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  • Writer's pictureThomas A. Alston

The Principal Use Test and Your Residency.

A resident, in the eyes of California, is defined as: Any person who manifests intent to live or be located in this state on more than a temporary or transient basis.

 

Although you may not think you are a resident of California, there is a good chance that the State of California’s tax agencies might think differently. While residing in a state across the United States and paying income taxes within that state intuitively means that you aren’t a resident of California, California’s tax agencies define residents based on their DMV (Department of Motor Vehicles) code, not paying taxes, which often allows for broad definitions of residency.

 

What Constitutes as Residency in California?

a)      Address where you are registered to vote is in California

b)      Location of employment or place of business in California

c)      Payment of resident tuition at a public institution of higher education in California

d)      Attendance of dependents at a primary or secondary school in California

e)      Filing a homeowner’s property tax exemption within California

f)       Renting or leasing a home for use as residence within California

g)      Declaration of residency to obtain a license or any other privilege or benefit not ordinarily extended to a nonresident in California

h)      Possession of a California driver’s license

i)        Other acts, occurrences, or events that indicate the presence in the state is more than temporary or transient.

 


Golden Gate Bridge

The Bad News

As the definitions are stated, California broadens its definitions of a resident to a large extent. With these definitions, a resident of Ohio whose kids attend public school in California with their mother is technically a resident of California. California’s aggressive tax officials only propagate the strict enforcement of these already strict definitions.

Most importantly, however, is letter (i), “Other acts, occurrences, or events that indicate the presence in the state is more than temporary or transient.” This last definition opens the door for almost any purchase of an aircraft, vessel, or vehicle where you are connected to California to be deemed taxable if the tax officials decide they have a case.


The Good News

These strict definitions of California residency cause many buyers to end up having to pay sales and use tax in a state they may not even live in. However, companies like Aero and Marine Tax Professionals take care of the paperwork, clear up any definitions, and work directly with you and your CPA’s to make sure that this does not happen to you. California will only make their tax codes stricter and harder to understand from here, and hiring a company like Aero and Marine will save you money for only a fraction of what you would’ve paid in sales and use tax.

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