipment to California, or 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.

• Note: note changes to Reg 1620 SPJ 12/24/01 and later changes SPJ
  4/18/03
  "For purposes of this subparagraph 'functional use' means use for the purposes for which the property was designed."

If you used the vessel outside California for more than 90 days prior to its first entry into California, exclusive of time of shipment and time of storage for shipment to California, you will not be presumed to have purchased the vessel for use in California, and use tax will not apply. Although you indicate that you "used" the yacht following your purchase in South Carolina on October 28, 1994 up until you brought it into

California, you have not described the facts regarding such use. We therefore are unable to determine whether you would be regarded as having used the vessel outside California for more than 90 days prior to the vessel's first entry into California, exclusive of time of shipment and time of storage for shipment. If you are not regarded as having used the vessel outside California more than 90 days prior to its entry into this state, you will be presumed to have purchased the vessel for use in this state and will owe use tax, unless you can establish that the vessel was used or stored for one-half or more of the time during the six-month period immediately following it entry into this state (which was apparently on February 7, 1995). The fact that the yacht remained in California for repairs longer than expected due to the accidental burning is not relevant to the determination whether you are regarded as having purchased the vessel for use in California. If you have questions regarding what type of documentation you need to present to establish that you did not purchase the vessel for use in California, or you have other questions regarding this transaction, please contact the Consumer Use Tax Section of the Board, 450 N Street MIC:37, P. O. Box 942879, Sacramento, CA, 94279-0037, telephone: (916) 445-9524.

Yours very truly,

Anthony I. Picciano
Tax Counsel

AIP:cl
Enclosure (Reg. 1620)
cc:

Out-of-State District Administrator
Ms. Oveta L. Riffle (MIC:37)