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California Taxes Due on Registration

nigelspeedy

Well Known Member
Hello All,

Good news is that I am about to send in all the documents to begin the registration process for my nearly complete RV-8. I am a resident of California and being new to the USA I am interested to find out how much I am going to be required to pay in taxes.

Will I be required to pay sales tax on the whole planes value upon registration, or just parts that were purchased out of state. Or am I just in for the property tax? Do I need to provide receipts for every purchase that went into the plane?

Who determines the value of the finished aircraft and how?

Is there any value in preempting the tax man with a sacrificial offering or should I just sit back and wait for the inevitable.

If anyone has gone through this precess recently or has some good websites or documents to reference that would be much appreciated.

Regards

Nigel
 
Well, to set the tone: California is more money grubbing and desperate for tax dollars spend then just about any State out there.

Document every dollar spent, do NOT let them decide your value unless you want to pay a huge tax bill. Hopefully you can show the value and the tax you may have paid for some or all of your parts.

Here's a story that explains why you need to get ahead of it in this state.

I didn't build (yet) but the State sent me a second bill a couple of months after I paid my "use taxes" on the purchase of my RV-6. They decided that I got too good of a deal and taxed me on a value that was about 60% higher than what I paid. Yes 60% more!

The State tax minions had sent a package of paperwork to the original owner/builder in Alabama, which he of course tossed. Since they got no response from him confirming the bill of sale value they chose to assign a NEW value to the airplane and bill me for the difference. I was never contacted until I received a bill stating that all previous attempts to contact me had gone unanswered and that they would be sending it to collection in 15 days or somesuch. When questioned on this by phone they flailed around about my previous address, from 13 years ago... I think it's simply a tactic they use to box you in. I had to generate a new bill of sale, an affidavit, the seller had to sign these documents and provide a copy of his drivers license.

I haven't heard anything since these hoops were jumped last fall, but it wouldn't surprise me if it's not over.

Good luck
Doug
 
Welcome to California.
1. CA sales/use tax. Strictly speaking you should have paid this every year that you bought something. (There is a section in the state income tax form devoted to this.) This only applies to items on which you did not already pay sales tax, e.g., bought from out of state.
2. Property tax is assessed at about 1% of value on January 1, although you won't get the bill until late July. The state will send you an inquiry when you apply for an N number (registration). When I got the notice I replied that I did not yet own an airplane since I did not have an airworthiness certificate yet. They seemed to buy that. The assessor will guess at the value of your airplane. You have the right to appeal that.

The property tax guys and sales tax guys are two separate divisions. The property tax inquiry asked if I had paid use tax. I replied that I had, and told them the tax years in which I had paid them on my CA 540 tax form. I heard nothing more from them, was never asked for receipts.

My suggestions:
Send in a revised CA income tax form for 2013, paying the use tax on the big ticket items from Vans. OR, get the use tax forms directly from the Franchise tax bureau and send it in that way.
If it looks like your airworthiness inspection will come in December, think about postponing it until January. This will save you one year of property tax ($1000 for a $100,000 plane). If your A/W is this fall, your first property tax bill will be due in August 2015.
 
I paid the state the use tax on each kit as I went. I registered the aircraft in January 2014 and got a tax bill in April (just days before my airworthiness certificate was issued). I sent them back the form and copies of all of my use tax payments and receipts for the 4 kits from Van's and indicated that I owed nothing. I haven't heard anything since, so hopefully they are OK with what I already paid to cover the kits. The remaining big ticket items like engine, avionics were all purchased in CA, so sales tax was taken out already. I haven't seen the county come looking for property tax yet, but expect that any time now that I'm flying.
 
Do I understand that you are new to CA? If you bought parts while a legal resident of some place other than CA then you do not owe use tax on those parts. Just stuff bought since you moved to CA.
 
Bruce,

Since you registered/ got A/W after Jan 1 2014 you will not get a property tax bill until July 2015 (assuming you own the airplane next January first).
 
