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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
A B C D E F G H I J L M N O P R S T U V W X
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570.0000 Use of Property in State and Use Tax Generally
Annotation 570.0505
(b) Use in State, Purchased for—Intent of Purchaser
570.0505 First Functional Use. For purposes of Regulation 1620, "functional use" is defined as "use for the purposes for which the property was designed." This definition distinguishes between property designed for personal use and property designed for commercial use. Vehicles, vessels and aircraft are not necessarily functionally used simply because they are driven or piloted. Thus, for example, while automobiles (including vans designed for families) are designed for personal use and are first functionally used when initially driven on a public street, "big rig" trucks, buses, commercial vans, limousines and hearses are first functionally used when they carry cargo or passengers, or when driven pursuant to dispatch orders for the same. A similar distinction exists between vessels designed for personal use and vessels, like a sightseeing boat, that are designed for commercial use. Likewise, aircraft designed for personal use (e.g., small prop airplanes that seat six or fewer) can be distinguished from aircraft designed for commercial use (e.g., jet aircraft).
Regardless of size, any vehicle, vessel or aircraft specifically modified or outfitted for commercial use is not designed for personal use. However, where a purchaser establishes that a vehicle, vessel or aircraft ordinarily considered to be designed for commercial use was, in fact, purchased for personal use, such property will be considered first functionally used when first driven or piloted. By establishing that the property was purchased for personal use, the purchaser is necessarily contending that it was not purchased for the primary purpose of business use in interstate or foreign commerce and the provisions for exclusion from use tax based on commercial miles traveled by a vehicle, commercial nautical miles traveled by a vessel and commercial flight time traveled by an aircraft in interstate or foreign commerce as set forth under Regulation 1620, subdivision (b)(4)(B), are not applicable. 5/31/02.