What is California Sales Tax
California sales tax is a tax imposed upon all retailers for the privilege of selling tangible personal property at retail in the State of California. The sales tax is charged as a percentage of the gross receipts of the retailer from the sale of tangible personal property, including aircraft, vessels and vehicles. A retailer may add sales tax reimbursement to the sales price of the tangible personal property sold at retail. This means the retailer may charge the customer the same amount of sales tax the retailer must remit to the State. There are legal ways to avoid paying sales tax on aircraft, vessel and vehicle purchases. A California sales tax consultant can advise you on the various ways to legally avoid sales tax.
What is California Use Tax
Most people understand the basics of California sales tax, which applies to the sales of physical merchandise in this state. However, they are often unclear about California use tax which is imposed on the use, storage and other consumption of those same types of items in California. California Use Tax is an excise tax (also known as a duty tax) which is levied on the purchase of tangible personal property, including aircraft, vessels, and vehicles, which were purchased outside of California or purchased from California sellers who do not hold seller’s permits. As a general rule, if sales tax would apply when you buy a plane, boat, or RV in California, use tax applies when you make a similar purchase from outside of California. While there are many ways to legally avoid California use tax or sales tax, there is a fine line between avoiding tax and what the state would consider tax evasion. A qualified California sales tax consultant can provide you more information and show you how to legally avoid California use tax or sales tax on your purchase.
How do I Get Around California Use Tax or Sales Tax
There are many exemptions from California use tax and sales tax. These exemptions are based on how the aircraft, vessel or vehicle is used during a specific period of time (usually between 6 months and 12 months). A qualified California sales tax consultant can help you not only learn how to get around California use tax or sales tax, but will work with you from beginning to end so that you can spend more time enjoying your new aircraft, yacht, or RV rather than jumping through all of hoops that the California Department of Tax and Fee Administration requires.
Do I Have to Pay Sales or Use Tax on My Aircraft, Vessel or Vehicle Purchase
Aircraft, vessels and vehicles purchased in California or used and/or stored in California are potentially subject to sales or use tax. Clipper Tax may be able to help you legally avoid the entire sales or use tax liability on your purchase.
Can I Use an Out-of-State Corporation, Like Delaware, to Avoid Sales or Use Tax
Using an out-of-state entity to avoid paying sales or use tax on the purchase of an aircraft, vessel or vehicle is a long standing myth. No, you can not legally avoid California use tax or sales tax by using a Delaware, Oregon, Nevada or Montana entity. The state where you domicile your aircraft, vessel or vehicle has the legal authority to assess sales or use tax on your purchase. Due to the revenue deficits in recent years, California, like many states, has dramatically stepped up its enforcement efforts to assess sales or use tax on these purchases. The tactics range from obtaining aircraft registration information directly from the FAA, auditing aircraft manufacturer’s or dealer’s sale records, to requiring airports / FBO’s to submit listings of tail numbers of aircraft that are hangared at their airport.
I Already Bought an Airplane, Boat or RV, Can You Still Help Me
It is possible that Clipper Tax may still be able to help you legally avoid California use tax or sales tax on your airplane, boat or RV purchase. There are several factors which will determine whether or not we can help you. Please contact us right away so we can review your situation.
I received a letter/notice from the California Department of Tax and Fee Administration asking me to pay tax on my aircraft purchase, can you help me?
Depending on how the transaction was structured and the subsequent use of the aircraft, Clipper Tax may still be able to help you. We will be happy to review the letter/notice to give you a definitive answer with no obligation to you.