Ezel / Tax Rulings / CA

Where did a vessel's first functional use occur when the lessor sailed it into California?

Short answer It depended on the trip's purpose: sailing in to find any lessee was California use, while sailing in to deliver to a specific lessee was out-of-state use.
State
CA
Ruling
Annotation 570.0510
Tax type
Sales and Use Tax
Issued
1978-04-07
Issued by
California State Board of Equalization
Requested by
Board staff
Topics
vessels lessor delivery first functional use out of state use california use use tax
Source
View Original PDF

Apply this to your situation

This page answers the general question as of 1978. Ask about yours and see what current California tax law says, with citations.

Currency note: this ruling is from 1978
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This brief April 7, 1978 internal memorandum addresses only where a vessel's first functional use occurred under two stated lessor-delivery scenarios. It does not provide the underlying audit facts or decide every requirement for taxability. Current vessel, lease, delivery, and California use-tax law controls.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

The vessel's destination did not by itself decide where first functional use occurred. The purpose of sailing it into California controlled.

If the lessor brought the vessel into California under its own power merely to find any lessee available here, the memorandum treated the first functional use as occurring in California.

If the lessor instead sailed the vessel into California to fulfill an existing delivery obligation to a specific lessee, the memorandum treated the first functional use as occurring outside California.

Common questions

Did sailing the vessel under its own power always create California first use?

No. The result changed when the voyage was undertaken to complete delivery to a specific lessee.

Did the memorandum state whether tax was ultimately due?

No. It agreed with the earlier staff memorandum on the first-functional-use issue and did not set out a complete tax determination.

Citations and references

  • February 27, 1978 staff memorandum — prior position adopted by the Legal Division; not included in the source PDF

Source

Original ruling text

State of California

Board of Equalization
Legal Division

Memorandum

To:

Mr. William D. Dunn

From:

Gary J. Jugum

Subject:

T--- M--- S--- Inc.

570.0510
Date:

April 7, 1978

No Permit

First Functional Use

We are in agreement with the position stated in your memorandum of February 27, 1978, to Mr. D--- A--- concerning the referenced account. If a lessor of a vessel were to transport the vessel by its own power into California in order to lease it to any lessee he could find, the first functional use would be in California. However, if the vessel were transported by its own power into California in order to fulfill delivery to a specific lessee, the first functional use would be outside California.

j:alicetilton

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