When did a corporate jet's Van Nuys–LAX positioning leg count as part of an interstate flight rather than an intrastate move?

Plain-English summary

Bruce Morgan asked how Regulation 1620 applied to a redacted corporation's jet ferrying between Van Nuys and Los Angeles airports and what “commercial flight time” meant. His December 21, 2000 memorandum is absent.

The basic dividing line was dispatch purpose. A Van Nuys–LAX move merely to make the aircraft available as needed was intrastate. A dispatch already committed to a Van Nuys–LAX–New York plan was entirely interstate, even when the first leg was a passengerless deadhead to pick up passengers.

An absent 1999 letter had accepted an overnight deadhead leg. A Van Nuys curfew required moving to LAX the night before an early New York departure; the layover was no longer than operationally necessary and a specific interstate plan always existed.

Morgan did not know whether current legs resulted from a curfew. Counsel therefore could not decide them definitively and supplied three examples:

• A 9:00 a.m. Van Nuys dispatch for a planned 10:00 a.m. New York departure remained interstate when unforeseen passenger delay moved arrival to 3:30 p.m. and takeoff to 4:30 p.m.
• A 9:00 a.m. just-in-case move remained intrastate even though employees were told at 9:45 to fly to New York to meet potential purchasers and left at 10:00.
• A 9:00 a.m. move for a specifically scheduled 3:00 p.m. New York flight was interstate; flexibility to leave early if employees arrived did not alter the fixed purpose.

“Commercial flight time” meant business rather than personal travel and remained fact-dependent. New York sales presentations qualified. A president's golfing vacation with his wife as a fringe benefit did not.

No actual current leg or audit result is supplied. The live annotation publishes the specific-dispatch distinction but omits the missing-facts limitation, curfew example, timed hypotheticals and commercial-flight analysis.

Common questions

Did a California-to-California leg automatically remain intrastate?

No. It could be the first leg of a specific interstate flight when dispatched for the continuing out-of-state trip.

Did deadheading prevent interstate treatment?

No. A passengerless first leg solely to pick up passengers could qualify when already part of the specific interstate plan.

Did a long LAX wait break continuity?

Not necessarily. Operational necessity or an unforeseen passenger delay did not change a preexisting specific interstate dispatch.

Could a very short wait create interstate treatment?

No. The just-in-case example remained intrastate although the later New York assignment arose within 45 minutes and departure occurred one hour after positioning.

What counted as commercial flight time?

Business travel, based on actual facts. Sales presentations were counsel's positive example; a personal golfing vacation was the negative example.

Did counsel decide the audit staff's current flights?

No. Missing curfew and dispatch facts prevented a definitive answer, and no later determination or tax result is provided.

Citations and references

• California Sales and Use Tax Regulation 1620 — named without subsection or text
• December 21, 2000 request — identified, not reproduced
• 1999 letter to a corporate representative — described, not reproduced
• Three timed dispatch/delay hypotheticals — guidance rather than proved flights
• Sales-presentation and golfing-vacation examples — business/personal flight-time guidance
• Official Annotation 325.1724 — publishes only the ferry-leg rule and an unexplained (2002–1)

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 325.1724
• Original supporting opinion: 325.1724 PDF

Original ruling text

State of California

Board of Equalization
Legal Division-MIC: 82

Memorandum
To :

Mr. Bruce Morgan
Supervising Tax Auditor
Petitions Section

From :

David H. Levine
Tax Counsel IV

Subject:

