New California Sales & Use Tax Rate in Effect as of January 1st

California’s statewide sales and use tax rate increased one quarter of one percent (0.25%) to 7.50 percent on January 1, 2013. California voters approved this rate increase by their adoption of Proposition 30 in the November 6, 2012 election. The sales tax increase gives potential aircraft buyers even more reason to plan their acquisitions carefully and consider how to qualify their purchases for exemption from sales and use tax.

Proposition 30 increases the California sales and use tax rate for four years, from January 1, 2013 through December 31, 2016. Although the new statewide rate is 7.50 percent, actual sales and use tax rates throughout the state range from 7.50 percent to 10.00 percent—the highest in the country. The rates vary widely because in some municipalities, voter-approved city, county and/or local district taxes are added to the state’s base rate.

According to the California State Board of Equalization, sales tax generally applies to retail sales of goods and merchandise unless specifically exempted, while use tax applies to the storage, use, or other consumption of goods in the state when the goods are purchased from retailers in transactions that are not subject to the sales tax.

The increased rate is not restricted to sales and use tax and that it will also affect annual property taxes assessed on aircraft. The county assessor’s office adds sales tax to the fair market value of an aircraft as of the lien date to determine the total assessed value shown on the property tax bill for each fiscal year. Those aircraft used primarily in charter operations will be able to reduce their property tax bill by this hypothetical sales tax if a timely appeal is filed and if a showing is made that more than fifty percent (50%) of the flight time for the aircraft during the preceding calendar year was in charter operations. Unfortunately, all owners of aircraft used in Part 91 operations only will have to pay an increased property tax bill due to the passing of Proposition 30.