Articles by Thomas Alston on ArticleSnatch.com

AeroMarineTaxPros.com: Misapplying Board Annotations Will Result In A Tax Liability

Fri, 18 Jul 2008 00:00:00 -0500

A recent case demonstrated how taxpayers can be at a disadvantage when it comes to understanding how to legally avoid sales/use tax. The taxpayer purchased his aircraft outside the State of California and intended to support a claim for exemption based on commercial use in his own business. Since the aircraft was registered to taxpayers California address, the Department asked him to submit records to determine if the aircraft was purchased for use in California. California Code of Regulations, title 18, section (Regulation) 1620, subdivision (b)(4), provides that where an aircraft is purchased from a retailer outside California, first functionally used outside California, and brought into California within 90 days after its purchase, it will be presumed that the aircraft was purchased for use here, unless during the six-month period immediately following California entry, the aircraft is used or stored outside California one-half or more of the time, or one- half or more of the flight time traveled by the aircraft is commercial flight time traveled in interstate commerce. It defines the term commercial as applying to business use and excluding personal use.** End Summary**

About the Author:
Thomas 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.

AeroMarineTaxPros.com: Transfer of Tangible Personal Property - Regulation 1595, Part 2

Wed, 14 May 2008 00:00:00 -0500

By transferring ownership of an aircraft from one entity or individual to another, a sales/use tax liability can be created. There are different types of transfers of ownership. In our previous article, we covered transfer or ownership into and out of a corporation, LLC and partnership. This article will cover: 1. Revocable Trusts 2. Involuntary transfers 3. Statutory mergers 4. Family transfers 5. Received as a gift 1. TRANSFER INTO REVOCABLE TRUST 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 1.the seller has unrestricted power to revoke the trust; 2.the transfer does not result in any change in the beneficial ownership of the property; 3.upon revocation of the trust the property reverts back to the beneficial seller. 2. INVOLUNTARY TRANSFERS Use tax normally does not apply if title to the property changes due to circumstances beyond the recipient's control.** End Summary**

AeroMarineTaxPros.com: Transfer of Tangible Personal Property - Regulation 1595, Part 1

Tue, 22 Apr 2008 00:00:00 -0500

When contemplating the purchase of an aircraft, a potential owner must consider the ownership structure that will best suit their needs. Often times, only after the aircraft is purchased, the owner realizes they do not own the aircraft in the entity that is most beneficial for tax purposes or that limits their liability in the event of an accident. By transferring ownership of an aircraft from one entity to another, an owner can create additional sales/use tax liability. The question then arises, if I transfer my aircraft or vessel into a newly formed LLC, corporation or partnership, can I legally avoid the additional tax liability? The simple answer is, it depends. Ask yourself the following questions: 1. Will the new entity (whether it is a Corporation, LLC or Partnership) be more than 80% owned by the same person(s) from whom the tangible personal property is being transferred from? If you answered, yes, then it can be a nontaxable transaction. 2. Will the transfer be more than 80% of the assets into the new entity? If you answered, yes, then it can be a nontaxable transaction. 3. Is there debt on the aircraft?** End Summary**

AeromarineTaxPros.com: Get it in Writing, or Pay the Price

Sat, 27 Oct 2007 00:00:00 -0500

There is an organizational axiom which exists that states If it is not in writing it isnt true. If an organization wants to hold another person liable for the expert advice they offer, the company receiving the advice would receive their instructions in writing. Only a naive person would attempt to win in court by using hearsay evidence. The rules of evidence require hard proof a communication took place. Basically the rules reaffirm the axiom when they require physical proof of an important communication. Yet every day otherwise very savvy business owners will rely on verbal advice when it comes to receiving information from a government employee. Million dollar corporations regularly make important accounting decisions based on verbal instructions received over the telephone from the California State Board of Equalization (Board). In their quest to do the right thing, companies often call the local branch of the California agency which is responsible for administering the sales and use tax laws and act on verbal data they receive. When these same companies receive additional tax assessments for following the advice given to them by the Board they inevitably use those instructions by a Board employee as their defense.** End Summary**