325.1724
Date:

February 1, 2001

Telephone: (916) 445-5550

CalNet 485-5550

H--- E--- C--S- -- XX-XXXXXX

This is in response to your memorandum dated December 21, 2000 regarding the application of Regulation 1620 to the use of a corporate jet. Your questions relate to the ferrying of the aircraft between Van Nuys and Los Angeles airports and the meaning of “commercial flight time.” A ferry flight from Van Nuys Airport to Los Angeles Airport so that the aircraft will be available at LAX for use as needed is an intrastate flight. On the other hand, if the aircraft is specifically dispatched, for example, from the Van Nuys Airport for a flight to New York, with a stop over in LAX to pick up passengers, the entire flight, Van Nuys to LAX to New York, is an interstate flight. This is true even if the first leg of the flight to LAX is a dead head flight solely to pick up the passengers who will then be flown to New York. In the letter you cite sent to a representative of H--- in 1999, the aircraft was dead headed from Van Nuys to LAX the night before the flight from LAX to New York. The reason for this layover was that the Van Nuys airport had a curfew that necessitated the leg of the flight from Van Nuys to LAX be flown the night before the early morning continuation of the flight to New York. The reason that the flight from Van Nuys to LAX was accepted as part of an interstate flight was that it, in fact, was the first leg of an intended interstate flight from Van Nuys to New York, with a stop over in LAX to pickup passengers. The lay over was no longer than required for operational needs and the intent was always that the aircraft would continue on a specific flight plan that commenced in Van Nuys and terminated in New York. Your current question is that you are unsure whether the flights in question here between Van Nuys and LAX were due to a curfew. Whether a flight from Van Nuys to LAX is part of a qualifying continuous interstate flight is a question of fact. Thus, without the facts, we are unable to provide you a definitive answer. However, I will provide you a couple of examples that I hope will provide you sufficient guidance to resolve the issues presented.

Mr. Bruce Morgan

-2-

February 1, 2001
325.1724

H--- dispatches the aircraft from Van Nuys to LAX at 9:00 a.m. with the intent to depart from LAX at 10:00 a.m. Unforeseen circumstances delay the passengers’ arrival at LAX until 3:30 p.m., and the aircraft thus does not depart until 4:30 p.m. The flight from Van Nuys to LAX is part of a qualifying interstate flight to New York. The unforeseen delay did not mean that the flight was other than a continuous flight in interstate commerce. H--- dispatches the aircraft from Van Nuys to LAX at 9:00 a.m. so that, if some of its employees need to travel to New York on short notice, they can do so. At 9:45 a.m., a group of employees is instructed to immediately travel to New York in order to meet with potential purchasers. The flight carrying those employees departs from LAX at 10:00 a.m. The flight from Van Nuys to LAX is not part of a qualifying interstate flight. Although the aircraft was on the ground at LAX for a very short time, at the time the aircraft was dispatched from Van Nuys, it was not dispatched for a specific interstate flight. H--- dispatches the aircraft from Van Nuys to LAX at 9:00 a.m. for a specific flight carrying H---’ employees from LAX to New York with a scheduled departure time of 3:00 p.m. The reason the aircraft is dispatched early is that, if all employees can reach the airport earlier than the scheduled departure time, the flight to New York will depart early. The flight from Van Nuys to LAX is part of a specifically scheduled flight to New York, and thus qualifies as part of an interstate flight. The fact that some flexibility in departure times is available does not alter this conclusion. There are obviously many permutations. If you have questions regarding other specific factual circumstances that these examples do not resolve, please let us know. Regarding the meaning of “commercial flight time,” this simply means business travel as opposed to personal travel. Again, this is a question of fact and will depend on the actual facts. However, I believe that this will usually be easy to apply. In most cases, for example, legitimate corporations use most of their assets for business purposes. For example, when H--- uses its aircraft to fly to New York for sales presentations, the flight qualifies as commercial flight time. On the other hand, if the president were to use the aircraft to go on a golfing vacation with his wife (e.g., as one of his fringe benefits), that trip would not be a business trip and the flight would not qualify as commercial fight time. If you encounter factual circumstances that do not appear clearly business or clearly personal for which you need additional guidance, please contact us. DHL/cmm cc:

Mr. William D. Dunn (MIC:49)
Mr. Philip W. Spielman (MIC:38)
Ms. Oveta L. Riffle (MIC:37)
Ms. Janice L. Thurston (MIC:82)
Ms. Sharon P. Jarvis (MIC:82)