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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
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325.0000 Interstate and Foreign Commerce—Regulation 1620
Annotation 325.0082
(a) In General—Shipments Into California from Points Outside State
325.0082 Out-of-State Lease of Vessel. A cruise company purchases a vessel from an out-of-state ship builder. The cruise company enters into a bareboat charter agreement with the shipbuilder, whereby the cruise company leases the vessel back to the shipbuilder for at least 91 days. The cruise company would receive a percentage of the revenues generated by the use of the vessel during the charter period.
The shipbuilder will host no charge parties to exhibit the vessel to generate future business for both the shipbuilder and the cruise company. Profit making charters would also be made. All of this use will occur outside California.
After expiration of the charter, the vessel would be brought to California for use in California waters by the cruise company.
The vessel is mobile transportation equipment. The use by the lessee (the shipbuilder) is therefore attributed to the lessor (the cruise company). Since the vessel was used outside California for more than 90 days before entering California, it is presumed that it was not purchased for use in California and no tax applies. 8/30/91. (Am. 2006–1; Am. 2008–1).
(Note.—For the period October 2, 2004 through June 30, 2007, under certain conditions any vehicle, vessel, or aircraft purchased outside of California and brought into the state within 12 months from the date of its purchase is presumed to be acquired for storage, use, or other consumption in California and subject to use tax.) (Regulation 1620(b)(5).)