Tax attorney advice: Misunderstanding Will Double Your Tax (I)

by Thomas Alston

If you have been overwhelmed by articles, advertising and friendly advice about the various schemes to legally avoid California Sales and Use Tax, let me set you straight about how to protect yourself. Aero Marine Tax Professionals (http://www.aeromarinetaxpros.com) handles this type of situation routinely.

First, you must know that your purchase of an aircraft or vessel is not exempt from tax until the California State Board of Equalization (Board) sends you a letter which affirms in writing your transaction is exempt. This may seem a little simplistic, but every month I encounter another taxpayer (the Board's term for you) who has never filed a tax return, yet firmly believes he/she does not owe tax.

In this case NO NEWS IS BAD NEWS.

The key to this warning is the fact that the burden of proof in supporting a claim for an exemption rests squarely on your shoulders. The Board does not have to prove anything. The taxpayer has to support the claim for an exemption and must file a tax return. Just because you know that your property was used in an exempt manner does not mean that it is exempt. You must have in your possession a document from the Board which affirms they agree you have supported your claim.

In California, when you purchase an aircraft or vessel from someone other than a retailer who collects sales tax from you at the time of the transaction, it is the legal obligation of the purchaser (you) to timely file (self report) a tax return. In general the return is due within twelve months from the date of the transaction.

If you received an inquiry letter from the Board, the due date is located in the top right hand section of the cover letter. The due date on the letter becomes the date the return must be filed and many times is less than twelve months from the date of the transaction.

If you took possession outside the state using an offshore delivery for a vessel, or an out-of-state delivery for an aircraft, it is your legal obligation to timely file a tax return. If you believe your aircraft is exempt because it has been used in a manner that you were told made it non-taxable, your purchase is NOT EXEMPT FROM TAX until you have filed a tax return and received written notification from the Board that you have supported a claim for exemption.

About the AuthorThomas A. Alston is the president of Aero & Marine Tax Professionals (http://www.aeromarinetaxpros.com). He has successfully filed hundreds of tax returns with the California State Board of Equalization. Mr. Alston is California's premier specialist in legitimate tax avoidance on aircraft, vessels and vehicles, having published many articles on sales and use tax.

to be continued