FAQ - Use Tax Exemptions or Exclusions

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1. Are there any exemptions or exclusions from the use tax?
2. Did the taxability of the use of vehicles, vessels, and aircraft purchased out of state change after October 1, 2004?
3. Did the taxability of the use of vehicles, vessels, and aircraft purchased out of state change after July 1, 2006?
4. How do I apply for a BOE-111, Certificate of Use Tax Clearance?

1. Are there any exemptions or exclusions from the use tax?

   As described in Publication 52, Vehicles and Vessels - How to Request a Use Tax Clearance for DMV Registration, the following is a list of possible exceptions to the use tax:

   1. Commercial Deep Sea Fishing
   2. Interstate and Foreign Commerce
   3. Family Transfers
   4. Not Purchased for Use in California
   5. Received as a Gift
   6. Transfers Into and Out of Corporations
   7. Transfers Into Revocable Trusts
   8. Involuntary Transfers
   9. Purchases from the United States Government
   10. Purchases by American Indians
   11. Purchases for Resale
   12. Purchases for Use Outside California
   13. Common Carrier
   14. Transfer of a Vehicle to Lessee by Lessor, when Vehicle resold to a Third Party (10-day Rule)

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   1. Commercial Deep Sea Fishing

   Not all fishing vessels qualify for this exemption. The vessel must be used by persons engaged principally in commercial deep sea fishing activities outside the three mile territorial waters of California, or used in interstate commerce or transport to offshore drilling. If your annual income from fishing activities is less than $20,000, you may not qualify for this exemption.

   Documentation required includes:

   • Twelve months of “fish tickets” identifying the species and location caught,
   • Loran and/or GPS readings,
   • Complete tax returns,
   • Profit and loss statements,
   • California Department of Fish and Game fishing licenses and boat registration,
   • Photographs of the vessel showing rigging, and
   • Other types of documentation as described on the commercial deep sea fishing questionnaire sent to you upon filing for exemption with the Board.

   For more information, see Publication 40, Tax Tips for the Watercraft Industry and Regulation 1594, Watercraft.

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   2. Interstate and Foreign Commerce

      Purchases of property that are both first functionally used outside the state of California and are used continuously in interstate or foreign commerce (both within and outside California), and not exclusively in California, are exempt from the use tax. For example, a purchase of a ferry boat to transport passengers between Los Angeles and Catalina Island (two California ports) does not qualify for the exemption, even though the vessel may travel through international waters to arrive at its destination. However, the purchase of an aircraft regularly used in transporting passengers from Mexico to Canada may be exempt, even if it stops at various airports in California to pick up additional passengers. Regulation 1620, Interstate and Foreign Commerce.

      In addition, vehicles, vessels, and aircraft first functionally used outside California may not be regarded as purchased for use in this state where the vehicle, vessel, or aircraft is brought into California within 12 months after its purchase and one-half or more of the miles traveled by the vehicle, or nautical miles traveled by the vessel, or flight time traveled by the aircraft during the six-month period immediately following its entry into this state are miles/nautical miles/flight time in interstate commerce.

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   3. Family Transfers

   The Sales and Use Tax Law provides an exemption from the use tax when the person selling a vehicle, vessel, or aircraft is related to the purchaser as either:

   • Parent
   • Grandparent
   • Grandchild
   • Child
   • Spouse
   • Brother or sister, if both are under age of 18 and related by blood or adoption.

   This exemption does not apply if the seller is engaged in the business of selling similar property. (For example, a car or boat dealer.) Additionally, the exemption does not extend to sales to stepparents or stepchildren if a natural parent or child is not involved in the sale nor does it apply to transactions between ex-spouses after a decree of divorce.

   To qualify for the exemption, the relationship between buyer and seller must be verified by marriage license, birth or adoption certificate, or any other documentation that is official or verifiable and confirms the qualifying relationship. (Revenue and Taxation Code section 6285.)

