Nope. It’s not me sitting in an ivory tower passing judgement on the tax experts you are hoping will keep you out of tax trouble with your aircraft purchase. The problem (as I see it) is that CPA training has an income tax point of view. There are accepted rules (state-by-state) for determining (from each state’s perspective) if you are subject to their income tax.
What most CPAs don’t know is that from a sales/use tax perspective, California has a unique way of determining if you are a resident of California. The first thing your CPA should know is that you don’t have to be a resident of California to be subject to either of the transaction taxes (sales or use tax).
The second thing you need to know is that for the purpose of aircraft use tax, California uses language out of the Department of Motor Vehicles code. See below:
"Resident" means any person who manifests intent to live or be located in this state on more than a temporary or transient basis.
The following are evidence of residency for purposes of vehicle registration:
(a) Address where registered to vote;
(b) Location of employment or place of business;
(c) Payment of resident tuition at a public institution of higher education;
(d) Attendance of dependents at a primary or secondary school;
(e) Filing a homeowner's property tax exemption;
(f) Renting or leasing a home for use as a residence;
(g) Declaration of residency to obtain a license or any other privilege or benefit not ordinarily extended to a nonresident;
(h) Possession of a California driver's license;
(i) Other acts, occurrences, or events that indicate presence in the state is more than temporary or transient.
When you read the above items you must look at them from the viewpoint of the tax agency that could attempt to use any of these items to make your purchase taxable. Think of each item from the viewpoint of how it could be used against you - the taxpayer.
I tell all my prospective clients;
“It does NOT matter that you are a resident of Ohio, take possession of your aircraft in Florida and register it in a Delaware Corporation...
If the aircraft enters the State of California any time within the first 12 months, the state has the right to assess the tax on your purchase and you have the burden of proof to support a claim for an exemption
if the state contacts you and you ignore them because you think you are an out-of-state resident, the state will ultimately lien your aircraft or worse - raid your bank account.”
The twelve-month period is important because if the aircraft was taken possession of (for the purpose of the current purchase) outside of California and remains outside of California and those facts can be supported by documents, it meets the test for a resident of California (the more restrictive of the tests) supporting a claim for an exemption from tax.
Other recent “Aviation Tax” posts by Thomas A. Alston:
- Aircraft Purchases: Why Many CPAs Get It Wrong
- Aviation Tax: Wrong Approach in California Can Cost Aircraft Owners
- Aircraft & Vessel Taxation: For Expense Documentation, Stick to Facts