Did the Vandenberg spaceflight exemption apply when a launch-ready aircraft first flew from Vandenberg to Florida before an Atlantic satellite launch?

Plain-English summary

Dan Lisonbee requested an opinion by February 9, 1994 letter and later calls. The Board apologized for delay. The proposed five-step sequence was:

1. A redacted company would sell and deliver a spacecraft bus and payload adapter to the Republic of China, with title passing in Taiwan.
2. Taiwan payload integration would create the satellite, which would return to the company in California for short storage, container opening, damage inspection and battery installation.
3. At Vandenberg Air Force Base, the satellite would mate to a Pegasus XL launch vehicle assembled there, and the launch vehicle would attach to an airplane in “launch ready condition.”
4. The airplane would fly to Florida for refueling and final checking.
5. It would then fly over the Atlantic Ocean for launch.

The request assumed the returned satellite potentially created California use and that the launch vehicle and other property might also be taxable unless section 6380 applied. It asked whether leaving “AVFB,” as the quoted request prints it, launch-ready overcame the Florida landing.

Then-existing section 6380 covered qualified satellite property used in a suborbital, orbital or interplanetary space flight originating at VAFB. Counsel held that the only flight beginning there was conventional aircraft travel to Florida, not the later space flight over the Atlantic. The 1994 exemption therefore failed.

That did not decide underlying use tax. Counsel said the facts did not make satellite use tax evident and quoted section 6009.1's outside-transport/use and processing/incorporation exclusions in a footnote. The live annotation calls those facts insufficient.

The live narrative introduces two defects: it says the spacecraft was assembled at VAFB, where the PDF says the launch vehicle was assembled and the satellite mated to it; and it changes Florida “refueling” to “reflecting.” Most importantly, a live note says section 6380 was amended operative January 1, 1999 to remove the VAFB-origin requirement.

Common questions

What property was sold in Taiwan?

A spacecraft bus and payload adapter, collectively called the spacecraft. After payload integration there, the resulting satellite returned to California.

What happened in California before VAFB?

Short storage, container opening, damage inspection and battery installation. The source supplies no dates, work records or duration.

Was the satellite assembled at VAFB?

The PDF says the launch vehicle was assembled there and the satellite was mated to it. The live annotation instead says the spacecraft was assembled.

Why did the 1994 exemption fail?

The flight originating at VAFB ended in Florida and was conventional aircraft travel. The space flight began later over the Atlantic.

Did the letter hold that California use tax applied?

No. It rejected section 6380 but expressly questioned the premise that the satellite otherwise incurred use tax and pointed to section 6009.1.

Does the VAFB-origin rule still control?

Not according to CDTFA's live note, which says legislation removed that requirement operative January 1, 1999. The page supplies no current statutory text or other conditions.

Did the proposed launch occur?

No completed sale, integration, return, assembly, flight, launch or tax outcome is supplied.

Citations and references

• California Revenue and Taxation Code section 6380 — pre-1999 qualified-property and VAFB-origin language
• California Revenue and Taxation Code section 6009.1 — quoted possible outside-use/processing exclusion
• February 9, 1994 request and later calls — identified, not reproduced
• Five-step Taiwan–California–VAFB–Florida–Atlantic proposal — no completion records
• Official Annotation 325.1768 — adds source-detail errors and a January 1, 1999 amendment note

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 325.1768
• Original supporting opinion: 325.1768 PDF

Original ruling text

325.1768

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

MEMBER
First District

450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-6593

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles

June 7, 1994

GRAY DAVIS
Controller, Sacramento
────────

Mr. D--- L--Tax Counsel
T---, Executive Offices
XXXX --- Road
---, OH XXXXX

BURTON W. OLIVER
Executive Director

Re: Sales Tax Exemption For Space Launches
at Vandenberg Air Force Base
Dear Mr. L---:
This is in response to your letter dated February 9, 1994, and our subsequent telephone conversations. I apologize for our delay. In your letter, you request our opinion on the applicability of the sales and use tax exemption provided in Revenue and Taxation Code section 6380 to the following circumstances:

1. T--- will sell and deliver a spacecraft bus and payload adapter (the spacecraft)
   to the Republic of China; title to pass upon delivery in Taiwan. The spacecraft will be integrated with its payload in Taiwan, and the resulting satellite will be returned to T--- in California.
2. After the return of the satellite to T--- in California, it will be stored for a
   short period of time, during which period the shipping container will be opened and the satellite will be inspected for damage. Then, batteries will be installed and the satellite will be shipped to Vandenberg Air Force Base (VAFB).
3. At VAFB, the satellite will be mated to a Pegasus XL launch vehicle that will
   be assembled at VAFB. The launch vehicle then will be attached to an airplane, in "launch ready condition."

Mr. Dan Lisonbee

-2-

June 7, 1994
325.1768

4. The airplane will then be flown to Florida for "refueling and final checking
   out."
5. Then, the airplane will be flown to a point over the Atlantic Ocean for launch.
   You also state the following:
   For purposes of this ruling it is assumed the return of the [satellite] from Taiwan to California for launch is potentially a taxable "use" of tangible personal property in the state, and that tax also might be due on the launch vehicle and other property involved, unless the exemption provided in section 6380 applies. The specific question is whether the fact the [airplane] will leave AVFB in launch ready condition qualifies for the exemption, or whether the mere fact that the
   [airplane] might land in Florida for refueling and a brief final check out disqualifies the use of the VAFB tax exemption. As you indicate, section 6380 of the Revenue and Taxation Code provides an exemption from the sales and use tax for the sale, storage, use, or other consumption in California of qualified property used in space flight. "Qualified property" means either: (1) "Tangible personal property that has space flight capability, including ... [a] satellite ..."; or (2) "Tangible personal property to be placed or used aboard any ... satellite ...." "Space flight" means "any flight designed for suborbital, orbital, or interplanetary travel by a space vehicle, ... and originating at Vandenberg Air Force Base." We initially note that, despite your stated assumption, it is not evident from your recitation of the facts that the satellite would be subject to a use tax in this state. In this regard, I would bring section 6009.1 of the Revenue and Taxation Code to your attention.1 With regard to the primary issue, however, we disagree with your conclusion that, for purposes of § 6380, the intended spaceflight will originate at VAFB. Based upon the facts set forth in your letter, we conclude that the only flight that will originate from VAFB is not a spaceflight, but, instead, a conventional flight from California to Florida. Thus, we disagree with your opinion that the exemption would apply to the stated facts.

1§6009.1 provides as follows: "'Storage' and 'use' do not include the keeping, retaining or exercising any right or power over tangible personal property for the purpose of subsequently transporting it outside the state for use thereafter solely outside the state, or for the purpose of being processed, fabricated, or manufactured into, attached to or incorporated into, other tangible personal property to be transported outside the state and thereafter used solely outside the state."

Mr. Dan Lisonbee

-3-

Please call if you have any further questions.
Very truly yours,

Robert W. Lambert
Senior Staff Counsel
RWL:plh

June 7, 1994
325.1768