E l i z a b E t h G . h i l l • l E G i s l a t i v E a n a l y s t
LAO
65 YEARS OF SERVICE
Out-of-State Purchases:
California’s Taxation of
Vessels, Vehicles, and Aircraft
in 2004, California temporarily extended,
from 90 days to one year, the time that
recently purchased vessels, vehicles, and air-
craft must be kept out of California in order
to avoid the state’s use tax. this report looks
at the economic and fiscal impacts of the law
change. We find that (1) the law change has
resulted in a sharp reduction in out-of-state
usage exemptions and an increase in sales
and use tax revenues, and (2) the negative
economic impacts arising from the measure
do not appear to be particularly large. ■
april 2006
L e g i s L a t i v e a n a L y s t ’ s O f f i c e
a n L a O R e p O R t
Acknowledgments
This report was prepared by Brad Williams,
with contributions from Jon David Vasché
and Mark Ibele, and data analysis by Robert
Ingenito. The Legislative Analyst’s Office
(LAO) is a nonpartisan office which provides
fiscal and policy information and advice to
the Legislature.
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L e g i s L a t i v e a n a L y s t ’ s O f f i c e
a n L a O R e p O R t
InTrOduCTIOn
This report has been prepared in response
to Chapter 226, Statutes of 2004 (Senate Bill
1100, Committee on Budget and Fiscal Review).
Among other things, Chapter 226 temporarily
increases—from 90 days to one year—the period
that a vessel, vehicle, or aircraft purchased by a
California resident must be kept out of California
following an out-of-state purchase in order to be
exempted from the use tax. This extended one-
year period applies to purchases made between
October 1, 2004 and June 30, 2006, after which
the out-of-state period reverts back to 90 days.
The