AeroMarineTaxPros.com: Off-Shore Delivery of a Yacht and 90 Days in Mexico Guarantees Nothing

Tue, 25 Sep 2007 00:00:00 -0500

In a recent ruling by an attorney for the California Board of Equalization, a taxpayerâs purchase of a vessel was held to be taxable. This was done in spite of support that an off-shore delivery occurred and the vessel remained in Mexico and outside California for more than 90 days (see note 1 below). Aero & Marine Tax Professionals ( http://www.aeromarinetaxpros.com ) consults purchasers of vessels and aircraft on how to avoid sales tax on their purchases. For those of you in the yacht brokerage business, as well as those thinking about purchasing a yacht, this case described above can have a profound impact on your transactions. In Southern California the myth has been running rampant for years that as long as the purchaser took delivery "off-shore," and then sailed to Mexico for a continuous period of at least 90 days, the transaction would be exempt of sales tax upon return to California. Many yacht club members have said this information was provided to them by a staff member of the Board of Equalization. Often yacht brokers who have been in the business for decades have argued the same point with me.** End Summary**

AeromarineTaxPros.com: Misunderstanding Will Double Your Tax

Fri, 31 Aug 2007 00:00:00 -0500

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.** End Summary**

AeromarineTaxPros.com: Hook Up With The Tax Pros At The Beginning

Sun, 17 Jun 2007 00:00:00 -0500

When Michael Thibodeau contacted the California Board of Equalization (BOE) in search of advice, he thought he was taking a prudent action, one that would ascertain whether he could bring a recently acquired aircraft into the Golden State before the 90-day waiting period was up--and still qualify for a use tax exemption. Thibodeau never dreamt that the advice he got would lead to a ruinous tax bill. "Michael was a typical victim of a relationship that is often very adversarial," explains Tom Alston, President of Aero & Marine Tax Professionals, a Sacramento, CA-based consultancy that specializes in advising purchasers of aircraft and marine vessels on state sales and use tax exemptions. "People like Michael, and even attorneys, CPAs and financial planners, often learn hard lessons when it comes to defending themselves against the perspectives and findings of the BOE--even though they are seeking legitimate exemptions that are designed as incentives to promote California business." Thibodeau, a 30-year veteran pilot-for-hire and aviation management consultant, handled the acquisition of a 1981 Citation CE-550 for three California-based corporations in March of 2000. Possession of the aircraft took place in Reno, NV.** End Summary**

AeromarineTaxPros.com: Out-of-State Affidavit Doesn't Exempt You From Filing a Tax Return For Aircraft Purchase

Sun, 27 May 2007 00:00:00 -0500

Many people sign affidavits when they purchase aircraft from a California retailer which allows them to make a purchase in a sales tax exempt manner. If you fit into this category, you probably have not been warned that subsequent to an audit of the retailerâs records the Board of Equalization (Board) will audit your purchase directly with you. The normal process used by the Board is to conduct audits of all aircraft retailers every three years. This means that even though the Board is aware you purchased the aircraft they may wait for several years to contact you. If you are feeling comfortable because the Board has not contacted you for the last several years, here is the danger in your current strategy. The purchaser (you) has an obligation to file a tax return with the Boardâs Consumer Use Tax Section (CUTS) within one year of the purchase date (unless the Board contacts you in writing and establishes an earlier date). If you have been waiting for the Board to send you a bill, you were mislead about the process. The purchaser has an obligation to file the return regardless of whether or not the Board contacts them.** End Summary**

