Tax Guide for Purchasers of Vehicles, Vessels, and Aircraft

California sales tax generally applies to the sale of vehicles, vessels, and aircraft in this state from a registered dealer. Use tax applies to the sale of vehicles, vessels, and aircraft purchased from non-dealers (for example, private parties) or from outside California for use in this state. Generally, although the rates are the same, it is the responsibility of the purchaser to report and pay use tax if the seller did not collect an amount for California sales or use tax from the purchaser.

Docked vessel

If you purchase a vehicle, vessel, or aircraft from a private party, from an out-of-state seller, or from a California dealer but took delivery outside this state, you may be required to report the use tax directly to the BOE. Use tax on the purchase of vehicles, vessels, and aircraft cannot be reported on your California State Income Tax return. To help you better understand the tax obligations for your purchase of a vehicle, vessel, or aircraft, we have created this guide detailing the tax issues and information important for you to comply with the law.



How to Use This Guide

This guide contains tabs with important use tax information for your purchases of Vehicles, Vessels, and Aircraft.

The Resources section provides links to a wealth of information, including forms and publications, statutory and regulatory information, and access to live help from our customer service representatives.

Please note that the information included is general in nature and is not intended to replace any law or regulation.



Small aircraft

If You Need Help

If at any time you need assistance, feel free to contact us.

If you have suggestions for improving this guide, please contact us by email.

Vehicles

You must report your purchase of a vehicle subject to use tax. In general, use tax applies to purchases of vehicles for use in this state when an amount for sales tax is not paid to a California dealer. This includes purchases from out-of-state sellers, private parties, or California dealers when delivery of the vehicle is taken out of state. Unless an exemption or exclusion applies, you must pay use tax on your vehicle purchase. Generally, you will pay the use tax when you register your vehicle with the Department of Motor Vehicles (DMV).

However, if you purchased a vehicle without completing registration and paying the use tax to the DMV, you must pay the use tax directly to the BOE. You can report your purchase of a vehicle and pay the use tax by using the BOE's online registration system and selecting the option to Pay use tax, file an exemption, or request a tax clearance (Vehicle, Vessel, Aircraft, or Manufactured Home/Mobile Home). Or, if you have received a Combined State and Local Consumer Use Tax Return for Vehicle from the BOE, complete the return and mail it to the address listed on the form.

Your tax return and payment are due on or before the last day of the month following the month of purchase.

Penalty and interest charges will begin to accrue once the due date has passed.

Determining the Use Tax Rate

The use tax rate is the same as the sales tax rate and is based on the address where you register your vehicle.

You can look up the current tax rate for your address on our Find a Sales and Use Tax Rate webpage. You may also find a list of current and historical rates on our California City & County Sales & Use Tax Rates webpage.

Determining the Amount Subject to Tax

The total purchase price of your vehicle is subject to tax. The total purchase price includes any type of payment, such as cash, checks, the payment or assumption of a loan or debt, and the fair market value of any property and/or services traded, bartered, or exchanged for the vehicle.

Example #1
You take over monthly payments for a car your friend can no longer afford and, in exchange, your friend transfers his or her interest in the car over to you. You owe use tax on the balance of the loan at the time you assumed the debt, plus any cash you paid for the car. You still owe use tax even if you do not make any cash payment directly to your friend and only assumed the unpaid debt.

Example #2
You purchase a vehicle for $5,000. As payment, you give the seller your current vehicle valued at $3,000 and $2,000 in cash. You owe use tax on the entire $5,000 purchase price.

Example #3
You trade vehicles with another person. No money is involved in the transaction. The vehicle you traded has a current market value of $5,000 at the time of the exchange, which is considered to be your purchase price for your new vehicle. You owe use tax on the $5,000 purchase price.

Example #4
You purchase a vehicle from a private party. The seller knows that you are a painter and offers you the car in exchange for painting his house. You would usually charge $5,000 for this service. You agree to the exchange. You owe use tax on the $5,000 value of the service you performed.

Credit for Tax Paid to Another State

If you paid tax to another state when purchasing your vehicle, you may be entitled to claim a credit for the tax previously paid to another state.

For example, if you previously paid $1,500 sales or use tax to another state for the purchase of the vehicle, and the California use tax due is $2,000, the balance of use tax due to California would be $500.

Incorrect tax amount paid at the DMV

If you believe you were charged and paid the incorrect amount of use tax at the DMV, please contact the BOE.

An incorrect tax amount may be collected if the wrong tax rate was charged or if tax was computed on the wrong purchase price. If you overpaid the use tax, please timely complete form BOE-101-DMV, Claim for Refund or Credit for Tax Paid to DMV, and mail it to the address listed on the form.

If you erroneously reported a lower purchase price than your actual purchase price to the DMV and did not pay enough use tax, you may make an additional payment using the BOE's online registration system and selecting the option to Pay use tax, file an exemption, or request a tax clearance.

Lease Buyout

If you purchased a vehicle you were leasing at the end of the lease agreement (lease buyout), the purchase is subject to tax.

If a vehicle dealer is not involved in handling the lease buyout for you, the bank or leasing company may not charge or collect the tax on the sale of the leased vehicle (i.e., the lease buyout amount). If that is the case, you will be responsible for paying the use tax at the DMV when you register your vehicle.