   For information on transfers as part of a divorce settlement, please see part h. Involuntary Transfers

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   4. Not Purchased for Use in California (The information below does not apply to a vehicle, vessel, or aircraft purchased out of state on or after October 2, 2004, until and including June 30, 2007. Please see question Frequently Asked Question 2)

   Property purchased from a dealer outside California, (including property purchased from a California dealer and subsequently delivered or picked up at a location outside of California where title is transferred to the purchaser), or from a non-dealer either in or outside of California, for use in this state is generally subject to the use tax. Residency is not a factor in determining if tax is due. However, the property may not be subject to tax if several conditions exist.

   The first is commonly referred to as the "90-Day Test." If the property is purchased (delivered) and functionally used (does not include storage) outside of California for more than 90 days, it is presumed to have been purchased for use outside California. However, if the property enters California during the first 90 days of ownership, it can still be considered not purchased for use in California if it can be verified that the property was used or stored outside California more than one-half of the time during the six month period following its entry into this state.

   To qualify for these provisions, documentation, satisfactory to the Board, must be submitted that verifies the transaction occurred outside of California and sufficiently identifies the date, location, and use of the property during the entire period required for the exclusion (90 days or six months).

   There are several other conditions under which a purchase may be excluded from the use tax. If, at the time of purchase, the purchaser did not know the property would be used in California, the transaction may not be subject to tax. For example, a person serving in the U.S. military who receives transfer orders to California right after buying a vehicle is required to pay use tax unless it can be shown that the date of the reassignment occurred after the vehicle's purchase date. The same rules may apply if a person received a promotion or job offer in California.

   To qualify for these provisions, documentation must be provided verifying that the purchaser did not know at the time of purchase that the vehicle would enter or be used in California within the first 90 days of ownership. Signed and dated copies of military orders or change in employment status are required. Additional supporting documentation such as an apartment lease or rental agreement may be used to support the claim.

   See also Publication 112, Purchases from Out-of-State Vendors, Regulation 1610, Vehicles, Vessels, and Aircraft and Regulation 1620, Interstate and Foreign Commerce.

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   5. Received as a Gift

   Changing the ownership of a vehicle, vessel, or aircraft does not cause a taxable sale or purchase if there is no consideration given to obtain the property. Consideration can take many forms such as cash, a loan, a trade, or assumption or cancellation of a debt. In order to qualify under this provision, it must be established that the property was transferred from the donor to the recipient with no requirement on the recipient's part to compensate the donor in any way. A signed, notarized statement from the donor is usually required. Please note: The donor must have the legal authority to transfer the vehicle, vessel, or aircraft.

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   6. Transfers Into and Out of Corporations

   A transfer of property transferred into a commencing corporation solely in exchange for first issue stock is not subject to tax. The corporation must acknowledge receipt of the property and verify that the only consideration given is stock in the company. If the corporation assumes any liabilities as consideration for the transfer, tax will apply to the transfer. If a corporation gives property, such as a depreciated vehicle, to an employee as payment of wages or compensatory bonus and a W-2 form, Statement of Wages Earned, is required to be issued, tax would apply on the monetary value given to the property in lieu of cash. If the transfer is a gift, no use tax would apply.

   To qualify, a copy of the Articles of Incorporation and Minutes of the Meeting of the Corporation detailing the transfer is required. When a corporation is dissolved and distributes assets to stockholders, no tax applies, provided the assets are distributed in accordance with the stockholders' ownership in the corporation and the assets were not inventory being held for resale. A copy of the Certificate of Election to Wind Up and Dissolve describing the disbursement of the corporate assets is required to support an exemption.

   For more information, see Regulation 1595, Occasional Sales—Sale of a Business—Business Reorganization.

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   7. Transfers Into Revocable Trusts

   A transfer of property into a revocable trust is exempt from tax provided the only consideration given, if any, is the assumption of the loan and sole collateral is property being transferred in exchange for the property and

   • The seller has unrestricted power to revoke the trust;
   • The transfer does not result in any change in the beneficial ownership of the property;
   • Upon revocation of the trust the property reverts back to the beneficial seller.

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   8. Involuntary Transfers

   Use tax normally does not apply if title to the property changes due to circumstances beyond the recipient's control. Some examples are repossession by a legal owner, inheritance from a decedent's estate, recovery of stolen property after settlement from an insurance company, and court settlements such as divorce decrees. Confirming documentation is required, depending on the nature of the transaction.

