Laws, Regulations and Annotations


Business Taxes Law Guide—Revision 2024

Sales and Use Tax Annotations

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325.0000 Interstate and Foreign Commerce—Regulation 1620

Annotation 325.0602.600

(c) Shipments from California to Points Outside State

(1) Generally

325.0602.600 Vessel Delivered Outside California Waters. Taxpayer is purchasing a new vessel from a California manufacturer and seller (seller). The taxpayer has paid progress installments to the seller for work completed on the vessel. Under the terms of the contract of sale, the taxpayer will make final payment for the vessel after final inspection and delivery of the vessel at a point more than three nautical miles from California. The taxpayer will take a separate transport vessel to meet the vessel for final inspection and approval. After final inspection and approval, the taxpayer will give the final payment to the seller and the seller will give the taxpayer a bill of sale. Title to the vessel will pass from the seller to the taxpayer at that time.

After taxpayer obtains possession and control of the vessel, the taxpayer will pleasure sail the vessel for the day and return the vessel to a California harbor. The vessel will remain in this state for less than 90 days. While in California, it will be prepared for shipment via common carrier to Florida. In Florida, the vessel will be reassembled and sailed in international waters, and then to its final destination at a point in the Mediterranean Sea.

The first functional use of the vessel after its transfer to the taxpayer will occur outside of California when it is used for pleasure sailing. However, since the vessel will reenter California within 90 days of its completed delivery and purchase, it is presumed to have been purchased for use in California. [See note below.] If the purchaser establishes that the vessel is used or stored outside of California one-half or more of the time during the six-month period after it enters California, the vessel will not be considered purchased for use in California and its use will not be subject to use tax. 5/30/97. (Am. 2001–3; 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).)