O/O In Cali AB5 problem and a question about temp authority

Discussion in 'Ask An Owner Operator' started by Carhauler363, Jul 22, 2022.

  1. Carhauler363

    Carhauler363 Bobtail Member

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    Brian, thanks for taking the time to help me out. The place I am buying the truck from also has me confused so I kind of don't know which avenue I should take. Currently my MC number is detached. The dealer is stating that if I am registered with a DOT number and I go pick the truck up from Georgia I will not have to pay state tax since I use the truck for interstate commerce, only FET. Thats a huge savings so at that point it makes a ton of sense to get my MC authority pick up the truck and just deal with the IRP plates and IFTA stuff. Thanks again.
     
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  3. brian991219

    brian991219 Road Train Member

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    No worries, happy to help. I do this stuff every day as a consultant to both motor carriers and truck dealers, even go to Cottrell myself almost weekly to pick up trucks for a large Midwest dealer group because I still love to drive even after 30 years. I am also formerly a licensed retail vehicle salesperson in the State of California, having worked for a tow truck equipment distributor in Santa Fe Springs (sadly that location closed a few months ago).

    Your dealer is correct, if you have an active MC number and your US DOT number is registered as interstate for-hire you are sales tax exempt in most states, which is a huge savings. Now, because you are California domiciled, you must take possession of the truck and complete a revenue generating interstate trip with it prior to reentering California otherwise you will owe them sales tax. This is a quirk of California tax code, and it can be as high as 10%. See below;

    Purchases of property that are both first functionally used outside the state of California and are used continuously in interstate or foreign commerce (both within and outside California), and not exclusively in California, are exempt from the use tax. For example, a purchase of a ferry boat to transport passengers between Los Angeles and Catalina Island (two California ports) does not qualify for the exemption, even though the vessel may travel through international waters to arrive at its destination. However, the purchase of an aircraft regularly used in transporting passengers from Mexico to Canada may be exempt, even if it stops at various airports in California to pick up additional passengers. For more information see Regulation 1620, Interstate and Foreign Commerce.

    Alternatively, under the 12-month test, vehicles, vessels, and aircraft first functionally used outside California will not be regarded as purchased for use in this state if the vehicle, vessel, or aircraft is brought into California within 12 months after its purchase and one-half or more of the miles traveled by the vehicle, or nautical miles traveled by the vessel, or flight time traveled by the aircraft during the six-month period immediately following its entry into this state are miles/nautical miles/flight time in interstate or foreign commerce. See the page outlining the 12-month test provisions for specific requirements. You may also see publication 110, California Use Tax Basics for more information.​

    With the 12 month rule you can see why you want to be considered engaging in interstate commerce, it is a requirement if you want to maintain your California sales tax exemption. For more info visit this link Exemptions & Exclusions: Vehicles, Vessels, Aircraft – Frequently Asked Questions (FAQs) You can also see why you will want to do a few out of state trips, just to make sure CA can't come back and say you own them the sales tax later. I have witnessed that happen a few times!

    Also, to address something in an earlier post, I will advise that you are most definitely required to have interstate MC authority because rail yard freight is interstate in nature, even with you only handling the final leg of it. Here is the definition from 390.5
    Interstate commerce means trade, traffic, or transportation in the United States -

    (1) Between a place in a State and a place outside of such State (including a place outside of the United States);

    (2) Between two places in a State through another State or a place outside of the United States; or

    (3) Between two places in a State as part of trade, traffic, or transportation originating or terminating outside the State or the United States

    The bold is the problem for you. The rail traffic either came from another state or possibly Mexico or Canada, maybe even further away if the vehicles first arrived by seaport. This means you must comply with all the Federal regulations, in addition to the California meal and rest break, CA #, registration with CHP and everything else a California based carrier must comply with.

    Hope this helps. My DM function is restricted, this message board doesn't allow me to solicit customers and that is fine, I'm happy to help any way. I strongly suggest you double check everything I posted with a California based tax professional and if your dealer is not CA based ask a local truck dealer, they should be able to give you some clear guidance. Who knows, maybe I will run into you down in Georgia when you come to pickup your new truck.

    Best wishes for success.

     
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  4. Carhauler363

    Carhauler363 Bobtail Member

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    thank you, you have been awesome!
     
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  5. Carhauler363

    Carhauler363 Bobtail Member

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    Brian, do you know of a company that you trust that can deal with transferring my old MC over to my new DOT number for my S-corp. My old dot is attached to my sole prop. I tried to fill out the online portal stuff but its not allowing me to update the 150 form to initiate a transfer since I am inactive.

    Thanks
    Mike
     
  6. Siinman

    Siinman Road Train Member

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    OOIDA might be able to help you if you are not a member you should sign up.
     
  7. brian991219

    brian991219 Road Train Member

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    Contact Penni Royston at Evilsizor in Colorado. They have a great working relationship with the western regional FMCSA field offices and I'm sure they can help. If not let me know and I can recommend a few others. Just stay away from Foley Services in Connecticut and DOT Compliance Group, those two outfits send out the majority of false and misleading spam trying to seperate hard working owner ops from their cash.
    Your Interstate Trucking Experts
     
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  8. brian991219

    brian991219 Road Train Member

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    You may also want to check out the Independent Automobile Transporters Alliance, they are one of only two national trade associations dedicated to car haulers.

    IATA – Independent Auto Transporters Alliance
     
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  9. Carhauler363

    Carhauler363 Bobtail Member

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    thank you again!
     
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