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   9. Purchases from the United States Government

   While purchases by the U.S. government and its agents are exempt from state taxes, not all purchases from, or sales by, the U.S. government are exempt from sales and use tax. Only under certain conditions are purchases from, or sales by, the U.S. government exempt from tax. The following types of transactions may qualify:

   • A sale by a U.S. Marshal pursuant to orders of a federal court.
   • A sale in accordance with certain United States Code sections. A letter should be provided identifying the applicable United States Code sections under which the property is sold.

   Please note: Sales made under Title 40, United States Code section 484, or Internal Revenue Code section 6335 are not exempt use tax purchases. For more information on purchases from the United States government, please see Publication 52, Vehicles and Vessels, How to Request a Use Tax Clearance for DMV Registration.

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   10. Purchases by American Indians

   Purchases of property purchased by American Indians are exempt under the following conditions:

   • The purchaser must be of American Indian descent and must be entitled to services as an Indian from the United States Department of Interior.
   • The property must be delivered and title transferred on a reservation or rancheria.
   • The item must be used on a reservation or rancheria more than 50 percent of the time during the first 12 months after the transfer.

   To qualify for the requested exemption, documentation such as a signed letter by the tribal council and dealer delivery statements signed by the purchaser verifying the above criteria must be submitted to the Board. For more information, see Regulation 1616, Federal Areas.

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   11. Purchases for Resale

   Purchases of property for resale are not subject to tax provided the purchaser makes no use of the property except demonstration and display in the course of offering the property for sale. You may provide a copy of your valid seller's permit, county business license, dated advertisements in newspapers and trade magazines, logs of engine hours or miles verifying the demonstration, and any other documentation which shows efforts made to sell the property to substantiate that the property was purchased for resale. If any personal use is made, the use tax is due.

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   12. Purchases for Use Outside California

   A purchaser is not required to pay California use tax if the only use of the property purchased in California is to remove it from the state and it will be used solely thereafter outside this state. No other use can be made of the property. See Regulation 1620, subdivision (b)(9).

   If the property is used in California for personal use or for recreation, use tax applies. For example, you, as a resident of Oregon, purchase a boat in San Diego and immediately leave for home. 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 to visit friends in San Francisco and take them for a ride in your boat. The California use tax applies because you made a personal and recreational use of the boat in California, and did not simply remove it 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, or lodging receipts to verify the property's departure from California, plus documentation showing at least six months out-of-state use of the property to qualify for this provision.

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   13. Common Carrier

   Generally, tax does not apply to the sale of an aircraft to any person who will use the aircraft as a common carrier of persons or property under authority of the laws of this state, of the United States, or of any foreign government, during the first 12 consecutive months beginning with first operational use. Unless you can show otherwise, we will presume you are not engaged in business as a common carrier unless your yearly gross receipts from such operations exceed 20 percent of the purchase price of the aircraft, or $50,000, whichever is less. (Revenue and Taxation Code sections 6366 and 6366.1)

   To qualify for exemption, the following list of documents must be submitted to the Board for review:

   • Copies of the operator's Federal Aviation Administration (FAA) certification.
   • FAA registration documents.
   • A list of operator's certified pilots.
   • Evidence of insurance coverage (a complete copy of the policy).
   • A complete copy of the aircraft flight logs from the date of delivery and the next succeeding twelve months of operational use.
   • A summary that describes each flight during the first twelve 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, date, and delivery 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 operator's customer revenue billings showing the amount charged on all charter flights.

   If the first 12 months has not yet expired by the due date of the use tax return, we recommend that you submit copies of documentation currently available. Action on your account will be suspended until the 12-month period has expired. You may submit the remaining required documentation at that time. For more information, see Regulation 1593, Aircraft and Aircraft Parts.

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   14. Transfer of a Vehicle to Lessee by Lessor, when Vehicle resold to a Third Party (10-day Rule)

       Generally, when a lessee elects the option to buy out the lease, tax does not apply to a vehicle if the lessee transfers title and registration to a third party within 10 days from the date the lessee acquired title from the lessor at the expiration or termination of a lease. However, if the lessee elects this option and then gifts the vehicle, the lease pay-off amount is subject to tax. For more information, please see Regulation 1610(d)(2).