However, if you sold the vehicle to a third party and you transferred title and registration to the buyer within 10 days after the date you acquired title from the lessor, the lease buyout is presumed to be a sale for resale and is not subject to tax. Use tax will be due, however, if you make personal use of the vehicle prior to reselling it to a third party. Additionally, use tax is also due if you gift the vehicle, rather than resell it, to a third party.

Claiming an Exemption or Exclusion from the Use Tax

If you claim that your vehicle purchase is exempt or nontaxable, the DMV may ask you to obtain a use tax clearance certificate from the BOE before allowing you to register the vehicle without paying tax.

To apply for a use tax clearance certificate (BOE-111), you must submit form BOE-106, Vehicle/Vessel Use Tax Clearance Request, to the BOE. You may mail, fax, or submit form BOE-106 to your local BOE field office or the Consumer Use Tax Section in Sacramento.

To submit your use tax clearance request directly to the Consumer Use Tax Section, please mail it to:

Consumer Use Tax Section, MIC: 37
State Board of Equalization
PO Box 942879
Sacramento, CA 94279-0037

In some instances, the DMV may not collect use tax when you register your vehicle because you state that your vehicle was a gift or a family transaction. You may be contacted by the BOE at a later time to provide supporting documentation.

Please see publication 52, Vehicles and Vessels: Use Tax for more information regarding obtaining a use tax clearance.

Gifts

If you receive a vehicle as a gift, you are not required to pay use tax on the vehicle.

To qualify as a gift, the owner must give the vehicle freely, without any payment from the person receiving the vehicle. The vehicle will not be considered a gift if:

  • You pay cash, trade property, provide services, or assume a liability in exchange for the vehicle; or
  • Your employer gives you the vehicle as a form of compensation (for example, a vehicle was given to you as a bonus).

A signed statement from the former owner indicating the property was given to you as a gift and a copy of the vehicle's certificate of title are needed to support your exemption claim. The statement should include the vehicle's identification number (VIN) or license plate number.

Family Transaction

If you purchase your vehicle from a qualifying family member who is not engaged in the business of selling vehicles, you are not required to pay use tax on the purchase.

A qualifying family member includes a:

  • Parent
  • Grandparent
  • Child
  • Grandchild
  • Spouse or registered domestic partner (as referenced in Family Code section 297.5).
  • Brother or sister (related to you by blood or adoption), if the sale occurs when both are minors.

The exemption does not extend to purchases from stepparents or stepchildren if a natural parent or child is not involved or there is not a legal adoption. The exemption also does not apply to transactions between ex-spouses after a decree of divorce.

For example, a purchase from your biological or adopted child would qualify as an exempt family transaction; however, a purchase from your stepchild generally would not.

To qualify for the exemption, you must supply documentation to support the family relationship, such as birth certificates, marriage license, or adoption paperwork, and a copy of the vehicle's certificate of title.

Involuntary Transfers

If you have received a vehicle as the result of an involuntary transfer of ownership, you are not required to pay use tax on the vehicle.

An involuntary transfer is one in which you assume ownership of a vehicle due to circumstances beyond your control.

For example, you acquire a vehicle as the result of a court order, a property settlement in a divorce, an inheritance from an estate, or the repossession of a vehicle you sold.

Documentation needed to support your exemption claim:

  • Official court property settlement documents or a certificate of repossession. The documents should include the vehicle's identification number (VIN) or license plate number.
  • A copy of the vehicle's certificate of title.

Military Personnel

If you are an active duty service member and your vehicle is brought into California because of an official transfer to this state, you may not owe use tax on the vehicle.

To qualify for the exemption, you must have purchased and taken delivery of the vehicle outside of California before you received your orders to come to this state. Use tax will apply if you take delivery of the vehicle in California or if you purchase the vehicle for use in this state after receiving your official transfer orders.

Documentation needed to support your exemption claim:

  • Your official military transfer orders.
  • A copy of your purchase contract.
  • A copy of the vehicle's certificate of title.

Not Purchased for Use in California

If you purchase your vehicle for use outside of California, your purchase may not be subject to use tax.

However, when a vehicle purchased outside of California, is first functionally used outside of California, and is brought into California within 12 months from the date of its purchase, it is presumed that the vehicle was purchased for use in California and is subject to use tax if any of the following occur:

  • The vehicle is purchased by a California resident.
  • The vehicle is subject to California DMV registration during the first 12 months of ownership.
  • If purchased by a nonresident of California, the vehicle is used or stored in California more than one-half of the time during the first 12 months of ownership.

Functional use means use for the purposes for which the vehicle was designed. For example, vehicles designed for personal use are functionally used when merely driven; however, vehicles such as busses or trucks designed for a commercial or other special purpose (e.g., transportation or passengers or property) are not functionally used until used for that purpose.

If the vehicle enters California within 12 months of purchase, you may overcome the presumption that the vehicle was purchased for use in California by providing the following documentation to support your claim:

  • A copy of your purchase contract.
  • A statement signed by the seller verifying the date and location of the vehicle's delivery out of state.
  • Evidence of registration with the proper out-of-state authority.
  • Evidence of tax paid to another state.
  • Documentation to show the use and location of the vehicle outside of California, such as receipts for meals, lodging or campgrounds, and fuel for the first 12 months of ownership.
  • Credit card/bank statements or cell phone bills supporting the use of the vehicle outside of California.

