Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales And Use Tax Court Decisions

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National Aircraft Leasing, Ltd. v. State Board of Equalization . . . (1979)

Modification Work Which Becomes a Component Part of an Airplane Leased by Common Carrier Is Not Exempt from Tax

Plaintiff engaged in the business of leasing transport category aircraft. Plaintiff and one of its common carrier lessees agreed that a leased aircraft would be modified to increase its load carrying capacity and engine power. The modification work was performed by a separate firm. The engines were removed from the airplane, delivered to the repair firm, and reinstalled when the modification was completed. The Board taxed the modification and tax was paid by the repair firm. Plaintiff reimbursed the repair firm for the amount of tax and the repair firm assigned its refund claim to plaintiff. After denial of the claim by the Board, plaintiff sought recovery in Superior Court on the basis that the modification work should be considered exempt as a sale, use, or other consumption of aircraft provided to common carriers pursuant to Revenue and Taxation Code Sections 6366 and 6366.1(a). The court of appeal held that Sections 6366 and 6366.1(a) do not exempt the gross receipts from the sale in this state of tangible personal property thereafter becoming component parts of aircraft which have already been sold, leased, or sold for the purpose of leasing, to persons using such aircraft as common carriers of persons or property. The engine modifications performed on the aircraft owned by plaintiff were therefore properly subject to tax. National Aircraft Leasing, Ltd. v. State Board of Equalization (1979) 90 Cal.App.3d 549.