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2. Did the taxability of the use of vehicles, vessels, and aircraft purchased out of state change after October 1, 2004?

   Yes. Changes were made to Revenue and Taxation Code section 6248 which affected the taxability of the use of vehicles, vessels, and aircraft. The following questions and related answers below discuss the specific changes.

   1. What changes were made in 2004 to Revenue and Taxation Code section 6248 affecting the taxability of the use of vehicles, vessels, or aircraft that are purchased out of state?
   2. Does the "90-day test" or the "12-month test" apply to my October 1, 2004, purchase of a vehicle, vessel, or aircraft?
   3. Does the "90-day test" or the "12-month test" apply to my June 30, 2007, purchase of a vehicle, vessel, or aircraft?
   4. What is a binding purchase contract?
   5. Which law applies if I have entered into a binding contract to purchase a vehicle, vessel, or aircraft on or before October 1, 2004, but delivery of the vehicle, vessel, or aircraft occurs after October 1, 2004?
   6. Which law applies if I have entered into a binding contract to purchase a vehicle, vessel, or aircraft prior to or on October 1, 2004, but the construction of the vehicle, vessel, or aircraft will not be completed until after October 1, 2004?
   7. If I am a California resident and the vehicle, vessel, or aircraft I purchase on or after October 2, 2004 through and including June 30, 2007, enters California during the first 12 months of ownership, can I still qualify for an exclusion from use tax?
   8. If I am a California resident and I purchase a vehicle or vessel out of state on or after October 2, 2004, and register it with the California Department of Motor Vehicles (DMV), can my purchase and use qualify for an exclusion from use tax if I do not bring the vehicle or vessel into California during the first 12 months of ownership?
   9. Am I considered a California resident if I maintain a residence in California and a residence in another state?
   10. A California resident purchases a vehicle outside of the state from a California dealer and represents to the dealer that the vehicle has not been purchased for use in the state (by completing and signing Form BOE-447 and Form BOE-448). May the dealer accept the form and register the vehicle with the California Department of Motor Vehicles (DMV) without collecting the use tax?
   11. If I am a California resident and the vehicle, vessel, or aircraft I purchase out of state on or after October 2, 2004, enters California during the first 12 months of ownership, and is used in interstate or foreign commerce, can my purchase and use of the vehicle, vessel, or aircraft qualify for an exclusion from use tax?
   12. If I am a California resident and I purchase an aircraft for use in or for lease as a common carrier, can my purchase and use qualify for exemption from tax if the aircraft is purchased out of state on or after October 2, 2004, and enters California during the first 12 months of ownership?
   13. If I am a California resident and I purchase a vessel for use in commercial deep sea fishing, can my purchase and use qualify for exemption from tax if the vessel is purchased out of state on or after October 2, 2004, and enters California during the first 12 months of ownership?

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1. What changes were made in 2004 to Revenue and Taxation Code section 6248 affecting the taxability of the use of vehicles, vessels, or aircraft that are purchased out of state?

Revenue and Taxation Code section 6248 was amended to replace the " 90-day test" [provide link to the answer to question 1.d because it explains the 90-day test] with a "12-month test" to determine whether the out-of-state purchase of a vehicle, vessel, or aircraft was a purchase for the purpose of storage, use, or other consumption in California and subject to California use tax.

Beginning October 2, 2004, through June 30, 2007, any vehicle, vessel, or aircraft purchased outside of California and brought into California within 12 months from the date of its purchase is presumed to be acquired for storage, use, or other consumption in California and subject to tax if that vehicle, vessel, or aircraft is

• Purchased by a California resident as defined in section 516 of the California Vehicle Code, or
• Subject to California's vehicle registration, or aircraft and vessel property tax laws, during the first 12 months of ownership, or
• Used or stored in this state more than one-half of the time during the first 12 months of ownership.

Under any of the conditions described above, it is presumed that use tax will apply. However, if a purchaser provides satisfactory documentary evidence showing that the vehicle, vessel, or aircraft was purchased for use outside of California during the first 12 months of ownership, use tax will not apply. Acceptable evidence may include proof of registration of that vehicle, vessel, or aircraft, with the proper out-of-state authority. This documentation must be submitted to the Board of Equalization for evaluation.

