The exemption is legal, but it is not automatic

One of the most useful parts of Thomas Alston’s interview is how clearly he separates legal tax avoidance from illegal tax evasion.

His view is straightforward. Avoidance means using the law and regulations correctly to reduce or eliminate tax. Evasion means doing it illegally. That distinction matters because this whole conversation is not about gaming the system. It is about following it precisely enough to qualify for the exemptions California already allows.

California guidance supports that. CDTFA confirms that aircraft purchases may qualify for exemptions such as common carrier use or interstate and foreign commerce, but those exemptions depend on the buyer meeting the rules and maintaining the documentation needed to prove it.

The interstate commerce path

Thomas says the interstate commerce exemption is the path his firm uses most often for Part 91 business-use aircraft. In the interview, he explains the basic sequence: take possession outside California, complete the first functional use outside California, then begin the test period once the aircraft first enters California. From there, the owner must keep enough qualifying out-of-state business flight hours during the test period.

What is important here is the difference between the legal threshold and Thomas’s operating discipline. He says the law requires more than 50 percent, but his firm pushes clients to maintain a 60 percent margin to avoid the danger of a close call. His reasoning is practical: audits are not the place to be living on decimal points.

CDTFA similarly states that qualifying interstate or foreign commerce use depends on first functional use outside California and continuing use in interstate or foreign commerce, not simply owning the plane through a clever structure.

The common carrier path

Thomas also walks through the common carrier exemption. In that framework, the aircraft is used as a common carrier during the first 12 months, typically through a lease arrangement with a charter operator. CDTFA says more than 50 percent of operational use during the first 12 consecutive months must qualify, and that supporting records are necessary.

Thomas’s caution is that this route shifts a large part of your documentation burden to someone else. If the charter company is not careful, organized, and cooperative, the owner is still the one carrying the exposure. That does not make the exemption bad. It just makes the operator's trust much more important.

Documentation is the real battlefield

Throughout the interview, Thomas keeps coming back to the same point: documentation wins or loses these cases.

He talks about using flight logs, maintenance logs, fuel receipts, and business support documents. He also gives a practical example for proving business purpose: set up the meeting by email, then follow up with a written confirmation of what happened. In his view, support has to be clean enough to survive California review, not just convincing enough for the owner to feel comfortable.

That matters because California’s aircraft guidance also emphasizes records. Qualifying use is not based on what you intended. It is based on what you can support.

Aircraft tax exemptions are not mysterious. But they are unforgiving.

Thomas Alston’s message is that the real challenge is not knowing the name of an exemption. It is structuring the delivery, managing the test period, and proving every piece of the story well enough that California agrees.

Listen to the full Iron Bird podcast episode featuring Thomas Alston for a step-by-step discussion of how aircraft buyers can use California exemptions correctly.

https://flyironbird.com/private_jet_podcast/how-aircraft-owners-accidentally-trigger-millions-in-tax

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