AeromarineTaxPros.com: Brokers May Be Held Liable For Sales Tax

Mon, 14 May 2007 00:00:00 -0500

During a recent discussion with a business owner, he told me he was not required to have a sellerâs permit because he was a broker and not a dealer. He said he called the California State Board of Equalization (Board) and they advised him he didnât need a permit. I researched laws and regulations and discovered that a definition for retailer is clear. The definition for broker is not. I called the information number at the Board and asked for an answer. The reply was, "Itâs simple, itâs a matter of title. Itâs just like a real estate agent. If the dealer actually owns the inventory, heâs a retailer. However, if he merely puts together two people and takes a commission, heâs a broker and is not responsible for collecting the tax." I referred the auditor who answered my question to several previous Board opinions that conflicted with what he said and he admitted the answer was not clear. I found cases where it primarily mattered whether the broker-dealer had control over the sale. California Sales & Use Tax Annotation 185.** End Summary**

AeromarineTaxPros.com: Legally Avoiding Sales and Use Tax on Aircraft Purchases -- A Challenge Best Left to Professionals

Wed, 02 May 2007 00:00:00 -0500

Anyone who buys or flies an aircraft in California is subject to taxation, but specialists can help purchasers save thousands of dollars. Imagine getting slapped with a $100,000 past-due tax bill from the State of California several years after you purchased an aircraft, and you don't even live in that state. Think it can't happen? Better think again, as this type of scenario plays out with increasing frequency as the State of California grapples with perennial budget shortages. As a money professional, your clients look to you for protection from such catastrophic events. At first glance, seeking an exemption seems simple enough. For several reasons, though, ensuring that your client is completely absolved of any sales or use tax involves several complicated steps, tremendous documentation, and often several trips to the state capital in Sacramento. One mis-step can completely undermine your efforts, leaving your client with a stiff tax levy. Given the expensive consequences of failure many attorneys, CPAs, and other business professionals are now turning to specialists that focus solely on defending aircraft purchasers against the California State Board of Equalization (BOE).** End Summary**

AeromarineTaxPros.com: Is There a Legal Way To Avoid Sales Tax?

Sun, 15 Apr 2007 00:00:00 -0500

Every person who has contemplated an aircraft purchase in the last few years has asked the question, "Is there a legal way to avoid sales tax?" Most of these people ponder this question with the same seriousness as "Will I win the Lotto tonight?" Many people have heard the horror story of a friend who tried one of those schemes and would wind up with penalties and interest that doubled or tripled the tax. A few have been embarrassed when their attorneys and CPAs laughed at them for asking the question. People who purchase aircraft fall into one of the following categories. 1. Those who hope they can avoid sales tax on their upcoming purchase. 2. Those who pay the sales tax. 3. Those who tried and failed to avoid sales tax on their last purchase. 4. Those who successfully avoided sales tax on their last purchase. 5. Those who tried to avoid sales tax on their last purchase by eluding the tax agency and are functioning under the illusion theyâll never get caught. 6. Those who have so much money theyâd rather pay the tax than think about dealing with a tax collector. 7.** End Summary**

AeromarineTaxPros.com: Where Should I Take Possession Of My Aircraft?

Wed, 04 Apr 2007 00:00:00 -0500

Definition of physical possession: This is where a party representing the seller (or the seller himself) and a person representing the buyer (or the buyer himself) transfer physical possession and control of the aircraft from the seller to the buyer.An example of transferring physical possession would be when a car dealer hands the buyer the keys to his new car.This question of âWhere should I take possession of my aircraft?â comes up every day. The answer is always, âIT DEPENDS.âIn most cases, it depends on who the seller is and in what state you are planning to take physical possession of your aircraft. But our caution is that you should never take possession inside California.This is not a case of my being coy with a potential client - it is the truth. There are many variables that add up to determine the correct answer.** End Summary**

