An assessment of personal property tax on the full value of the jets owned by an air taxi service was upheld by a California Appellate Court. The fact that the company’s jets touched down in other states did not mean that California could no longer tax the full value of the jets. Landing in other states, without more, does not give those states taxable situs over the jets under the traditional due process test.
The company, which provided on demand flights, was headquartered in California. It had no permanent hangar space in California. However, its jets received maintenance at manufacturer facilities in California and Arizona. As an example, one jet flew to 309 airports located in 42 different states and six different countries in one year. However, that jet spent over 60% of the year in California. That jet is representative of the jets in the company’s fleet. During that year, no other jurisdiction taxed the jets.
In addition, the company did not show that:
- the time the jet spent in other states was more than the sum of incidental touch downs; or
- the benefits and protection that a particular state conferred on those jets.
The jets were just passing through the states where they landed. And the company intended to drop off passengers and to fly elsewhere at the earliest opportunity. Aircraft landing at airports do benefit from local services, such as police and fire protection. However, a jurisdiction’s provision of those services does not automatically confer situs.
Internal Consistency; Absurd Result
The California statute establishing situs once a single aircraft made a landing in the state did not apply in this case. However, the single landing situs rule applied only to fractionally owned aircraft. The company’s argument that the internal consistency doctrine required the rule be applied to all aircraft was misplaced; the internal consistency rule is used to determine whether a jurisdiction’s tax laws impermissibly discriminate against interstate commerce in violation of the dormant commerce clause. In contrast, situs is a function of due process. In addition, extending the rule would have the “absurd result” of giving 42 other states and six countries situs over the jets.
The company tried to introduce a recent Utah Tax Commission decision finding that Utah had acquired situs over the company’s fleet of jets in 2013. However, the California appellate court determined that the decision was entitled to no weight.
JetSuite, Inc. v. County of Los Angeles, Court of Appeal of California, Second District, No. B279273, October 10, 2017, ¶406-725