Interstate or Foreign Commerce

If you purchase a vehicle for use in interstate or foreign commerce, your purchase may not be subject to use tax.

To document that use tax does not apply, you must supply documentation to support the following:

  • You took delivery of the vehicle outside of California.
  • You first functionally used the vehicle outside of California.
  • One-half or more of the miles traveled by your vehicle must be commercial miles traveled in interstate or foreign commerce during the six-month period immediately following the vehicle's first entry into California.

Functional use means use for the purposes for which the vehicle was designed. For a commercial truck or trailer, first functional use occurs when the vehicle first hauls cargo or is first dispatched to pick up a specific load of cargo.

Documentation needed to support your exemption claim:

  • A copy of your purchase contract.
  • A statement signed by the seller verifying the vehicle was delivered to you outside of California.
  • A load confirmation, bill of lading, or other similar document verifying the vehicle was first functionally used outside of California.
  • Bills of lading and driver logs, fuel receipts, and other similar documents verifying the location and use of your vehicle and the origin and destination of each load from the date of out-of-state delivery until the vehicle first entered California and for the next six months.

Purchased by an American Indian for Use on a Reservation

If you are an American Indian who resides on a reservation, your vehicle purchase may qualify as exempt from use tax.

To qualify for the exemption, you must supply documentation to support the following:

  • Ownership transferred on the reservation.
  • You took delivery of the vehicle on the reservation.
  • You used your vehicle on a reservation more than one-half of the time during the first 12 months of ownership.

Documentation needed to support your exemption claim:

  • A purchase invoice showing the date you took title of the vehicle and showing the date and place the vehicle was delivered to you.
  • A copy of the vehicle's certificate of title.
  • Documentation showing you are an American Indian residing on a reservation, such as a proof-of-residency letter from your Tribal Council, your tribal ID card, or a letter from the U.S. Department of the Interior.

Farm Equipment

You may be eligible for a partial tax exemption if you purchase a vehicle that will be used exclusively in producing and harvesting agricultural products.

The partial exemption applies only to the state general and fiscal recovery funds portion of the sales and use tax, currently 5.00 percent.

To calculate the tax rate for a qualifying purchase, subtract 5.00 percent from the tax rate that would normally apply at the location where the vehicle is registered. For example, if the current tax rate in effect is 9 percent, the tax rate for a qualifying purchase would be 4.00 percent.

Note: The state rate portion of the sales and use tax is subject to change. The rates used in this example are for demonstrative purposes only. You must use the rate in effect at the time of the sale. Current tax rates can be found on our website.

Three requirements must generally be met for the partial exemption to apply to the purchase of a vehicle. The vehicle must be:

  • Purchased for use by a qualified person.
  • Used exclusively (100 percent of the time) in producing and harvesting agricultural products.
  • Qualifying farm equipment and machinery. For a vehicle to be considered farm equipment and machinery, it must be designated as an implement of husbandry under the California Vehicle Code. Appendix A to Regulation 1533.1, Farm Equipment and Machinery, lists vehicles which are typically regarded as farm equipment and machinery.

If any of these three requirements are not met, the partial exemption does not apply.

Generally, the term implement of husbandry does not include a vehicle primarily designed to transport people or property on a public street or highway, such as a passenger car or truck.

Documentation needed to support your partial exemption claim:

  • A copy of your most recent federal or state income tax return with Schedule F, Profit or Loss from Farming.
  • DMV registration or identification slip showing the DMV has determined the vehicle to be an implement of husbandry.
  • A copy of the bill of sale or purchase contract.
  • A copy of the vehicle's certificate of title.

For more detailed information about farm equipment and machinery, see Regulation 1533.1, Farm Equipment and Machinery, and publication 66, Agricultural Industry.

Purchases for Use Outside of California

You may not be required to pay California use tax if the only use of the vehicle in California is to remove it from the state and it will be used solely thereafter outside this state, and you do not register the vehicle in California with the DMV.

This exclusion only applies to a purchase that would otherwise be subject to use tax. This exclusion does not apply to a purchase from a licensed vehicle dealer subject to sales tax.

For example, you purchase a vehicle from a person (private party) in California who does not hold a dealer's license or a California seller's permit. Generally, use tax would be collected by the DMV at the time the vehicle is registered. However, use tax is not required if the only use of the vehicle in California is to remove it from the state and it will be used solely thereafter outside this state. A One-Trip Permit may be issued by the DMV in lieu of registration, for operating certain vehicles while being moved or operated for one continuous trip from a place within this state to another place outside this state.

Use Tax Verification for Other States

If you have moved out of California, and you need to register your vehicle in a different state, you may be asked to provide verification of the tax you paid to the State of California.

The BOE can provide you verification of tax previously paid on your vehicle. Please complete the Verification of Sales/Use Tax Paid to DMV request form located on the BOE website.

