Were tax-paid airline parts later resold from regularly traded inventory disqualified as property committed to standby use?

Plain-English summary

California concluded that airline spare parts actually resold from tax-paid inventory should be treated as not having been committed to standby use. Airlines regularly resold some parts, making it difficult to identify in advance which items were held for standby use.

The memorandum adopted an end-result approach for those resold parts and said the study did not justify expanding the standby theory for airline parts inventories through a regulation amendment.

Common questions

Did maintaining spare parts automatically place every part in standby use?

No.

How did the memorandum classify parts that were actually resold?

As not committed to standby use.

Did it recommend broadening the standby rule for airlines?

No.

Are the study memoranda included in the published PDF?

No. The source describes and lists them as attachments but does not reproduce them.

Citations and references

• California Sales and Use Tax Regulation 1701(c) — standby-service rule identified by the official annotation
• April 21 and April 25, 1978 study memoranda — described as attachments but absent from the published PDF

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/545-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/545-0052.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

545.0052

To:

Honorable Richard Nevins

From:

T. P. Putnam

Subject:

Airline Spare Parts

Date:

May 2, 1978

In accordance with my memo to you of December 30, 1977, a study has been made of the practices of the airlines with respect to maintaining inventories of parts. The results are summarized in the attached memos of April 25 from Mr. Brady and of April 21 from Audit Evaluation and Planning. In those cases where airlines purchase parts tax-paid and regularly resell some of them, there is a question as to which parts can be regarded as having been held for standby use. It appears that the most reasonable and practical resolution of that question is to look to the end result and treat those parts that are resold as not having been committed to standby use. Based on the study made, it does not seem necessary or advisable to amend a regulation to broaden the application of the standby theory with respect to parts inventories of airlines. If you have any further questions, please let me know.

TPP:po
Attachments
cc:

J.D. Dotson
R. Nunes
D. F. Brady