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Business Taxes Law Guide—Revision 2024

Sales And Use Tax Law

Revenue and Taxation Code

Division 2. Other Taxes
Part 1. Sales and Use Taxes
Chapter 4. Exemptions

Article 1. General Exemptions

Section 6366


6366. Aircraft sold to common carriers, foreign governments, and nonresidents. (a) There are exempted from the taxes imposed by this part the gross receipts from the sale in this state of, and the storage, use, or other consumption in this state of, the following:

(1) Aircraft sold to any person using the aircraft as a common carrier of persons or property under authority of the laws of this state, of the United States, or of any foreign government, or sold to any foreign government for use by that government outside of this state, or sold to any person who is not a resident of this state and who will not use that aircraft in this state otherwise than in the removal of the aircraft from this state.

(2) (A) A ground control station sold to any foreign government for use by that government outside of this state or sold to any person who is not a resident of this state and who will not use that ground control station in this state otherwise than in the removal of the ground control station from this state.

(B) A "ground control station" means a portable facility used to operate aircraft in the air without a pilot on board. The term includes controls, video equipment, computers, generators, and communications equipment, sold as an integral part of the station, and antennas used to control the aircraft. The term does not include trucks, tractor-trailers, or other devices solely used to transport the station.

(3) Tangible personal property that is purchased on or after October 1, 1996, and becomes a component part of any aircraft described in paragraph (1), as a result of the maintenance, repair, overhaul, or improvement of that aircraft in compliance with Federal Aviation Administration requirements, and any charges made for labor and services rendered with respect to that maintenance, repair, overhaul, or improvement.

(b) With respect to aircraft sold on or after January 1, 1997, it shall be presumed that a person is not engaged in business as a common carrier if the person's yearly gross receipts from the use of the aircraft as a common carrier do not exceed 20 percent of the purchase cost of the aircraft to him or her, or fifty thousand dollars ($50,000), whichever is less. This presumption may be rebutted by contrary evidence satisfactory to the board showing that the person is engaged in business as a common carrier. In no event shall "gross receipts" include compensation by the person or related parties for use of the aircraft as a common carrier.

History—Added by Stats. 1947, p. 2216, in effect June 25, 1947. Stats. 1951, p. 2982, in effect September 22, 1951, added provision exempting sales to nonresidents whose only use of the aircraft in this State will be the removal thereof from this State. Stats. 1965, p. 3449, in effect September 17, 1965, deleted "certificated or licensed" inserting "common" and deleted "in interstate or foreign commerce." Also, "of this state" was added. Stats. 1986, Ch. 1361, effective January 1, 1987, added a rebuttable presumption regarding a person not engaged in business as a common carrier. Stats. 1996, Ch. 954, in effect September 26, 1996, but operative January 1, 1997, added "in this state" after "from the sale" and substituted "in this state of, the following:" for "of aircraft" after "other consumption" in subdivision (a); added "(1) Aircraft" before "sold to", substituted "any person" for "persons" after "sold to", substituted "the" for "such" after "using", added "of" after "States, or", substituted "that" for "such" after "use by", substituted "any person" for "person" after "or sold to", substituted "is" for "are" after "any person who", substituted "a resident" for "residents" before "of this state", substituted "that" for "such" after "will not use", substituted "the" for "such" after "removal of" in the former first paragraph of subdivision (a), and deleted former second paragraph of subdivision (a) which provided a rebuttable presumption regarding a person not engaged in business as a common carrier; added paragraph (2) to subdivision (a); added subdivision letter designation (b) and "With respect to … exceed 20" therein; substituted "fifty thousand dollars ($50,000)" for "twenty-five thousand dollars ($25,000)" after "or her, or"; added the second sentence in subdivision (b); and added second paragraph of subdivision (b); and added subdivision (c). Stats. 1997, Ch. 733 (SB 1101), in effect October 7, 1997, operative April 1, 1998, added "a" after "aircraft as" in paragraph (1) of subdivision (a) and in the second paragraph of subdivision (c); and added paragraph (2) and paragraph number designation (3) in subdivision (a). Stats. 2000, Ch. 923 (AB 2894), in effect January 1, 2001, added "a" after "the aircraft as" in paragraph (1) of subdivision (a), and deleted former subdivision (c) which stated, "For purposes of this section, it shall be rebuttably presumed that the aircraft is not regularly used in the business of transporting for hire property or persons if the yearly gross receipts of the lessor from the lease of that aircraft to persons using that aircraft as common carriers of property or persons do not exceed 10 percent of the cost of the aircraft to the lessor, or twenty-five thousand dollars ($25,000), whichever is less."

Note.—Sec. 2, Stats. 1997, Ch. 733 (SB 1101), states the following: "It is the intent of the Legislature that the State Board of Equalization administer the exemption for the sale and use of ground control stations provided by Section 1 of this act consistent with existing regulations administering the exemption for the sale and use of aircraft sold to a foreign government for use by that government outside of this state or sold to a person who is not a resident of this state and who will not use that aircraft in this state otherwise than in the removal of the aircraft from this state."

Note.—Sec. 41, Stats. 1986, Ch. 1361 required that:

(a) On January 15, of each year from 1988 to 1992, inclusive, the State Board of Equalization and the Franchise Tax Board shall submit a report to the Legislature on implementation of the provisions of this act, with the exception of Section 40 of this act (for which separate reporting requirements are set out).

(b) The revenue and taxation policy committees of each house of the Legislature shall hold a public hearing no later than June 30 of each year from 1988 to 1992, inclusive, on the reports submitted pursuant to subdivision (a).

(c) The intent of this section is to assure the Legislature the opportunity to oversee the implementation of this act. The intent of the Legislature in enacting this act is to improve enforcement and voluntary compliance with the tax system and cash-pay reporting rules. The intent of the Legislature in enacting this act is not to cause harassment of or undue burden on innocent taxpayers.

Sec. 41 applies to the following Revenue and Taxation Code Sections: 6069, 6071, 6366, 6366.1, 6368.1, 6452, 6455, 6776, 6777, 7154, 8404, 9355, 30481, 32556, 40188, 41143, and 44186.

Separate purchase of extra equipment.—Assuming the other conditions for exemption are met, use tax does not apply to equipment which the Civil Aeronautics authority requires to be installed in an aircraft and which has been installed by the time the aircraft first enters this state, even though the carrier purchases the equipment from a seller other than the manufacturer of the aircraft but has the equipment delivered to the manufacturer of the aircraft for installation. Pan American World Airways, Inc. v. State Board of Equalization (1955) 131 Cal.App.2d 638.

Purchase of replacement parts.—This section exempts from use tax a purchase of ailerons outside this state by a certificated carrier where the carrier installs the ailerons on its aircraft outside this state and the aircraft is subsequently flown to this state and thereafter is placed in use in interstate commerce. Flying Tiger Line, Inc. v. State Board of Equalization (1958) 157 Cal.App.2d 85.

Resident.—Sales of aircraft to out-of-state corporations doing a substantial business in California were not exempt under the above section since the vendee corporations were residents due to the fact that they had a factual abode of some permanency in this state. Garrett Corp. v. State Board of Equalization (1961) 189 Cal.App.2d 504.

Six Months Principal Use Test.—In the absence of prior notice of its test by regulation or otherwise, the board may not deny the common carrier exemption of this section on the basis of the principal use of the aircraft during the first six months of ownership when records for a longer period are available. Pacific Southwest Airlines v. State Board of Equalization (1977) 73 Cal.App.3d 32.