Vessels

You must report your purchase of a vessel subject to use tax. In general, use tax applies to purchases of vessels for use in this state when an amount for sales tax is not paid to a California dealer. This includes purchases from out-of-state sellers, private parties, or California dealers when delivery of the vessel is taken out of state. Unless an exemption or exclusion applies, you must pay use tax on your vessel purchase. How you report your purchase and pay the use tax on your vessel purchase depends on whether the vessel is a "documented vessel" or an "undocumented vessel."

Documented Vessel

The term "documented vessel" means a vessel which is required to be documented with the United States Coast Guard (USCG) and for which the USCG has issued a valid marine certificate. As a general matter, a vessel is required to be documented with the USCG if:

  • It will be used in international waters (outside the 3-mile limit); or
  • The vessel is a commercial vessel of at least 5 net tons displacement (typically 28.5' in length).

Pleasure vessels meeting the above size requirement may be documented at the owner's option.

If you owe use tax on your purchase of a documented vessel, you must pay the use tax directly to the BOE (see heading below, Reporting the Use Tax on Documented Vessels).

Undocumented Vessel

A vessel which is not required to be documented with the USCG, and which does not have a valid marine certificate issued by the USCG, is an undocumented vessel. Undocumented vessels are generally required to be registered with the DMV. If you owe use tax on your purchase of an undocumented vessel, you generally must pay the use tax to the DMV when you register the vessel (see heading below, Reporting the Use Tax on Purchases of Undocumented Vessels).

Reporting Use Tax on Purchases of Documented Vessels

You must report your purchase of a documented vessel and pay the use tax directly to the BOE.

You can report your purchase of a documented vessel and pay the use tax by using the BOE's online registration system and selecting the option to Pay use tax, file an exemption, or request a tax clearance (Vehicle, Vessel, Aircraft, or Manufactured Home/Mobile Home). Or, if you have received a Combined State and Local Consumer Use Tax Return for Vessel from the BOE, complete the return and mail it to the address listed on the form.

Your tax return and payment is due on or before the last day of:

  • The month following the month you were mailed a return by the BOE, or
  • The twelfth month following the month in which you purchased the vessel, whichever period expires first.

Penalty and interest charges will begin to accrue once the due date has passed.

Reporting Use Tax on Purchases of Undocumented Vessels

Generally, the DMV will collect any use tax due on behalf of the BOE when you register your undocumented vessel.

You do not need to file a use tax return with the BOE if you registered your undocumented vessel with, and paid the use tax directly to, the DMV. However, if you purchased an undocumented vessel without completing registration with DMV, any use tax due on your purchase must be paid directly to the BOE. You can report your purchase of an undocumented vessel and pay the use tax by using the BOE's online registration system and selecting the option to Pay use tax, file an exemption, or request a tax clearance (Vehicle, Vessel, Aircraft, or Manufactured Home/Mobile Home). Or, if you have received a Combined State and Local Consumer Use Tax Return for Vessel from the BOE, complete the return and mail it to the address listed on the form.

Your tax payment is due on or before the last day of the month following the month of purchase.

Penalty and interest charges will begin to accrue once the due date has passed.

Determining the Use Tax Rate

The use tax rate is the same as the sales tax rate and is based upon where you principally moor or berth a documented vessel or the address where you register your undocumented vessel.

For example, if you live in Anaheim, California, but moor your documented vessel in Long Beach, California, you must pay tax at the rate charged in the city of Long Beach.

You can look up the current tax rate by address on our Find a Sales and Use Tax Rate webpage. You may also find a list of current and historical rates on our California City & County Sales & Use Tax Rates webpage.

Determining the Amount Subject to Tax

The total purchase price of your vessel is subject to tax. The total purchase price includes any type of payment, such as cash, checks, the payment or assumption of a loan or debt, and the fair market value of any property and/or services traded, bartered, or exchanged for the vessel.

For example, if you purchase a vessel for $50,000 and give the seller your current vessel valued at $30,000, and $20,000 in cash, you owe tax on the entire $50,000 purchase price.

Credit for Tax Paid to Another State

If you paid tax to another state when purchasing your vessel, you may be entitled to claim a credit for the tax previously paid to another state.

For example, if you previously paid $1,500 sales or use tax to another state for the purchase of the vessel, and the California use tax due is $2,000, the balance of the use tax due to California would be $500.

Dealer vs. Broker Purchase

In general, if you purchase your vessel from a dealer who has a California sellerís permit, the dealer is responsible for paying the sales tax to the BOE, unless the dealer is acting as a broker. However, if you purchase your vessel through a broker, the broker may, but is not required to, collect and report the tax to the BOE. If the broker does not collect any amount for sales or use tax, you are required to report and pay the use tax to the BOE.

A broker is a person who arranges transactions between buyers and sellers, and who does not have the power or authority to transfer title of the vessel to the purchaser. A broker is not considered the retailer, and therefore is not responsible for the payment of tax. If the broker collects and reports the correct amount of tax to the BOE, you have no additional liability. However, if the BOE determines that an insufficient amount of tax was collected and reported, you will be billed for the additional tax. For example, if the broker incorrectly collects tax based on an 8 percent tax rate when the applicable tax rate was really 9 percent, you will be billed for the additional remaining tax due.

If the broker collects an amount for sales or use tax but fails to report it to the BOE, you will be credited for the amount of tax paid to the broker provided you have a receipt from the broker showing the amount of tax paid to the broker.

