Did California sales tax apply to bonded aircraft fuel eligible for duty- and federal-tax-free withdrawal, or to nonbonded jet fuel?

Plain-English summary

A redacted excise-tax supervisor wrote on December 6, 1961 about sales tax on bonded turbine fuel. A January 5 Board letter answered only part of the request and promised more consideration and Attorney General consultation. Neither letter is reproduced, and the source does not give the January year.

After an undocumented consultation with the California Attorney General's Office, tax counsel answered using the term bonded jet fuel. Sales to aircraft federally allowed to withdraw that fuel free of customs duty and Internal Revenue taxes were exempt under California section 6352.

The reason was conflict: counsel said the combined effect of then-present 19 U.S.C.A. section 1309 and unidentified implementing regulations made California sales tax conflict with federal regulation of foreign and interstate commerce.

Nonbonded jet fuel received the opposite answer. Counsel found no federal constitutional or statutory prohibition and no exemption in the California Constitution or Revenue and Taxation Code. The letter therefore called sales-tax collection mandatory.

No actual sale, fuel, aircraft, route, federal withdrawal eligibility, return or tax outcome is supplied. The live annotation closely tracks the conclusion, but says California “will continue” collection on nonbonded fuel where the underlying letter says collection is mandatory.

Common questions

Was every bonded aircraft-fuel sale exempt?

No. The answer covered fuel that aircraft were allowed under federal law to withdraw free of customs duty and Internal Revenue taxes.

What federal regulation created the conflict?

The letter names section 1309 and regulations issued under it but supplies no subsection, regulation number, text or aircraft-eligibility criteria.

Why did section 6352 matter?

Counsel used it as the California exemption when state sales tax would conflict with federal regulation of foreign and interstate commerce. Its text is not reproduced.

Why was nonbonded fuel taxable?

The letter identified neither a federal bar nor a California constitutional or statutory exemption and therefore said California had to collect sales tax.

Did the Attorney General issue a written opinion?

None is supplied or identified. The letter says only that consultation occurred and that the conclusion resulted.

Did “turbine fuel” and “jet fuel” describe different products here?

The request is characterized as concerning bonded turbine fuel, while the April answer says bonded jet fuel. The source gives no product specifications or explanation, so this page does not assume a distinction.

Citations and references

• California Sales and Use Tax Law section 6352 — cited federal-conflict exemption
• Then-present 19 U.S.C.A. section 1309 and unidentified implementing regulations — federal commerce regulation
• California Constitution and California Revenue and Taxation Code — no particular nonbonded-fuel exemption identified
• December 6, 1961 request and January 5 partial response — identified, not reproduced
• California Attorney General's Office consultation — described without advice or record
• Official Annotation 325.1620 — publishes the bonded/nonbonded result

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.1620
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-1620.pdf

Original ruling text

325.1620

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

April 11, 1962

Mr. W. A--- E--Excise Tax Supervisor
U--- --- --- of California
U--- O--- C----- --- XX, California

AA-X-XXXX

Dear Mr. E---:
This is with further reference to our letter of January 5, which partly answered your letter of December 6, 1961, relating to the application of sales tax to sales of bonded turbine fuel. You will recall that we proposed to give further consideration to the matter and to consult with the Office of the Attorney General. As a result of the consultation, it has been concluded that pursuant to Section 6352 of the California Sales and use Tax Law sales of bonded jet fuel to aircraft, which under federal law are allowed to withdraw such fuel free from customs duty and Internal Revenue Taxes, are exempt from California sales tax. It is clear that the combined effect of present Section 1309 of Title 19 of the U.S.C.A., and the Regulations issued pursuant to that section would make California sales tax levied upon sales of bonded jet fuel free from customs duty and Internal Revenue taxes conflict with the Federal government’s regulation of foreign and interstate commerce. Therefore, such sales are exempt under Section 6352 of the California Sales and Use Tax Law. As there are no federal constitutional or statutory prohibitions against California applying its sales tax to sales of non-bonded jet fuel, and as there is no exemption in the California Constitution or the California Revenue and Taxation Code for sales of non-bonded jet fuel, it is mandatory that California collect sales tax on sales of non-bonded jet fuel. Very truly yours,

E. H. Stetson
Tax Counsel
EHS:fb
cc:
--- --- (--) – Asst. District Administrator