The smart money will be to not register your aircraft as an RV but rather something along the lines of "NS Special." It confounds the government types, particularly the property tax people who, at least in my end of the State, determine value by checking ads on Barnstormers looking for the same make and year without any regard to avionics variations and assess you at an average of three "asking prices." My 6A is assessed some 45-50% more than others with which I am familiar which were not registered as RV's but given some generic name. My hat is off to them for understanding government inner workings better than I.
 
I got my airworthiness cert in January. Still waiting for the property tax hammer to fall. As for use tax, the Board of Equalization (equal for whom, exactly?) sent me a letter to the effect of "you registered a plane, cough up the bill of sale and pay the tax on the amount."

Since my bill of sale reads $1 + OVC (other valuable consideration, it's not the public's business what I paid for my stuff), I sent them a letter and copies of the bill of sale and copies of my receipts from the kit purchases. The letter itemized the kit part prices, and specifically pointed out that shipping charges don't apply, and that the aircraft was built in CA from said kit and wasn't actually an aircraft until the airworthiness certificate was awarded.

I also included the relevant paragraphs in the FARs regarding homebuilding and links to Van's Aircraft. I think that part was more like sprinkling magic dust on a voodoo doll, but I thought it might be helpful to give them a little background.

I also sent them a cheque --I think this may have been the important part-- for the amount of the tax on the kit parts, that I probably should have been paying as I went, from 2005 to 2007.

A couple of weeks later, they sent back a document acknowledging my payment with a "remaining amount owed" statement totaling $0.00.

I have no particular expertise in the area of tax, law, tax law, lawyers, or tax lawyers, this is just an account of my own fumbling around and betting heavily on excesses in bureaucratic workload at the state level.
 
I got my airworthiness cert in January. Still waiting for the property tax hammer to fall. As for use tax, the Board of Equalization (equal for whom, exactly?) sent me a letter to the effect of "you registered a plane, cough up the bill of sale and pay the tax on the amount."

Since my bill of sale reads $1 + OVC (other valuable consideration, it's not the public's business what I paid for my stuff), I sent them a letter and copies of the bill of sale and copies of my receipts from the kit purchases. The letter itemized the kit part prices, and specifically pointed out that shipping charges don't apply, and that the aircraft was built in CA from said kit and wasn't actually an aircraft until the airworthiness certificate was awarded.

I also included the relevant paragraphs in the FARs regarding homebuilding and links to Van's Aircraft. I think that part was more like sprinkling magic dust on a voodoo doll, but I thought it might be helpful to give them a little background.

I also sent them a cheque --I think this may have been the important part-- for the amount of the tax on the kit parts, that I probably should have been paying as I went, from 2005 to 2007.

A couple of weeks later, they sent back a document acknowledging my payment with a "remaining amount owed" statement totaling $0.00.

I have no particular expertise in the area of tax, law, tax law, lawyers, or tax lawyers, this is just an account of my own fumbling around and betting heavily on excesses in bureaucratic workload at the state level.

Unless you have told the county where your plane is parked in, you probably won't recieve a property tax bill. Most airports will require an "N" number
of the aircraft you have in a city or county hangar. This is one way the county finds out. My advise is to email the county.
Usually around January, a questionaire is mailed by the county. The tax bill is mailed in late July, usually due by the end of August.
Where your plane is on January 1 is the important date. If you didn't have a airworthy cert until after 1/1
you are probably good until the following year.
 
The smart money will be to not register your aircraft as an RV but rather something along the lines of "NS Special." It confounds the government types, particularly the property tax people who, at least in my end of the State, determine value by checking ads on Barnstormers looking for the same make and year without any regard to avionics variations and assess you at an average of three "asking prices." .

In such a case register the airplane naming it a Quicksilver or Challenger so they can find plenty of "examples" on Barnstormers :p
 
It seems like naming the plane something different could bring problems if you try to sell it. I'd be leery if the registration doesn't at least mention the actual model. Maybe call it so,etching like Challenger RV, Challenger RV8 or NS RV Special?
 
I'm expecting LA county to send me a bill in January, since I'm now at a tie down at SMO. I wasn't aware that you could email them directly, I thought they just picked the info up from wherever the aircraft is kept, starting with airport records of tenants.