Binding Contract

The version of section 6248 containing the 12-month test does not apply if a vehicle, vessel, or aircraft is purchased, or is the subject of a binding purchase contract [provide link to answer to question d] that is entered into, on or before October 1, 2004.

Resident

Vehicle Code section 516 provides in part that a "resident" means any person, including a natural person, firm, partnership, association, limited liability company, or corporation, who shows an intent to live or be located in California on more than a temporary basis. If you have a presence in California for six months or more in any 12-month period, we will presume you are a resident, as evidenced by factors including the address where you are registered to vote and the location of your place of employment or business.

Limited Exclusions
Repair, retrofit, and modification of aircraft and vessels

An aircraft or vessel is not presumed to have been purchased for use in California, and is therefore not presumed to be subject to use tax, if the aircraft or vessel is brought into this state within the first 12 months of ownership for the limited purposes of repair, retrofit, or modification, provided that no more than 25 hours of air or sailing time is logged for incidental or other use. This exclusion does not apply to vehicles.

Warranty and repair service for vehicles

A vehicle is not presumed to have been purchased for use in California, and is therefore not presumed to be subject to use tax, if the vehicle is brought into this state within the first 12 months of ownership for the exclusive purpose of warranty or repair service, provided that the vehicle was used or stored in this state for that purpose for 30 days or less.

Interstate or foreign commerce

The version of section 6248 containing the 12-month test does not apply to the purchase of a vehicle, vessel, or aircraft that is used in interstate or foreign commerce as explained in Board regulations. For more information, see response to Frequently Asked Question 2.k.

The version of section 6248 which contains the 12-month test will be in effect from October 1, 2004, through and including June 30, 2007.

Many of the questions and answers below address purchases made by individuals. However, section 6248 addresses purchases made by both individuals and legal entities such as corporations or partnerships. For more information, please call our Information Center at 800-400-7115. The Information Center's TDD/TTY number is 800-735-2929.

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2. Does the "90-day test" or the "12-month test" apply to my October 1, 2004, purchase of a vehicle, vessel, or aircraft?

The "90-day test" is used to determine the application of tax to the use in California of a vehicle, vessel, or aircraft purchased outside of California on or before October 1, 2004. The 12-month test is in effect from October 2, 2004 through and including June 30, 2007.

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3. Does the "90-day test" or the "12-month test" apply to my June 30, 2007, purchase of a vehicle, vessel, or aircraft?

The "12-month test" applies to determine the application of tax to the use in California of a vehicle, vessel, or aircraft purchased outside of California on or after October 2, 2004, through and including June 30, 2007. The 12-month test applies even if the vehicle, vessel, or aircraft enters California after the July 1, 2007, sunset date of the statute requiring the 12-month test.

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4. What is a binding purchase contract?

A contract is an agreement to do or not to do a certain thing. Therefore, a purchase contract for a vehicle, vessel, or aircraft is an agreement to buy the vehicle, vessel, or aircraft. A binding purchase contract is an enforceable contract for purchase of a vehicle, vessel, or aircraft.

To form a binding purchase contract, one required element is that all parties to the contract must agree to the same terms for the purchase of the vehicle, vessel, or aircraft. For example, an agreement to agree is not binding, because the parties have not agreed to one or more of the specific terms that can be enforced. Another required element of a binding purchase contract is that each of the parties must be obligated to fulfill his or her part of the contract. This means that if one of the parties promises to buy or sell only if he or she chooses, a contract is not binding.

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5. Which law applies if I have entered into a binding contract to purchase a vehicle, vessel, or aircraft on or before October 1, 2004, but delivery of the vehicle, vessel, or aircraft occurs after October 1, 2004?

If a binding contract for the purchase of the vehicle, vessel, or aircraft was entered into on or before October 1, 2004, the law that was in effect prior to October 2, 2004, applies, even if the delivery of the vehicle, vessel, or aircraft occurs after October 1, 2004.

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6. Which law applies if I have entered into a binding contract to purchase a vehicle, vessel, or aircraft prior to or on October 1, 2004, but the construction of the vehicle, vessel, or aircraft will not be completed until after October 1, 2004?

