Were overhauled aircraft engines exempt when sold to Canadian or other out-of-state customers but delivered and installed in California before departure?

Plain-English summary

A redacted aircraft-engine seller's comptroller had written during the prior year, but the Board misplaced the letter and apologized for its delayed response. The missing request outlined three overhauled-engine situations.

First, the seller would sell and bill an engine to a Canadian customer, install it on an aircraft in Oakland and complete the export declaration. Second, a Canadian would buy a new aircraft without engines in California and order an overhauled engine from the seller, which would bill the customer and deliver the engine to the aircraft company for California installation before flight to Canada. Third, an out-of-state American would have an engine delivered and installed in California before the aircraft flew outside. No underlying transaction record is supplied.

Tax counsel treated all three sales as taxable. Under the cited Ruling 55 provision, California tax applied when property was sold and delivered to the purchaser or its representative in this state, even if the purchaser intended to transport—and actually transported—the property elsewhere.

Delivering each engine for California installation before departure was not the kind of delivery contemplated by Ruling 55 A-1-(e). Counsel said neither the federal Constitution nor California law supplied an exemption under those circumstances but cited no constitutional provision.

The stated Ruling 55 copy is absent. The source gives no completed installation, export, interstate flight, tax amount or later outcome. The live annotation preserves the three scenarios and taxable result but omits the misplaced-request and apology provenance, export declaration, direct billing, detailed aircraft facts, authorities and evidence gaps.

Common questions

Did a seller-prepared export declaration exempt the Canadian sale?

No. The first engine was delivered for Oakland installation before the aircraft left.

Did direct billing to Canada change the delivery point?

No. Both Canadian scenarios still involved California delivery and installation.

What if the purchaser intended and actually flew outside?

The cited historical rule made that intent and later movement immaterial after California delivery.

Why did Ruling 55 A-1-(e) not apply?

Counsel said engine delivery for installation on the aircraft in California before its own flight was not the delivery type that paragraph contemplated.

Is the prior-year request or Ruling 55 enclosure available?

No. The Board said the request had been misplaced, and the published PDF omits both it and the stated ruling copy.

Does the source document any actual assessment?

No. It supplies no tax amount, audit, payment, claim, appeal or later outcome.

Citations and references

• Sales and Use Tax Ruling 55 paragraphs A-2-(b) and A-1-(e) — historical delivery rules; stated enclosure absent
• Federal Constitution and California Sales and Use Tax Law — invoked generally without a numbered provision
• Prior-year request and transaction records — request reportedly misplaced; underlying evidence absent
• Official Annotation 325.0700 — publishes the three results while omitting material provenance and limits

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.0700
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-0700.pdf

Original ruling text

325.0700

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
0953 Sale and installation of overhauled-aircraft-engines in California.

April 30, 1957

Attention:

--Comptroller

Gentlemen:
In reviewing our files we find that a letter written by you last year was misplaced. We apologize for this oversight. You inquired concerning the application of the sales tax to sales of overhauled aircraft engines. Three situations were outlined. In the first, an overhauled engine is sold to a customer in Canada, installation of the engine on the aircraft to be made at Oakland. Your company completes the export declaration. In the second, a customer in Canada purchases a new aircraft (minus engines) in California. He orders an overhauled engine from you to be delivered to the aircraft company for installation after which the plane will be flown to Canada. In both cases you bill the Canadian customer for the engine. In the third situation, an out-of-state American customer has an overhauled engine delivered to a point in California where the engine is installed and the plane flown out-ofstate. Paragraph A-2-(b) of Sales and Use Tax Ruling 55, copy enclosed, provides in part that sales tax applies to sales of property which is sold and delivered to the purchaser or his representative in this State whether or not the disclosed or undisclosed intention of the purchaser is to transport the property outside the State, and whether or not the property is actually so transported. All three transactions fall within the scope of this paragraph. Accordingly, each sale would be a taxable transaction. The reason that the tax applies is that neither the Federal Constitution nor the California Sales and Use Tax Law provides for an exemption under those circumstances.

Furthermore, it is our opinion that delivery of an engine for installation, in the aircraft, in this State, prior to being flown out, is not the type of delivery contemplated in paragraph A-l-(e) of Ruling 55. If you should have any further questions we shall do our utmost to see that you receive a prompt reply.

Very truly yours,

Warren W. Mangels
Associate Tax Counsel

JDP:rg
cc: Long Beach - Auditing