Frequently Asked Questions

Most people understand the basics of California sales tax, which applies to the sale 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 that same physical merchandise 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 purchase an aircraft, vessel or vehicle in California, then use tax applies when you make a similar purchase outside of California and bring the item into this state for use, storage and other consumption. While there are many ways to legally avoid California sales tax or use 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 sales tax or use tax on your purchase.

There are a number of exemptions from California sales tax and use 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 legally avoid California sales tax or use tax, but will work with you from beginning to end so you can spend more time enjoying your new aircraft, yacht, or RV rather than trying to figure out what the California Department of Tax and Fee Administration requires.

Aircraft, vessels and vehicles purchased in California or used and/or stored in California are potentially subject to sales or use tax. Clipper Tax Consulting may be able to help you legally avoid the entire sales or use tax liability on your purchase.

Using an out-of-state entity to avoid paying California sales or use tax on the purchase of an aircraft, vessel or vehicle is a long-standing myth. No, you cannot legally avoid California sales tax or use tax just by using an out-of-state entity such as a Delaware LLC or corporation. 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, DMV and Coast Guard, auditing manufacturers or dealers sale records, to requiring airports and marinas to submit listings of all aircraft or vessels based at their facilities.

It is possible that Clipper Tax Consulting may still be able to help you legally avoid California sales tax or use tax on your airplane, yacht 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.

Depending on how the transaction was structured and the subsequent use of the aircraft, vessel or vehicle, Clipper Tax Consulting 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.