If a binding contract was entered into on or before October 1, 2004, the law in effect prior to October 2, 2004, applies, even if the construction of the vehicle, vessel, or aircraft will not be completed until after October 1, 2004.

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7. If I am a California resident and the vehicle, vessel, or aircraft I purchase on or after October 2, 2004 through and including June 30, 2007, enters California during the first 12 months of ownership, can I still qualify for an exclusion from use tax?

Under current law, when a California resident purchases a vehicle, vessel, or aircraft outside of California and the vehicle, vessel, or aircraft enters the state during the first 12 months from the date of purchase, we presume that the vehicle, vessel, or aircraft was purchased for storage, use, or other consumption in California and that its use is subject to tax. To show that the vehicle, vessel, or aircraft was not purchased for use in California and, therefore, qualifies for an exclusion from use tax, you must provide documentary evidence to show that the vehicle, vessel, or aircraft was purchased for use outside of California during the first 12 months of ownership. Evidence may include, but is not limited to, evidence of registration with the proper authority outside of California. A purchaser's failure to provide such evidence means that the purchase is subject to tax.

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8. If I am a California resident and I purchase a vehicle or vessel out of state on or after October 2, 2004, and register it with the California Department of Motor Vehicles (DMV), can my purchase and use qualify for an exclusion from use tax if I do not bring the vehicle or vessel into California during the first 12 months of ownership?

We will not consider your purchase to be for use in California unless you bring the vehicle or vessel into California during the first 12 months of ownership. However, when a California resident purchases a vehicle or vessel outside of California and the vehicle or vessel does enter the state during the first 12 months of ownership, we will presume that the vehicle or vessel was purchased for storage, use, or other consumption in California and, therefore, that its use is subject to tax. The registration of such a vehicle or vessel with the California DMV by a California resident supports intent to use the vehicle or vessel in California.

However, a California resident may request a certificate of tax clearance (Form BOE-111, Certificate of Vehicle, Mobilehome, or Motor Coach Use Tax Clearance; Form BOE-111-B, Certificate of Vessel Use Tax Clearance) from the Board so that the registration of the vehicle or vessel may be completed with the DMV without the payment of use tax at that time. See question 4 for instructions on requesting forms BOE-111 or BOE-111-B. At the end of the first 12 months of ownership, the California resident must clearly demonstrate through documentary evidence that the vehicle/vessel in question did not enter the state during this period of time. Without that evidence we will presume the vehicle or vessel is for use in California and tax would be owed.

If we determine that a vehicle or vessel registered in California qualifies for an exclusion from use tax based upon the use of the vehicle or vessel in another state, we may give certain information about this use to that state.

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9. Am I considered a California resident if I maintain a residence in California and a residence in another state?

If you maintain a residence in California and a residence in another state, California Vehicle Code section 516 will be used to determine the state of your primary residency. The definition of "resident" in section 516 provides criteria for determining an individual's primary residency. These criteria include where an individual is registered to vote and the location of the individual's place of employment or business. Of course, even if California is determined to be the place of an individual's primary residency, the vehicle, vessel, or aircraft must still be brought to California within 12 months after purchase before its use may become subject to use tax.

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10. A California resident purchases a vehicle outside of the state from a California dealer and represents to the dealer that the vehicle has not been purchased for use in the state (by completing and signing Form BOE-447 and Form BOE-448). May the dealer accept the form and register the vehicle with the California Department of Motor Vehicles (DMV) without collecting the use tax?

Form BOE-447, Statement Pursuant to Section 6247 of the California Sales and Use Tax Law, is used by purchasers to certify that a vehicle purchased and delivered to an out-of-state location will not be brought into California during the first 12 months of ownership. Form BOE-448, Statement of Delivery Outside California, is used by automobile dealers to certify that a vehicle has been delivered to a purchaser at an out-of-state location.

A dealer may complete the DMV registration of a vehicle for its California customers. However, if the dealer accepts a Form BOE-447 and Form BOE-448 from a California resident who requests that the dealer register the vehicle in California, the dealer's good faith acceptance of these certifications may be questioned and the dealer may be liable for the tax if it is subsequently determined that the vehicle was purchased for use in California.