Claiming an Exemption or Exclusion from the Use Tax

If you claim that your vessel purchase is exempt or nontaxable, you must submit documentation to the BOE to support your claim.

You can report your purchase of a documented vessel and claim an exemption or exclusion using the BOE's online registration system and selecting the option to Pay use tax, file an exemption, or request a tax clearance. Or, if you received a Combined State and Local Consumer Use Tax Return for Vessel from the BOE, select the exemption on section 3 of the return and mail it to the address listed on the form with your supporting documentation.

Many tax exemptions and exclusions for vessel purchases have a test period of 6 to 12 months. If the applicable test period has not elapsed before the due date of your use tax return, we recommend that you submit copies of documentation currently available.You may submit the remaining required documentation after your test period has expired. (See the below exemptions and exclusions for information on what documentation is needed to support your claim.)

The process for claiming an exemption for an undocumented vessel is the same as for a vehicle. Please see our Vehicle section, Claiming an Exemption from the Use Tax, for more information.

Not Purchased for Use in California

If you purchase your vessel for use outside of California, your purchase may not be subject to use tax.

However, when a vessel purchased outside of California*, is first functionally used outside of California, and is brought into California within 12 months from the date of its purchase, it is presumed that the vessel was purchased for use in California and is subject to use tax if any of the following occur:

  • The vessel is purchased by a California resident.
  • The vessel is subject to property tax in California during the first 12 months of ownership.
  • If purchased by a nonresident of California, the vessel is used or stored in California more than one-half of the time during the first 12 months of ownership.

If the vessel enters California within the first 12 months of purchase, you may overcome the presumption that the vessel was purchased for use in California by providing the following documentation to support your claim:

  • A copy of your purchase agreement.
  • A statement signed by the seller verifying the date and location of the vessel's delivery out of state.
  • Documentation showing the location and use of the vessel between the date of sale and date of delivery, if different.
  • Evidence of tax paid to another state.
  • A copy of the insurance policy which indicates the navigational limits of the vessel.
  • Slip rental/mooring receipts, repair invoices, maintenance receipts, and fuel receipts from the date of out-of-state delivery and for the next 12 months. These documents should identify the vessel by name or documentation number.
  • Foreign port of entry documents, if applicable.
  • Credit card/bank statements supporting the location and use of the vessel from the date of out-of-state delivery and for the next 12 months.

*Pursuant to Article 3, Section 2 of the California Constitution, California's territorial boundaries extend three nautical miles beyond the outermost islands, reefs, and rocks of this state and include all waters between those islands and the coast.

Family Transaction

If you purchase your vessel from a qualifying family member who is not engaged in the business of selling vessels, you are not required to pay use tax on the vessel purchase.

A qualifying family member includes a:

  • Parent
  • Grandparent
  • Child
  • Grandchild
  • Spouse or registered domestic partner (as referenced in Family Code section 297.5).
  • Brother or sister (related to you by blood or adoption), if the sale occurs when both are minors.

The exemption does not extend to purchases from stepparents or stepchildren if a natural parent or child is not involved or there is not a legal adoption. The exemption also does not apply to transactions between ex-spouses after a decree of divorce.

For example, a purchase from your biological or adopted child would qualify as an exempt family transaction; however, a purchase from your stepchild generally would not.

To qualify for the exemption, you must supply documentation to support the family relationship, such as birth certificates, marriage license, and/or adoption paperwork.

Commercial Deep Sea Fishing

If you purchase your vessel for use in commercial deep sea fishing, your purchase may be exempt from use tax.

To qualify for the exemption, you must supply documentation to support the following:

  • The vessel was principally used in commercial deep sea fishing outside the three mile territorial waters of California during the first 12 consecutive months after the first operational use of the vessel, and
  • You are a person who is regularly engaged in commercial deep sea fishing.

Generally, if your gross receipts from commercial deep sea fishing activities are less than $20,000, it is presumed that you are not regularly engaged in commercial deep sea fishing.

Documentation needed to support your exemption claim:

  • A copy of your purchase contract.
  • 12 months of Commercial Fish Receipts identifying the species and location caught.
  • Vessel logs showing GPS readings and engine hours.
  • A copy of your income tax return(s), including profit and loss statements.
  • Copies of California Department of Fish and Wildlife fishing licenses and boat registration.
  • Photographs of the entire vessel showing rigging.

Purchases for Use Outside of California

You may not be required to pay California use tax if the only use of the vessel in California is to remove it from the state and it will be used solely thereafter outside this state.

This exclusion only applies to a purchase that would otherwise be subject to use tax. No use of the vessel, other than to remove it from the state, can be made. This exclusion does not apply to a purchase from a vessel dealer subject to sales tax.

For example, you purchase a vessel from a person (private party) in San Diego who does not hold a dealer's license or a California seller's permit and immediately leave for your vacation home in Astoria, Oregon. Along the way, you stop at Marina Del Rey, have dinner, and have a boat decal added. The next day you fish in the Channel Islands. Later, you stop and visit friends in San Francisco and take them for a ride on your boat. The exclusion from use tax does not apply because you did not simply remove the boat from the state.