Unless you have told the county where your plane is parked in, you probably won't recieve a property tax bill. Most airports will require an "N" number
of the aircraft you have in a city or county hangar. This is one way the county finds out. My advise is to email the county.
Usually around January, a questionaire is mailed by the county. The tax bill is mailed in late July, usually due by the end of August.
Where your plane is on January 1 is the important date. If you didn't have a airworthy cert until after 1/1
you are probably good until the following year.
 
Premium

Taxes in California are prohibitive .. It's the sunshine premium! For those on the coast the fog is free!
 
My experience is Florida and may not be completely relevant.
I called the state sales tax department just before completion. Spoke with a gentleman that sounded like he knew what he was doing. I fessed up and told him some of my purchases were out of state without having taxes paid. Very nice and sent me a form. I was able to assemble all my relevant receipts to come up with a cost to build. The number I came up with was much better than what I assume he would have used. They took my number and sent me a bill later. Not much fun but I assume it to be better than waiting for the hammer to drop. In Florida we do not pay Property tax on vehicles. :D
 
It seems like naming the plane something different could bring problems if you try to sell it. I'd be leery if the registration doesn't at least mention the actual model. Maybe call it so,etching like Challenger RV, Challenger RV8 or NS RV Special?

Understand, but I think you would find, as others have, that there really is no reason to be concerned over the make and model we as builders choose to put on property tax and registration forms. Since we personally are the manufacturer's, we are allowed to give our constructed planes any model number we wish...I may go with "Model A" for the next one. Most pilots will know what it is. Here in California, there are lines on the property tax form to identify the manufacturer (we builders, not Van's) and the model number, as well a separate lines for engine type, avionics & other equipment, to include make, model, year of purchase for each piece and price paid. There is plenty for the parasites to tax...Why give them ammunition to inflate the tax bill when their source for value is asking prices on Barnstormers?
 
California taxes

Every year I get a letter from the County wanting to know the new status of my RV-7 build. I can only guess they know I am building because I have a reserved N number (that was a mistake.)

My Cherokee (now sold) was also taxed every year. They embed a "sales tax" into the property tax that represents the sales tax owed IF you had sold it (even though you have not.) When you do sell the buyer also pays sales tax. If you sell after Jan 1, you owe property tax for the whole year. I sold my Cherokee on Jan 15th, as I was the FAA registered owner after Jan 1 I owed property tax for the whole year!

Wait it gets better. I rent a hangar from the city. The county bills me for the property tax for the land the hangar sits on (also owned by the city.) I am told I should not feel too bad as the guys in the marina (city owned) pay taxes on the land (under water) below their boats.

My wife has five more years to retire. Guess what our plans are!
 
Every year I get a letter from the County wanting to know the new status of my RV-7 build. I can only guess they know I am building because I have a reserved N number (that was a mistake.)

My Cherokee (now sold) was also taxed every year. They embed a "sales tax" into the property tax that represents the sales tax owed IF you had sold it (even though you have not.) When you do sell the buyer also pays sales tax. If you sell after Jan 1, you owe property tax for the whole year. I sold my Cherokee on Jan 15th, as I was the FAA registered owner after Jan 1 I owed property tax for the whole year!

Wait it gets better. I rent a hangar from the city. The county bills me for the property tax for the land the hangar sits on (also owned by the city.) I am told I should not feel too bad as the guys in the marina (city owned) pay taxes on the land (under water) below their boats.

My wife has five more years to retire. Guess what our plans are!

Another way your county knows you are building is because the local airport managers either told them, or took pictures of your hangar contents during routine "rent or lease compliance" inspections and then sent the pictures or information over to the assessor's office. What is it we always say, 'never volunteer information to someone who can/will tax you.'
 
Best advise so far!
What is it we always say, 'never volunteer information to someone who can/will tax you.'

To the OP, I would not seek tax advice in an open internet forum.

An option you may consider is an exemption for " historical aircraft and one of a kind aircraft." This exempts you from the annual property tax providing that you have displayed your aircraft 12 times in a public event for the year of the exemption. A little bit of a hassle but worth it in my opinion.

