Assembly Bill 321 was approved by California Governor Gavin Newsom on September 5th, 2019. It amends Section 63889.5 of the California Revenue and Taxation Code to expand the Sales and Use Tax exemption to certain new, used, and reworked trucks and trailers. It sounds good on paper, but the state of California has made obtaining this exemption a rigorous process to make sure people do not abuse this new exemption as a tax loophole beyond its original intention.
How to Use Assembly Bill 321 to Obtain an Exemption
If you want to avoid Sales and Use Tax on your recently purchased truck, you need to fulfill certain requirements to obtain the exemption:
- When purchasing the truck or trailer, you must provide an affidavit (written statement) to the dealer that the purchased truck or trailer will be exclusively used outside of California or in interstate/foreign commerce.
- Once the truck or trailer is delivered, you must remove it from the state of California in an allotted time frame. 30 days if it was manufactured outside of California, 75 days if manufactured inside California.
- Once the truck or trailer is outside of California, you must provide another affidavit to the dealer that the equipment is removed from California. This affidavit must be provided within the same timeframe as moving the equipment out of the state.
- After this affidavit, you must provide the dealer with written evidence that the equipment is licensed and registered within 60 days of providing the previous affidavit.
- If obtaining an exemption for a trailer registered in-state under the Permanent Trailer Identification (PTI) program, you must provide proof of registration, including your DOT number, with the DMV, within 60 days of providing an affidavit for exemption. If you are purchasing a truck or a trailer that is not under the PTI program, you can skip this step.
- Once you have done all applicable steps, you must avoid using the equipment for Californian intrastate hauling.
- All of these steps must be completed before January 1st, 2024.
Violating this process can result in cases of tax fraud and/or perjury. This summary of the Assembly Bill 321 process is informative only and does not constitute legal advice. Please read the Assembly Bill to obtain a full understanding of the new law for yourself.
The Value of Assembly Bill 321
By using AB321, you can save about six percent on the purchase price of a vehicle. Like with the Section 179 deduction, a savvy owner of a trucking business in California can use this change to the tax code to effectively reduce the cost of purchase, a discount.
For an example of an affidavit to provide the dealer in step one, you can check here for a form directly from the California Department of Tax and Fee Administration.
Paying taxes when you otherwise would not need to or can easily avoid by making simple changes are essentially discounts on the final cost of purchase. If your fleet has Authority to haul freight across state lines, avoiding shipments from one point in California to another point in California on your new-to-you truck or trailer can help save money and raise your bottom line.
Article courtesy of TopMark Funding.