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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
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335.0000 Leases of Mobile Transportation Equipment— Regulation 1661
Annotation 335.0064.500
335.0064.500 Out-of-State Leases. When MTE is removed from ex-tax California inventory for a lease that commences in California, the act of leasing constitutes a use in this state. Even if the MTE is later removed from the state, use tax applies measured by purchase price unless the lessor makes a timely election to pay tax measured by fair rental value on its timely return for the reporting period in which the MTE is first leased. If the lessor elects to pay tax on fair rental value, tax must be paid on that basis whether the MTE is in or out of California.
If instead, the lease commences outside California and there has been no use in California other than to transport the MTE outside California to the lessee at the out-of-state point, California use tax would not apply provided the MTE does not return to California for at least six months. (Annotation 570.1040.) If the MTE does return within six months, use tax would be due measured by purchase price unless the lessor had made a timely election to pay tax measured by fair rental value on its return for the period in which the MTE was first leased. 10/26/88.