Clearly your aircraft is one of a kind unless you have built more than 5 exactly the same. Bureaucrats in various counties seem to arbitrarily approve or deny
these exemptions but the wording for qualification is very clear. You may have to put up a little fight but to each his own.
Good luck!
 
Best advise so far!


To the OP, I would not seek tax advice in an open internet forum.

An option you may consider is an exemption for " historical aircraft and one of a kind aircraft." This exempts you from the annual property tax providing that you have displayed your aircraft 12 times in a public event for the year of the exemption. A little bit of a hassle but worth it in my opinion.

Clearly your aircraft is one of a kind unless you have built more than 5 exactly the same. Bureaucrats in various counties seem to arbitrarily approve or deny
these exemptions but the wording for qualification is very clear. You may have to put up a little fight but to each his own.
Good luck!

Tricky one. I know some CA residents that have tried.

Read the text here -

http://www.boe.ca.gov/proptaxes/exempt.htm#1
 
From Out-of-California

What's the process to bring your plane to California in a relocation? Is it like a car? Registration & sales tax? Enquiring minds want to know!
 
What's the process to bring your plane to California in a relocation? Is it like a car? Registration & sales tax? Enquiring minds want to know!

If you own an aircraft for more than 6 months, and then bring it into the state, you are exempt from the "use" tax (just another name for sales tax). If you have owned it less than six months, and bring it in, you get a "credit" for taxes paid to another state... otherwise... bam!

You will get a bill for property tax if your FAA registration shows an address in California.

Don
 
Comment Regarding "Use Tax"

It is outrageous that states such as CA and several others are attempting to collect euphemistically named "use taxes", which, given that the states have no intention of measuring and taxing actual usage of any item, are in fact no more than just disguised interstate sales taxes.

The problem is, Article 1, Section 8 of the U.S. Constitution grants to the Federal government the exclusive power to regulate (and hence tax) interstate commerce:

"The Congress shall have Power...
To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;"

The purpose of this article was to prevent protectionist interstate "tax wars", where states would apply punitive taxes to interstate commerce in favor of intra-state commerce.

You might send Article I to your state taxing agency and point out they have no authority to tax interstate commerce.

Here in OH, we also have a use tax. The enforcement idea is that at the end of the year taxpayers are supposed to report on their tax form the entire list of their out-of-state purchases for the year and pay "use tax" on them. I believe compliance with this provision is, appropriately, almost non-existent.

-Paragon
 
I bought my 8 in Michigan, (already flying), live in georgia, and am thinking of moving to California. Well I be sorry tax wise? All this tax stuff is definitely not my cup of tea. Any advice on what to do or expect would be appreciated.
 
CA has a personal property tax on houses, cars, boats, airplanes,...
Annual tax on homes, airplanes, and hangars is 1% of assessed value. If you lease a hangar from a municipality the tax will be passed on to you.

Consider taxes, but don't let it drive your life.
 
You might send Article I to your state taxing agency and point out they have no authority to tax interstate commerce.

-Paragon

I agree with this, but court cases have consistently upheld the state. You need a lawyer to explain the logic.
 
I bought my 8 in Michigan, (already flying), live in georgia, and am thinking of moving to California. Well I be sorry tax wise? All this tax stuff is definitely not my cup of tea. Any advice on what to do or expect would be appreciated.

If you have owned the aircraft for more than six months you are exempt from any sales or use tax.

If the aircraft remains registered with an address NOT in California, then I doubt you will ever see a property tax bill. Some airport authorities may report N numbers but I can't say how widespread that is. It probably depends on whether you rent a hangar and need to list the registration number.

As I recall, property tax runs about 1.15 percent of the assessed value, which can be negotiated a bit. I can imagine an RV-8 could be anywhere from 40K to 125K.

Don
 
Pp

=live in georgia, and am thinking of moving to California. Will I be sorry tax wise? .


No, but you may be sorry otherwise and you won't be sorry weather wise. :D

I'm pretty sure I'll be sorry tax wise next year when I get the initial use tax bill, which in San Diego County will be 8% of say, $75-$100k, or 5 to 8 thousand dollars. I deferred it this year because my aircraft was registered but not flying. CA tax code requires the plane has flown "once" to be taxed. Both registering with the FAA and/or hangaring a plane will trigger the Tax collector. And you are required to change your registration with the FAA within 30 days of moving.