Delays for emergency repairs made to the vessel must be verified as functionally necessary for the vessel to continue its departure from the state. You must provide supporting documentation such as fuel, repair, mooring, and/or lodging receipts to verify the property's departure from California, plus documentation showing that the vessel did not return during the applicable test period.

Bareboat Charters and Rentals

If you purchase a vessel with the intent to limit its use to bareboat charters and leasing, you may be able to report tax based on the fair rental value of the vessel rather than the purchase price.

Vessels 30 feet or more in length are considered mobile transportation equipment (MTE). As the lessor of MTE, you are responsible for the use tax due. If you are leasing your vessel and it is considered MTE, you must report tax based upon the purchase price unless:

  • The purchaser's use of the vessel will be limited to leasing the vessel; and
  • You make a timely election to report tax based on the fair rental value (i.e. the rental payments that are required by the lease).

To be considered a lease, you must give up possession and control of the vessel to the lessee. If you require the lessee to obtain your services to operate the vessel (i.e. you do not allow your customers to pilot your boat and instead require them to hire your own crew and Captain), the transaction is not a lease for sales and use tax purposes and tax must be paid on the purchase price of the vessel.

To be considered timely, if you purchased the vessel without paying tax at the time of purchase, then an election to pay the use tax based on the fair rental value of the vessel must be made:

  • On or before the due date of a return for either the period in which the vessel is first leased, or
  • If the vessel is purchased out of state, the reporting period in which the vessel first entered California, whichever is later.

This election cannot be changed, and if the election is not made timely, then tax must be paid based upon the purchase price of the vessel. If you elect to pay tax based on the fair rental value of the vessel and later make personal use of the vessel, then tax will be based upon the purchase price.

For more information regarding leases of MTE, see Regulation 1661.

Vessels less than 30 feet in length are not MTE. If you lease a vessel less than 30 feet in length, as the lessor, you are responsible for collecting tax at the time rentals are paid by the lessee, providing the lessee with a receipt, and paying the tax directly to the BOE. Tax is not due based on rental receipts only under the following conditions:

  • You paid sales tax at the time you purchased the vessel, or
  • You made a *timely election to report and pay use tax measured by the purchase price.

In addition, the vessel must be leased in substantially the same form as acquired.

*To be considered timely, use tax measured by the purchase price must be reported and paid timely with a return of the lessor for the period during which the property was first leased.

Personal Property Tax

In addition to sales or use tax, personal property tax may be due.

Please contact your local county assessor's office for more information.

Aircraft

You must report your purchase of an aircraft subject to use tax to the BOE. In general, use tax applies to purchases of aircraft for use in this state when an amount for sales tax is not paid to a California dealer. This includes purchases from out-of-state sellers, private parties, or California dealers when delivery of the aircraft is taken out of state. Unless an exemption or exclusion applies, you must pay use tax on your aircraft purchase directly to the BOE.

You can report your purchase of an aircraft and pay the use tax by using the BOE's online registration system and selecting the option to Pay use tax, file an exemption, or request a tax clearance (Vehicle, Vessel, Aircraft, or Manufactured Home/Mobile Home). Or, if you have received a Combined State and Local Consumer Use Tax Return for Aircraft from the BOE, complete the return and mail it to the address listed on the form.

Your tax return and payment are due on or before the last day of:

  • The month following the month you were mailed a return by the BOE, or
  • The twelfth month following the month in which you purchased the aircraft, whichever period expires first.

Penalty and interest charges will begin to accrue once the due date has passed.

Determining the Use Tax Rate

The use tax rate is the same as the sales tax rate and is based on where you principally hangar the aircraft.

For example, if you live in Anaheim, California, but keep your aircraft in Long Beach, California, you must pay tax at the rate charged in the city of Long Beach.

You can look up the current rate by address on our Find a Sales and Use Tax Rate webpage. You may also find a list of current and historical rates on our California City & County Sales & Use Tax Rates webpage.

Determining the Amount Subject to Tax

The total purchase price of your aircraft is subject to tax. The total purchase price includes any type of payment, such as cash, checks, the payment or assumption of a loan or debt, and the fair market value of any property and/or services traded, bartered, or exchanged for the aircraft.

For example, if you purchase an aircraft for $50,000 and give the seller your current aircraft valued at $30,000, and $20,000 in cash, you owe tax on the entire $50,000 purchase price.

Credit for Tax Paid to Another State

If you paid tax to another state when purchasing your aircraft, you may be entitled to claim a credit for the tax previously paid to another state.

For example, if you previously paid $15,000 sales or use tax to another state for the purchase of the aircraft and the California use tax due is $20,000, the balance of use tax due to California would be $5,000.

Dealer vs. Broker Purchase

In general, if you purchase your aircraft from a dealer who has a California sellerís permit, the dealer is responsible for paying the sales tax to the BOE, unless the dealer is acting as a broker. However, if you purchase your aircraft through a broker, the broker may, but is not required to, collect and report tax to the BOE. If the broker does not collect any amount for sales or use tax from you, you are required to report and pay use tax to the BOE.

