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Business Taxes Law Guide—Revision 2024
Motor Vehicle Fuel Tax Annotations
Aircraft Jet Fuel Tax—Regulation 1137
All-Cargo Air Transportation Certificate. An all-cargo air transportation certificate issued to an air carrier by the U.S. Department of Transportation is sufficient to satisfy the certificate of public convenience and necessity requirement under section 7389(a). The language of section 7389(a) and its history indicate that the exemption was meant to apply to air common carriers engaged in the air transportation of only property or only mail, or both. 9/05/06.
Certificate of Public Convenience and Necessity. In order to be excluded from the definition of an aircraft jet fuel user under Revenue and Taxation Code Section 7389(a), an air common carrier must hold a certificate of public convenience and necessity issued by the United States or a foreign government. The certificate of public convenience and necessity issued by the U.S. Department of Transportation qualifies, but the Air Carrier Certificate issued by the Federal Aviation Administration does not qualify as a certificate of public convenience and necessity issued by the United States. 4/03/03.
Engine Overhaulers. Pursuant to section 7389(b), a company that is engaged in the overhaul and repair of jet aircraft engines is excluded from the definition of "aircraft jet fuel user," even though the overhaul and repair work is performed on only a part of the aircraft, such as the engine. Further, the exclusion applies whether the engine that is being overhauled or repaired is attached to an aircraft or not. 10/12/06.
Foreign Government Sales Exempt. Since foreign governments are not included in the definition of "person" under the Motor Vehicle Fuel Tax Law, foreign governments are not "aircraft jet fuel users." Therefore, aircraft jet fuel dealers are not liable for the tax on sales of aircraft jet fuel to foreign governments. 10/12/06.
Fueling Aircraft Does Not Exempt. Activities that involve merely the sale and delivery of aircraft jet fuel into the fuel tanks of aircraft are not considered to be the "servicing of aircraft" for purposes of the aircraft jet fuel tax. Otherwise, the fundamental basis for the imposition of the tax would be defeated. To avoid this absurdity, sections 7389 and 7392 cannot reasonably be interpreted to mean that an aircraft jet fuel dealer is excluded from the definition of "aircraft jet fuel user," and is not liable for tax because the dealer delivers that aircraft jet fuel into the fuel tanks of the subject aircraft. 10/12/06.
Good Faith Acceptance of Exemption Certificate. If an aircraft jet fuel dealer accepts an exemption certificate from a purchaser in good faith, it is reasonable to conclude that the dealer is relieved from liability for the tax due on that sale. If the purchaser subsequently uses the fuel as an "aircraft jet fuel user," the purchaser "is liable for the tax" on such fuel "at the time of such use" and "shall report and pay the tax to the board as though he were an aircraft jet fuel dealer."
However, if the aircraft jet fuel dealer accepts an exemption certificate from a purchaser who, based on the dealer's experience or knowledge, would likely use the fuel in a nonexempt activity, the dealer's good faith acceptance may be questioned. In such a situation, the dealer should not accept the exemption certificate and may collect tax reimbursement on that sale from the purchaser. 10/12/06.
Refund of Aircraft Jet Fuel Tax From Dealer. None of the aircraft jet fuel tax provisions or the Motor Vehicle Fuel Tax Law in general permit a purchaser of aircraft jet fuel who is excluded from the definition of "aircraft jet fuel user" pursuant to section 7389(a), (b), or (c), to claim directly a refund from either the Controller or the Board for excess tax reimbursement that the purchaser erroneously paid when it purchased fuel. However, if a purchaser erroneously pays aircraft jet fuel tax reimbursement on fuel sales that are not taxable due to an exemption, the purchaser may obtain a refund of the excess tax reimbursement paid from the aircraft jet fuel dealer to whom the excess tax reimbursement was paid. Upon a showing that the excess tax reimbursement has or will be refunded to the purchaser, the aircraft jet fuel dealer may obtain a refund from the state of excess tax reimbursement that was remitted to the state in error. 10/12/06.
State and Local Government Sales Not Exempt. Since state and local governmental agencies are included in the definition of "person" under the Motor Vehicle Fuel Tax Law, state and local governmental agencies are "aircraft jet fuel users." Therefore, an aircraft jet fuel dealer is liable for the tax on sales of aircraft jet fuel to state and local governmental agencies. 10/12/06.
Supplemental Air Carriers. A charter air carrier (or supplemental air carrier) holding a certificate of public convenience and necessity issued by the U.S. Department of Transportation under 49 U.S.C.A. section 41102(a)(3) is among the entities excluded from the definition of "aircraft jet fuel user" under section 7389(a). 10/12/06.
United States Govenment Sales Generally Not Exempt. Although sales of aircraft jet fuel to the armed forces of the United States are exempt from the aircraft jet fuel tax, an aircraft jet fuel dealer is liable for the tax on sales of aircraft jet fuel to other departments, agencies, and instrumentalities of the United States. 10/12/06.