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11. If I am a California resident and the vehicle, vessel, or aircraft I purchase out of state on or after October 2, 2004, enters California during the first 12 months of ownership, and is used in interstate or foreign commerce, can my purchase and use of the vehicle, vessel, or aircraft qualify for an exclusion from use tax?

When a California resident purchases a vehicle, vessel, or aircraft outside of California on or after October 2, 2004, and the vehicle, vessel, or aircraft enters the state during the first 12 months of ownership, we will presume the purchase was for use in California and subject to tax. However, use tax generally will not apply if

• The vehicle, vessel, or aircraft is first functionally used outside California, and
• One-half or more of the miles traveled by the vehicle, or the nautical miles traveled by the vessel, or flight time traveled by the aircraft during the six-month period immediately following entry into California are commercial miles or flight time traveled in interstate or foreign commerce.

The term "commercial" applies to business uses and excludes personal use. (Regulation 1620(b)(5)(C).)

Use tax generally will not apply to a vehicle, vessel, or aircraft that is both first functionally used outside the state of California and is continuously used in interstate or foreign commerce within and without California, and not exclusively in California. (Regulation 1620(b)(2)(B)1.)

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12. If I am a California resident and I purchase an aircraft for use in or for lease as a common carrier, can my purchase and use qualify for exemption from tax if the aircraft is purchased out of state on or after October 2, 2004, and enters California during the first 12 months of ownership?

If the requirements for the common carriage exemption are met, the aircraft's purchase and use are generally exempt from tax even if the aircraft was purchased outside this state by a California resident on or after October 2, 2004, and was brought into this state within the first 12 months of ownership. The requirements for the common carriage exemption are explained in our response to Frequently Asked Question 2.m.

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13. If I am a California resident and I purchase a vessel for use in commercial deep sea fishing, can my purchase and use qualify for exemption from tax if the vessel is purchased out of state on or after October 2, 2004, and enters California during the first 12 months of ownership?

If the requirements for the commercial deep sea fishing exemption are met, the vessel's purchase and use are generally exempt from tax even if the vessel was purchased outside this state by a California resident on or after October 2, 2004, and was brought into this state within the first 12 months of ownership. These requirements are generally explained in Publication 40, Tax Tips for the Watercraft Industry, and in our response to Frequently Asked Question 1.a.

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3. Did the taxability of the use of vehicles, vessels, and aircraft purchased out of state change after July 1, 2007?

No. The 12-month provision in the statute was due to expire at 11:59 p.m. on June 30, 2006. The passage of Assembly Bill 1809 (Chapter 49, Stats 2006) extends the previous sunset date in section 6248 from June 30, 2006 to June 30, 2007.

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4. How do I apply for a BOE-111, Certificate of Use Tax Clearance?

   As agents for the Board, the Department of Motor Vehicles (DMV) and the Department of Housing and Community Development (HCD) are required to collect use tax upon registration by new owners of vehicles, undocumented vessels, and mobilehomes. In order for these agencies to complete registration without collection of use tax, they require a clearance certificate issued by the Board.

   To apply for the clearance certificate, an application form BOE-106, Vehicle/Vessel Use Tax Clearance Request must be completed. The application must include all the identifying information, the reason for exemption, and must be signed by the purchaser. Copies of any documentation verifying the exempt nature of the transaction should be included, as well as a copy of the current title. Family transfers require documentation showing the relationship between buyer and seller. Trust transfers require copies of the trust title page, signature page, and property description pages, etc.

   You may mail, fax, or personally submit the application to your local district office or the Consumer Use Tax Section located in Sacramento. (Some district offices are not equipped to provide this service. Please call in advance to confirm service is available.) If your clearance request is approved, you will receive a BOE-111, Certificate of Use Tax Clearance. Upon presentation of the BOE-111 at DMV or HCD, you will be allowed to complete registration without payment of use tax. However, this will not relieve you of your use tax liability if use tax is later determined to be due.

   Additional information for requesting a use tax clearance can be found in Publication 52, Vehicles & Vessels: How to Request a Use Tax Clearance for DMV Registration.

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