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Loop Holes for Purchasers of Expensive Yachts
December 2004
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Is the well-known loophole for purchasers of expensive vehicles, motorhomes, yachts, and airplanes really over? The passage of SB 1100 which revises R&TC section 6248 from a 90-day rule to a 12-month rule would, at first glance, seem to accomplish this.
The misuse of the 90-day rule & the 180-day rule has finally resulted in a new law change effective 10-1-04. Every yacht broker, aircraft dealer, new car dealer, and motorhome dealer was aware of the 90-day rule and many were aware of the 6-month rule. These former rules allowed the buyer of these items (actually any item) to take an out of state delivery, use the item outside of CA and for 91 days and re-enter tax-free. If the buyer returned within 90 days the rule changed to the six month rule. This rule stated that if the item purchased was used out of state for more than one half the time during the next six months from when it entered CA it was exempt from tax. Use for this purpose included storage time whereas use for purposes of the 90-day rule did not.
The problem was these rules were blatantly promoted as a sales incentive by dealers and/or tax consultants. As such this became a well-known loophole on the State’s radar.
After several articles and advertisements in the Sacramento Bee and other publications, the Senate Budget and Fiscal Review Committee finally said enough is enough.
The rule now is a 12-month rule which basically says that the item purchased can’t be used in CA for one full year or there will be a rebuttable presumption that the item purchased was for use in CA and will be taxable.
Does this mean no other ways exist to legally avoid tax on these big-ticket items? Anybody who can think outside the box can come up with other ways to find an exemption. To preserve these other ways I choose not to make the same mistake as my peers. Sometimes tax avoidance creativity is better left discreet. Suffice it to say that the exemption is not over and if there is enough money at stake, creative tax planning will reign.
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Sales Tax Group Office Location:
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Carlsbad Office
5790 Fleet Street #120
Carlsbad, CA 92008
Phone (760) 931-9900
Fax (760) 931-9913
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