Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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A

105.0000 AIRCRAFT—Regulation 1593

Annotation 105.0065

105.0065 Common Carrier. An aircraft owner leases his aircraft to a charter company operating under the authority of the Federal Aviation Administration. The charter company charters the aircraft to the aircraft owner's medical corporation and permits the aircraft owner to pilot the aircraft as the charter company's employee on these flights.

When the aircraft owner's medical corporation "charters" the aircraft for the purpose of having only the aircraft owner transported, this would not be recognized as a true charter if the aircraft owner is the pilot. Such use does not constitute use as a common carrier for purposes of calculating the principal use of the aircraft during the test period specified under Regulation 1593(b). When the aircraft owner's medical corporation charters the aircraft for the purpose of transporting several persons and the aircraft owner acts as the pilot, the charter will be recognized as common carrier use if the aircraft owner is a true employee of the lessee and if such use is common carrier use within the intent of Revenue and Taxation Code section 6366.1.

The intent of the Legislature in adopting section 6366.1, did not include extending an exemption to the use of an aircraft by the owner in a lease and sublease back arrangement. The Board will not regard the transaction as common carriage for the medical corporation for purposes of the exemption explained in Regulation 1593 if the sole purpose of the aircraft owner's employment with the lessee is to act as pilot of his aircraft when the aircraft owner's medical corporation charters the aircraft.

Among the indications of a bona fide charter relationship are the following:

(1) If the aircraft owner is not available to act as a pilot on flights other than those chartered by the aircraft owner's medical corporation, the relationship with the lessee (charter company) will not be regarded as a true employment relationship.

(2) The aircraft owner must be treated as an employee of the lessee in the lessee's records as well as in his own records.

(3) The aircraft owner must be paid the same amount as any other pilot of equivalent experience.

(4) All applicable employment taxes and fees must be paid.

(5) The aircraft owner must satisfy all regulatory requirements of an air taxi or commercial operator carrier under applicable regulations.

(6) The rates to the medical corporation can be no lower than rates available to other charters. 11/2/89.