Did converting a piston aircraft to a jet create a newly manufactured aircraft, or was it repair or modification of the existing plane?

Plain-English summary

Converting a piston-powered aircraft to a jet, even with other changes, was not extensive enough to amount to manufacture or fabrication of a new aircraft. The letter classified the work as repair, reconditioning, or modification of an existing aircraft, with tax applying to the sale price of the parts, materials, and equipment entering into the conversion.

The letter separately said aircraft sales could be exempt when made to qualifying common carriers operating under governmental authority. It found no comparable exemption for aircraft parts, accessories, or engines delivered in California merely because they would be used outside California or in interstate or foreign commerce; Ruling 55 governed that issue.

Tax counsel emphasized that the conversion position had not been issued as a published ruling. It reflected action in a particular matter, and the business could request a ruling based on a specific statement of facts.

Citations and references

• California Sales and Use Tax Ruling 55, Interstate and Foreign Commerce (as cited)
• Flying Tiger Line, Inc. v. State Board of Equalization, 157 Cal. App. 2d 85 (as cited)
• American Airlines, Inc. v. State Board of Equalization, 216 Cal. App. 2d 180 (as cited)

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/435-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/435-0160.pdf

Original ruling text

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

435.0160

September 21, 1965
Gentlemen:
This is in reply to your letter of September 13 addressed to H 11 This letter has been referred to this office for reply by of our Headquarters office. You ask whether under five enumerated circumstances the sale to F" of aircraft and aircraft parts will be sub­ ject to the California sales tax. 11

•

11

Question No. 1 involves the sale of aircraft which are exempt when the sale is made to persons using the aircraft as common carriers of persons or property under the authority of the laws of this state, the United States, or any foreign government. The remainder of the questions deal with the sale of aircraft parts and accessories, and engines, delivered in California, but for use outside California. There is no exemption of sales of these articles even though they are to be utilized on aircraft operating in interstate or foreign commerce. The application of the tax is governed basically by the provisions of sales and use tax Ruling 55, Interstate and Foreign Commerce. With respect to aircraft, see the decisions of our courts in Flying Tiger Line, Inc. v. State Board of Equalization, 157 Cal. App. 2d 85, and Amer­ ican Airlines, Inc. v. State Board of Equalization, 216 Cal. App. 2d 180. In our telephone discussion of today, you indicate that you have certain conversion work done in California consisting of the change-over of a piston-type aircraft to a jet-type aircraft, which also involves certain other changes. As I indicated to you, we have in the past taken the pos­ ition that the conversion of a piston-type aircraft to a jet aircraft is not such an extensive change as amounts to the manufacture or fabrication of a new aircraft. It is a repair, reconditioning or modification of an existing aircraft, and we have held the tax to apply to the sale price of the parts, materials, and equipment entering into the repair, recondi­ tioning or conversion. If you wish to do so, you may request a letter ruling from us on a spec­ ific statement of facts should you desire to obtain such a ruling. I find that our position as I have stated it with respect to the change­ over from piston-type to jet aircraft did not result in the issuance of a digest of a ruling, as is often the case, but was simply the action taken in a particular matter without being the subject of a published ruling. Very truly yours, E. H. Stetson Tax Counsel EHS:fb

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