A broker is a person who arranges transactions between buyers and sellers, and who does not have the power or authority to transfer title of the aircraft to the purchaser. A broker is not considered the retailer and, therefore, is not responsible for the payment of tax. If the broker collects and reports the correct amount of tax to BOE, you have no additional liability. However, if the BOE determines that an insufficient amount of tax was collected and reported, you will be billed for additional tax. For example, if the broker incorrectly collects tax based on an 8 percent tax rate when the applicable tax rate is really 9 percent, you will be billed for the additional tax remaining due.

If the broker collects an amount for sales or use tax but fails to report it to the BOE, you will be credited for the amount of tax paid to the broker provided you have a receipt from the broker showing the amount of tax paid to that broker.

Claiming an Exemption or Exclusion from the Use Tax

If you claim that your aircraft purchase is exempt or nontaxable, you must submit documentation to the BOE to support your claim.

You can report your purchase of an aircraft and claim an exemption or exclusion using the BOE's online registration system and selecting the option to Pay use tax, file an exemption, or request a tax clearance. Or, if you received a Combined State and Local Consumer Use Tax Return for Aircraft from the BOE, select the exemption in section 3 of the return and mail it to the address listed on the form with your supporting documentation.

Many tax exemptions and exclusions for aircraft purchases have a test period of 6 to 12 months. If the applicable test period has not lapsed before the due date of your use tax return, we recommend that you submit copies of documentation currently available. You may submit the remaining required documentation after your test period has expired. (See the below exemptions and exclusions for information on what documentation is needed to support your claim.)

Not Purchased for Use in California

If you purchase your aircraft for use outside of California, your purchase may not be subject to use tax.

However, when an aircraft purchased outside of California, is first functionally used outside of California, and is brought into California within 12 months from the date of its purchase, it is presumed that the aircraft was purchased for use in California and is subject to use tax if any of the following occur:

  • The aircraft is purchased by a California resident.
  • The aircraft is subject to property tax in California during the first 12 months of ownership.
  • If purchased by a nonresident of California, the aircraft is used or stored in California more than one-half of the time during the first 12 months of ownership.

If the aircraft enters California within 12 months of purchase, you may overcome the presumption that the aircraft was purchased for use in California by providing the following documentation to support your claim:

  • A copy of your purchase agreement.
  • A statement signed by the seller verifying the date and location of the aircraft's delivery out of state.
  • Flight logs from the date of purchase until the date of delivery and for the next 12 months.
  • Evidence of registration with the proper out-of-state authority.
  • Evidence of tax paid to another state.
  • A copy of the insurance policy for the aircraft.
  • Tie-down, hangar rental, fuel, repair invoices, and maintenance receipts from the date of delivery and for the next 12 months. These documents should identify the aircraft by tail or serial number.
  • Credit card/bank statements supporting the location and use of the aircraft from the date of out-of-state delivery and for the next 12 months.

Family Transaction

If you purchase your aircraft from a qualifying family member who is not engaged in the business of selling aircraft, you are not required to pay use tax on the purchase.

A qualifying family member includes a:

  • Parent
  • Grandparent
  • Child
  • Grandchild
  • Spouse or registered domestic partner (as referenced in Family Code section 297.5).
  • Brother or sister (related to you by blood or adoption), if the sale occurs when both are minors.

The exemption does not extend to purchases from stepparents or stepchildren if a natural parent or child is not involved or there is not a legal adoption. The exemption also does not apply to transactions between ex-spouses after a decree of divorce.

For example, a purchase from your biological or adopted child would qualify as an exempt family transaction; however, a purchase from your stepchild generally would not.

To qualify for the exemption, you must supply documentation to support the family relationship, such as birth certificates, marriage license, and/or adoption paperwork.

Common Carrier

If you purchase your aircraft for use as a common carrier of persons or property, your purchase may qualify as exempt from tax.

To qualify, you must use the aircraft as a common carrier for more than 50 percent of the operational use during the first 12 consecutive months beginning with first operational use. Generally, if your yearly gross receipts from common carrier operations do not exceed 20 percent of the purchase price of the aircraft or $50,000, whichever is less, it is presumed that you are not using the aircraft as a common carrier.

Documentation needed to support your exemption claim:

  • Copies of the operator's FAA certification.
  • FAA registration documents.
  • A list of the operator's certified pilots.
  • A complete copy of the insurance policy.
  • A complete copy of the aircraft flight logs from the date of delivery and for the next 12 months of operational use. (Note: Copies of actual flight logs are required.Computer print-outs are not acceptable.)
  • A summary that describes each flight during the first 12 months of operation.
  • A complete copy of the aircraft or engine maintenance logs.
  • A complete copy of the sales contract which verifies the purchase price, purchase date, and delivery date and location of the aircraft.
  • A complete copy of the lease agreement if the aircraft is leased.
  • A copy of all lease payment invoices made to the lessor (owner) by the lessee (operator).
  • Copies of the operator's customer revenue billings showing the amount charged on all charter flights.

Interstate or Foreign Commerce

If you purchase an aircraft for use in interstate or foreign commerce, your purchase may not be subject to use tax.

To document that use tax does not apply, you must supply documentation to support the following:

  • You took delivery of the aircraft outside of California.
  • You first functionally used the aircraft outside of California.
  • One half or more the flight time traveled by the aircraft during the six month period immediately following the aircraft's initial entry into California must be commercial flight time traveled in interstate or foreign commerce.

