Aircraft

							State of California                                                                                   E-Mail Response
Board of Equalization
Information and Advisory Unit
Telephone 916-324-2883  FAX 916-322-0187




To             : Mr. Robert Comperini                                                      Date   : February 14, 2006
                 webmaster@usua.org


From           : Bradley Miller
                 Business Taxes Specialist, MIC 44

Reference      : F06-01-064 - 0118 - 0209


Subject        : Aircraft

          Thank you for your recent e-mail requesting our advice regarding the proper application of the
          California Sales and Use Tax Law.

          As a preliminary matter, Section 6596, “Excusable Delay-Reliance on Advice,” of the California
          Sales and Use Tax Law grants taxpayers relief from future liabilities if the underreported tax is
          based on incorrect written advice provided by a Board representative. However, without specific
          details regarding the transactions in question, I cannot provide you with a specific opinion. The
          answer given is intended to provide general information regarding the application of tax based on
          the information you have provided and will not serve for relief of liability under Section 6596.

          For your general information, the Revenue and Taxation Code provides that sales tax is imposed
          on the gross receipts from the retail sales of tangible personal property in this state. The sales tax
          is imposed upon the retailer for the privilege of selling tangible personal property at retail in
          California. The use tax is complementary (and mutually exclusive) to the sales tax and is
          imposed upon the storage, use, or other consumption in this state of tangible personal property,
          not subject to the sales tax. The obligation to pay the use tax is on the consumer.

          Regulation 1610, “Vehicles, Vessels, and Aircraft,” provides that an aircraft is defined to mean
          any contrivance designed for powered navigation in the air, except a rocket or missile.
          “Aircraft” includes and airframe or a fuselage even without an engine.

          Regulation 1610 provides that sales tax does not apply to sales of aircraft by a person not
          required to hold a seller’s permit by reason of the number, scope, and character of the person’s
          sales of such aircraft. In the event the sale is not subject to sales tax, the purchaser is required to
          pay use tax measured by the sales price of the aircraft to the purchaser.

          A purchaser of an aircraft who holds a valid seller’s permit, or to whom a consumer’s use tax
          account number has been assigned, must include the use tax in the purchaser’s return for the
          period in which the aircraft was purchased. A purchaser who does not hold a seller’s permit, or
          to whom a consumer’s use tax account number has not been assigned, shall make a return and
Mr. Robert Comperini                                   -2-                                       February 14, 2006


      pay use tax, measured by the sales price of the aircraft, on or before the last day of the calendar
      month next succeeding the month in which a return form is mailed to the purchaser, or the last
      day of the twelfth month following the month during which the aircraft was purchased,
      whichever period expires the earliest. If a purchaser of an aircraft failed to report the use tax, the
      Board generally has eight years from the due date of the return in which to issue a billing.

      The recent change in FAA regulations requiring the registration of “Experimental Light Sport”
      aircraft that were previously exempt from registration should not have any impact on the
      application of sales or use tax. The sale or purchase of these types of aircraft were subject to
      sales or use tax prior to the change in FAA regulations since these types of airplanes were
      already classified as “aircraft” for the purposes of the Sales and Use Tax Law.

      Due to the new FAA registration requirement for this class of aircraft, the Board may be more
      readily aware of transactions involving these types of aircraft. Currently, the Board of
      Equalization has no plans to formally offer forgiveness for payment of the tax or providing
      documentation proving payment of the tax. If any of your members are contacted by the Board
      regarding payment of the tax, Board staff will work with each member on an individual basis to
      resolve any potential or alleged sales and use tax liability.

      For the purpose of sharing information with your members, you may direct them to the Board’s
      website where they may obtain a copy of Publication 79-A, “Aircraft and California Tax.” You
      may also share the following information with your members regarding various different types of
      transactions that may apply to your members, along with the sales or use tax consequences of
      each:

      1. Purchase of complete aircraft from a registered aircraft dealer.
      Since the aircraft dealer is a registered retailer in this state, the applicable tax is the sales tax.
      The dealer is required to report the sales tax directly to the Board and would most likely collect
      sales tax reimbursement from the purchaser. If the dealer is located out-of-state, the applicable
      tax is the use tax (see scenario #2 below).

      2. Purchase of complete aircraft from a private party (in-state or out-of-state).
      Since the aircraft is purchased from a private party, not a registered retailer, the applicable tax is
      the use tax. The purchaser is required to report the use tax directly to the Board based on the
      purchase price of the aircraft. If the purchaser fails to report the tax, the Board may generally
      issue a billing for the tax within eight years of the due date of the tax.

      3. Purchase of a kit or component parts from a retailer.
      If the retailer is located in this state, the applicable tax is the sales tax. The tax consequences
      would be the same as provided in scenario #1 above. If the retailer is not located in this state, the
      applicable tax is the use tax. If the out-of-state retailer is registered with the Board to collect the
      use tax, the out-of-state retailer is required to provide a receipt to the purchaser for the collection
      of the use tax. If the out-of-state retailer is not registered to collect the use tax, the purchaser is
      required to pay the tax directly to the Board as provided in scenario #2 above.
Mr. Robert Comperini                                  -3-                                     February 14, 2006


      4. Purchase of a kit or component parts from a private party.
      The purchase of a kit or component parts from a private party generally will qualify as an
      occasional sale and would not be subject to sales or use tax. Please note that this differs from the
      purchase of a complete aircraft, as defined in Regulation 1610, since the occasional sale
      exemption does not apply to the sale or purchase of an aircraft.

      I hope this information is helpful. If you have any further questions regarding this or any other
      issue, please write or call our Information Center at (800) 400-7115. You may also visit our
      website at www.boe.ca.gov.




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