Sort of like Like Bob Turner said, it is what it is, "don't let it ru(I)n your life.
 
I just had the "joy" of paying the 6% Use Tax in Maryland on my recent purchase of an RV-8 in Texas. The amusing part is that I received the demand to file a Use Tax return before I had the opportunity to ferry the aircraft back to Maryland. The change of registration hit the FAA's registry database on July 30th, and by August 18th, I had a letter from the Comptroller of Maryland. Very efficient.
 
If I could parley a Use tax question here:

Is there a time limit from purchase to collection? Or time, location and collection limits?

for example:
- If someone purchases and emp kit 12 years ago in another state (call it state "A"),
- then purchased a wing kit in state "A" 10 years ago,
- then moved to state "B" and bought a fuselage kit 3 years ago. paid use tax on the fuselage kit on tax returns for state "B",
- then moved to state "C" 1 year ago, and bought a finishing kit, and is planning on paying use tax on the finishing kit on the next tax return.

Will state "C" (for California) ask for use tax on the emp, wing, and fuse kits? The airplane as a whole? Or maybe just the emp and wing, as proof of paid use tax on the fuselage kit exits from state "B" (and soon will exist for the finishing kit?

What is considered "first use"? when the whole kit is assembled, registered and flown? or when I started working on that kit?
 
Ha ha. Such a simple ploy as out of state LLC won't stop CA!
Seriously, forget about the name 'use tax'. This is just a ploy to get around the constitional prohibtion of states taxing interstate commerce. It's a sales tax. If you buy something when you are a CA resident you are supposed to pay tax. If you bought it put of state then you change the name to use tax. It does not matter when or if you actually 'use' it. Use tax is due no later than April 15 of the year following purchase (you can pay it on the state income tax form). If you bought something when you were a legitimate resident of another state, you do not owe any use tax on it when you move here. (Can you imagine having to pay sales tax on every item you own when you move here?).

So send in the sales tax you owe on purchases you made while a CA resident. Send it in with your income tax return.

When you register the plane and get your AW certificate, CA will send you a property tax bill (in late July following the first Jan 1st after AW date). They will ask if you paid use tax. Just say yes, and refer them to your 2013 (or whenever) tax return.
 
Thanks Bob.

Property taxes I am expecting.
The use tax, I worry will be assigned a value for the entire aircraft, not just the parts I purchased in CA.
I can prove taxes paid in Virginia, but anything from 12 years ago....maybe not.

(I know the "difference" between use and sales tax... and I don't like it either)


Ha ha. Such a simple ploy as out of state LLC won't stop CA!
Seriously, forget about the name 'use tax'. This is just a ploy to get around the constitional prohibtion of states taxing interstate commerce. It's a sales tax. If you buy something when you are a CA resident you are supposed to pay tax. If you bought it put of state then you change the name to use tax. It does not matter when or if you actually 'use' it. Use tax is due no later than April 15 of the year following purchase (you can pay it on the state income tax form). If you bought something when you were a legitimate resident of another state, you do not owe any use tax on it when you move here. (Can you imagine having to pay sales tax on every item you own when you move here?).

So send in the sales tax you owe on purchases you made while a CA resident. Send it in with your income tax return.

When you register the plane and get your AW certificate, CA will send you a property tax bill (in late July following the first Jan 1st after AW date). They will ask if you paid use tax. Just say yes, and refer them to your 2013 (or whenever) tax return.
 
You are "safe" if you were not a California resident at the time of purchase. Doesn't matter if you paid VA, or anyone else, sales tax. IF they ask (and in my experience they won't) just say you owned these things for many years before you moved here. The tax is on purchases, not finished products.

(I should mention that there are some complicated rules to keep people from "moving" to Reno for a month, buying a car, then "moving" back.)

Since you know about property tax, I'll just mention again the assessment date is Jan 1. If it looks like your AW inspection might be Dec 20, you can save one year's worth of taxes by postponing that inspection until Jan 2.
 
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