Documentation needed to support your claim:

  • A copy of your purchase agreement.
  • A statement signed by the seller verifying the date and location of the aircraft's delivery out of state.
  • Flight logs from the date of purchase until the date the aircraft initially entered California and for the following six months. The logs should demonstrate that itineraries and hours are carried forward to each successive flight entry.
  • A flight log summary that describes the business purpose of each flight claimed as interstate or foreign commerce.
  • Documentation to support the business purpose of each flight claimed as interstate or foreign commerce. This documentation may include, but is not limited to, meeting minutes, signed affidavits from third parties, or email correspondence regarding business trips.
  • Copies of maintenance logs and repair invoices verifying the aircraft's total air time at various dates throughout the exemption period.
  • A copy of your federal income tax return for the applicable test period showing depreciation of the aircraft as a business asset.

Farm Equipment

You may be eligible for a partial tax exemption if you purchase an aircraft that will be used primarily in producing and harvesting agricultural products (that is, used for the dusting, spraying, fertilizing, or seeding of crops).

The partial exemption applies only to the state general and fiscal recovery funds portion of the sales and use tax, currently 5.00 percent.

To calculate the tax rate for a qualifying purchase, subtract 5.00 percent from the tax rate that would normally apply at the location where the aircraft is principally hangared. For example, if the current tax rate in effect is 9 percent, the tax rate for a qualifying purchase would be 4.00 percent.

Note: The state rate portion of the sales and use tax is subject to change. The rates used in this example are for demonstrative purposes only. You must use the rate in effect at the time of the sale. Current tax rates can be found on our website.

Three requirements must be met for the partial exemption to apply. The item must be:

  • Purchased for use by a qualified person.
  • Used primarily (50 percent or more of the time) in producing and harvesting agricultural products.
  • Qualifying farm equipment and machinery.

If any of these three requirements are not met, the partial exemption does not apply.

For more detailed information about farm equipment and machinery, see Regulation 1533.1, Farm Equipment and Machinery and publication 66, Agricultural Industry.

Documentation needed to support your exemption claim:

  • A copy of your purchase agreement.
  • A copy of your most recent federal or state income tax return with Schedule F, Profit or Loss from Farming.
  • FAA registration verifying the aircraft is classified for agricultural use.

Purchases for Use Outside of California

You may not be required to pay California use tax if the only use of the aircraft in California is to remove it from the state and it will be used solely thereafter outside this state.

This exclusion only applies to a purchase that would otherwise be subject to use tax. No use of the aircraft, other than to remove it from the state, can be made. This exclusion does not apply to a purchase from an aircraft dealer subject to sales tax.

Delays for emergency repairs made to the aircraft must be verified as functionally necessary for the aircraft to continue its departure from the state. You must provide supporting documentation such as fuel, repair, hangar, and/or lodging receipts to verify the property's departure from California, plus documentation showing that the aircraft did not return during the applicable test period.

Personal Property Tax

In addition to sales or use tax, personal property tax may be due.

Please contact your local county assessor's office for more information.

Resources

Need to know more? Follow the links below for more information about the topics covered in this guide, as well as other information you might find helpful:

Forms

BOE-101, Claim for Refund or Credit
BOE-101-DMV, Claim for Refund or Credit for Tax Paid to DMV
BOE-106, Vehicle/Vessel Use Tax Clearance Request
BOE-126, Paying Your Consumer Use Tax Amount Due
BOE-392, Power of Attorney
BOE-401-CUTS, Combined State and Local Use Tax Return for Vehicle, Mobilehome, Vessel, or Aircraft
BOE-416, Petition for Redetermination (Appeal)

Publications

Publication 17, Appeals Procedures
Publication 40, Watercraft Industry
Publication 52, Vehicles and Vessels: Use Tax
Publication 61, Sales and Use Taxes: Exemptions and Exclusions
Publication 66, Agricultural Industry
Publication 79, Documented Vessels and California Tax
Publication 79a, Aircraft and California Tax

Notices

Special Notice: Interstate or Foreign Commerce Exemption for Trucks and Trailers (Español)

Laws and Regulations

Regulation 1533.1, Farm Equipment and Machinery
Regulation 1593, Aircraft and Aircraft Parts
Regulation 1594, Watercraft
Regulation 1595, Occasional Sales—Sales of a Business—Business Reorganization
Regulation 1610 , Vehicles, Vessels, and Aircraft
Regulation 1616, Federal Areas
Regulation 1620, Interstate and Foreign Commerce
Regulation 1620.1, Sales of Certain Vehicles and Trailers for Use in Interstate or Out-of-State Commerce
Regulation 1654, Barter, Exchange, "Trade-Ins" and Foreign Currency Transaction
Regulation 1655, Returns, Defects and Replacements
Regulation 1660, Leases of Tangible Personal Property—In General
Regulation 1661, Leases of Mobile Transportation Equipment
Regulation 1669, Demonstration, Display and Use of Property Held for Resale—General
Regulation 1669.5, Demonstration, Display and Use of Property Held for Resale—Vehicles
Regulation 1684, Collection of Use Tax by Retailers
Regulation 1685, Payment of Use Tax by Purchasers

Other Helpful Resources