AeroMarineTaxPros.com: The Dealer License Myth

Fri, 23 Mar 2007 00:00:00 -0500

Many times taxpayers call me when they receive a notice from the Board of Equalization (BOE); often they feel that they have been unfairly singled out. Many times they open the conversation with, âI have a dealerâs license. I donât have to pay tax.â Unfortunately, I have to be the one to break the bad news. They have fallen prey to one of the most insidious lies that resides in the aircraft industry. Worse, this lie permeates into many California businesses that donât own aircraft. IT IS NOT TRUE THAT A CALIFORNIA SELLERâS PERMIT OR AN FAA DEALERâS LICENSE ALLOWS YOU TO MAKE PURCHASES WITHOUT BECOMING LIABLE FOR THE TAX. If you or anyone you know is operating based on this belief, have them call our office today. This is one of the areas that always rank high on the BOEâs list of âmost common mistakes.â If a taxpayer purchases an aircraft for resale, he is not allowed to make any use of the aircraft unless he can support through documentation the use was for demonstration and display.** End Summary**

AeromarineTaxPros.com: Advice About Taxes on Vessels Can Save Thousands of Dollars

Sat, 03 Mar 2007 00:00:00 -0600

"All you have to do is register the vessel outside of California and no tax is due." One dealer told me. "If you register it anywhere outside of California the tax is avoided. Thatâs the long and the short of it." Another said. One advised me to, "Dock the vessel in Ensenada for 90 days (note 1) and the tax is avoided completely." Another added. "All you need is a resale number to not be charged tax." Itâs not a question of whether these people are lying or just trying to be a salesperson. They believe what they are saying and in the absence of an audit their advice will never be discovered to be wrong. It is a question of whether a strategy to legally avoid or diminish taxes really exists. This means a strategy that will survive an audit. Partial truths like the preceding comments have sent many taxpayers screaming. Every lawyer doesnât know every law. Every accountant canât possibly know every regulation of every jurisdiction. What happens generally is that one taxpayer tries a strategy and it seems to work, he tells his friends and the rumor acquires the facade of fact.** End Summary**

Aeromarinetaxpros.com: Contrary to What Is Being Said, There Is No Part 135 Sales Tax Exemption for Aircraft

Sat, 10 Feb 2007 00:00:00 -0600

During the everyday conversations of aircraft dealers, brokers and prospective buyers the belief is being enforced that a Part 135 exemption exists in California. This belief is dangerous and misleading. The applicable sections of the California Sales and Use Tax Laws and Regulations are 6366 and 6366.1. They do not mention Part 135. They state in pertinent part: Aero & Marine Tax Professionals ( http://www.aeromarinetaxpros.com ) are experts in helping people avoid paying sales tax on their aircraft purchases. "6366. Aircraft sold to common carriers, foreign governments and nonresidents. (a) There are exempted from the taxes imposed by this part the gross receipts from the sale in this state of, and the storage, use or other consumption in this state of, the following: (1) Aircraft sold to any person under authority of the laws of this state, of the United States or of any foreign government, or sold to any foreign government for use by that government out of this state, or sold to any person who is not a resident of this state and who will not use that aircraft in this state otherwise than in the removal of the aircraft from this state..." "6366.** End Summary**

You Need to Know the Difference Between Sales and Use Tax or You'll Pay for Your Ignorance

Fri, 05 Jan 2007 00:00:00 -0600

This article contains information that is designed to help a prospective aircraft or vessel buyer to understand the maze known as California Sales and Use Tax Laws and Regulations. This first section will contain some definitions. It is intended to clear up questions, such as, "Who owes the tax?" and "What is use tax?" The summary will explain why these definitions are important to you and give examples why. It is felt that with the basic understanding of these terms you can determine prior to the transaction who will ultimately be responsible for the tax. The information contained herein will apply whether you are buying a $20,000.00 ski boat or a $2,000,000.00 aircraft. These are issues that we deal with and advise people on all the time, at Aero & Marine Tax Professionals ( http://www.aeromarinetaxpros.com ). Definitions Sale: Any transfer of title or possession, exchange, or barter, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a consideration.** End Summary**