California Sales Tax Question

If you live in California and buy an uncompleted kit (still in the original crate) from a private party, also in California, is sales tax due? One tax expert at the Board of Equalization told me no tax is due because it's an "occasional sale" as defined in tax regulation 1595. Another tax expert at the BOE told me you would still owe the tax and regulation 1595 does not apply. Does anybody know for sure?

Thanks,

You don't pay any tax on a new kit from vans shipped to CA, why would the State benefit if that kit changed hands? From my research I don't think you owe any tax until the aircraft has flown once. You should be able to google this regulation. There are some events that will trigger a tax collection notice, such as registering your airplane with an N number, which can be done before it flies. Or having a hangar or storing your aircraft at an airport, as the landlords must report their tenants to the state...which can also be done before it flies. But once it flies I think you'll be on the hook for a one time use tax of (in my area) about 8%. And then a 1% recreational type tax annually thereafter. Fun stuff eh!

Qualification: I'm just an average Joe with no experience in this field. YMMV

BOE is confused. Did you tell them it was an airplane? Airplanes have different rules than airplane parts. I suggest:
1. As you buy avionics, engine, etc., from commercial enterprises you will owe tax, regardless of in or out of state vendor. Send in the sales/use tax on your CA income tax return.
2. When you get your N number (registration) CA will send you a property tax notice, and ask if you paid sales tax. Answer yes, refer them to your 20xx tax return. If they come back and ask about the airframe, say it was a casual sale of parts, and refer them to the first BOE guy, hopefully you kept his name.
3. The annual 1% tax is property tax. It will be first due in August of the first year where you had an A/W certificate on Jan 1. e.g., if you get the A/W certificate on May 2015 your first property tax will be due August 2016.

Dbro172 said:

You don't pay any tax on a new kit from vans shipped to CA,

Qualification: I'm just an average Joe with no experience in this field. YMMV

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Ah, but you are supposed to pay 'use' tax on the kit from Vans. They are a commercial enterprise, not a casual sale. The state won't find out until you register the plane, but then they'll ask for their money, plus interest.

Welcome to CA.

You can pay it now, or they'll bill you as soon as the registration hits the books. If you plan on finishing and registering the airplane in California, it won't make much difference. If you plan to leave the state before registering the airplane, you may want to hold off.

Thanks for your help, guys.

BobTurner said:

Ah, but you are supposed to pay 'use' tax on the kit from Vans. They are a commercial enterprise, not a casual sale. The state won't find out until you register the plane, but then they'll ask for their money, plus interest.

Welcome to CA.

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Bob is absolutely right about paying use tax on kits from Van's because Van's is a commercial enterprise, even though they are out of state.

longranger said:

You can pay it now, or they'll bill you as soon as the registration hits the books.

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Miles, I think you hit the nail on the head--we can either pay the tax now or later.

My guess is that the person at the BOE who told me no tax is due on an occasional sale from a private party probably knew that the state would get their money when I finished the kit and registered the plane. She just didn't tell me that because I didn't ask that question.

The other person at the BOE who told me tax was due probably figured that the state would like to get their money sooner, rather than later. If you do it this way, you also don't have to worry about late penalties and interest.

Would it make any difference if you have it shipped to a relative in Oregon and then truck it down to CA? (I'm ordering the fuze kit soon and my sister lives in Salem.)

kevinl4000 said:

Would it make any difference if you have it shipped to a relative in Oregon and then truck it down to CA? (I'm ordering the fuze kit soon and my sister lives in Salem.)

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Nope. That's why they call it a "use" tax. Legally they cannot impose a sales tax on interstate commerce. This is just a ploy, apparently legal, to do just that.

Now, if your sister bought the kit (I think OR has no sales tax), then you bought it from her, and she sold no more than 2 things during the year, CA might consider it to fit in the "casual sale" exemption. But it would look strange to them and might cause more trouble than it's worth.

This has been hashed out before in several threads regarding use /sales / property taxes for those of us who call California home. Here are a few of the links;

http://www.vansairforce.com/community/showthread.php?t=535

http://www.vansairforce.com/community/showthread.php?t=84365

http://www.vansairforce.com/community/showthread.php?t=88060

I can sum it up for planes built and registered in California; If you can prove to the California State Board of Equalization that you paid SOME OTHER STATE a tax for your kit, you don't have to pay California a Use Tax.

If you cannot prove it, you will have to pay California a Use Tax Rosie