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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 325.0198
(a) In General—Shipments Into California from Points Outside State
325.0198 Vessel Purchased Out of State. A taxpayer is purchasing a yacht from a manufacturer in the State of Florida. The taxpayer will pay for the yacht in Florida, and the seller will deliver the yacht to the taxpayer in Florida. After the purchase, the taxpayer may use the yacht in Florida for a short period of time, possibly as little as 14–21 days. The taxpayer will then have the vessel broken down in Florida and shipped by a licensed carrier to California. Upon arrival in California, a third party will, for a fee paid by the taxpayer, reassemble the yacht. Upon that reassembly, the taxpayer will have the yacht placed into the ocean at San Diego, California, and the yacht will then be voyaged to Mexico for a minimum of four to five months of continuous usage in Mexican territorial waters.
Since the yacht enters California within 90 days of purchase, it is presumed to have been purchased for use in California. [See note below.] Tax applies unless the taxpayer overcomes that presumption. The presumption can be overcome by showing that the vessel will be used outside of California one-half or more of the time during the six-month period immediately following its entry into California. Assuming that the yacht will be in California no more than one month prior to departing California waters for Mexico, the yacht will be used outside California for at least four months during the six months immediately following its entry into California. As such, the taxpayer will overcome the presumption that he purchased the yacht for use in California and use tax will not apply.
On the other hand, if the taxpayer does not use the yacht in Florida and the vessel is first functionally used in California, the yacht would be considered to have been purchased for use in California and will be subject to use tax measured by the sales price of the yacht. 10/21/96. (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).)