| Many people sign affidavits when they purchase | | | | The aircraft owner must be able to document and |
| aircraft from a California retailer which allows them to | | | | support one of the following criteria: |
| make a purchase in a sales tax exempt manner. If you | | | | (1) The aircraft was used and stored outside California |
| fit into this category, you probably have not been | | | | for a period of time exceeding 90 days from the date |
| warned that subsequent to an audit of the retailers | | | | of transfer of title or possession. (Note 1) |
| records the Board of Equalization (Board) will audit | | | | (2) If the aircraft entered California within the 90 day |
| your purchase directly with you. | | | | period, the aircraft must be used and stored outside |
| The normal process used by the Board is to conduct | | | | California more than one-half the time during the year |
| audits of all aircraft retailers every three years. This | | | | following the aircrafts date of first entry into California. |
| means that even though the Board is aware you | | | | (3) If the aircraft entered California within the 90 day |
| purchased the aircraft they may wait for several | | | | period, more than one-half of the flight time during the |
| years to contact you. If you are feeling comfortable | | | | six months following the aircrafts date of first entry |
| because the Board has not contacted you for the last | | | | into California must be commercial (ie. business use) |
| several years, here is the danger in your current | | | | flight time traveled in interstate of foreign commerce. |
| strategy. | | | | These flight hours can be all Part 91. |
| The purchaser (you) has an obligation to file a tax | | | | Additionally, if you have arranged for your aircraft to |
| return with the Boards Consumer Use Tax Section | | | | be owned by an out-of-state domiciled LLC or |
| (CUTS) within one year of the purchase date (unless | | | | corporation and you smugly sit in your easy chair |
| the Board contacts you in writing and establishes an | | | | watching the news, comfortable that you are exempt, |
| earlier date). If you have been waiting for the Board to | | | | let me tell you a story. |
| send you a bill, you were mislead about the process. | | | | A State of Washington-domiciled corporation |
| The purchaser has an obligation to file the return | | | | purchased and leased aircraft that were used by |
| regardless of whether or not the Board contacts them. | | | | various entities throughout the country. During the |
| The reason the Board may have not contacted you | | | | financing process a document was filed with the FAA |
| immediately is that the seller was a retailer of aircraft. | | | | that gave the California address of the primary |
| When CUTS knows the seller is a retailer they will hold | | | | shareholder who guaranteed the loans. The Board |
| back your audit of the transaction until after they | | | | discovered the document and began to harass the |
| review the sellers audit. It is easier for them to send | | | | shareholder as if he were the owner of the aircraft. |
| one auditor to the sellers location and review three | | | | Some of the purchases of the leased aircraft were |
| years worth of sales files than to contact each buyer | | | | nearly seven years old and had been leased to a |
| one-by-one. This creates the situation where they do | | | | common carrier. By the time the Board contacted the |
| not contact you right away. However, once they | | | | taxpayer the Part 135 certificate holder had gone out |
| perform the audit of the retailer and discover your | | | | of business and the records were gone. The |
| out-of-state delivery form which changes the | | | | shareholder was assessed tax on all the purchases. |
| transaction from a sales tax obligation to a use tax | | | | The assessments required the shareholder to file |
| obligation, they will audit your transaction with you | | | | documents to support that each aircraft was used in |
| personally. | | | | an exempt manner in the State of California. |
| The following represents the process when you sign | | | | What is vital for you to understand is, there are two |
| an affidavit and what your obligation is to the State of | | | | parts of every transaction. The substance and the |
| California: | | | | form. The substance is the events as they actually |
| A. If an out-of-state resident purchases an aircraft | | | | occurred. The form is the documents to support all the |
| from a California retailer, and the retailer delivers said | | | | events. If you remember nothing else from this article |
| aircraft outside the State of California, there is no tax | | | | remember this: |
| due to California if the following criteria are met: | | | | The Board auditor was not with you when you made |
| You must meet the Boards definition of an out of | | | | the purchase and was not with your aircraft while it |
| state resident not the one you want to use. I have | | | | was used during the test period where you are |
| seen situations where the presence of a bank | | | | required to support your claim for an exemption. All the |
| account, California drivers license, California property | | | | auditor knows is what you reveal to him via your |
| owned, or anything with any connection to California | | | | documentation. |
| has turned the tide against the taxpayer. | | | | In other words, to an auditor the documents are the |
| The aircraft can not enter California for any reason | | | | reality. It does not matter what you really did, it only |
| within the first 90 days after the date of the | | | | matters what your documents say. Your testimony will |
| out-of-state delivery. California Sales and Use Tax | | | | be considered "self-serving." That means they will |
| Regulation 1620. | | | | consider it irrelevant. |
| B. If an out-of-state resident purchases an aircraft | | | | If you really believe your transaction is exempt, file the |
| from a California retailer, and the retailer delivers said | | | | tax return. Dont wait for something to get lost. Be at |
| aircraft inside the State of California, there is no tax | | | | cause over your claim for an exemption. Dont let the |
| due to California if the following criteria are met: | | | | Board put you at effect. |
| See the notes in section A about residency. | | | | If you are not sure, or if you are conservative and |
| The out-of-state resident must immediately remove | | | | want to make sure it is exempt send them to me for |
| the aircraft from California and the aircraft can not | | | | review. This will ensure that you are at cause over |
| re-enter California for any reason during the next | | | | your claim for an exemption. |
| twelve months. California Sales and Use Tax | | | | If you know it is taxable and spend your time praying |
| Regulation 1593. Maintenance flights are not exempted | | | | you are not discovered, keep lighting candles. |
| from the 12 month test. | | | | However, I have a suggestion for you. It came from an |
| C. If a California resident purchases an aircraft from a | | | | old baseball coach I knew. He always said, "when you |
| California retailer, and the retailer delivers said aircraft | | | | find yourself at the bottom of a hole, STOP DIGGING." |
| outside the State of California, there is no tax due to | | | | I invite you to communicate with me, no matter which |
| California if the following criteria are met: | | | | situation you think you are in. |