Does a stopover in California trigger use tax on goods in transit?

The statutory baseline: storage, use, and the excise tax that reaches them

California's use tax is a companion to the sales tax, not a substitute for it. Section 6201 imposes an excise tax on the storage, use, or other consumption in California of tangible personal property purchased from a retailer, aimed at property that escapes sales tax because the purchase itself happened outside the state or was otherwise not subject to it. The tax base depends entirely on the two defined terms that trigger it. Section 6008 defines "storage" to include any keeping or retention in California for any purpose except sale in the regular course of business or subsequent use solely outside the state. Section 6009 defines "use" to include the exercise of any right or power over property incident to ownership, and the possession or exercise of a right or power over property by a lessee, other than resale in the regular course of business. One forward note: effective January 1, 2027, SB 122 (Stats. 2026, ch. 23) amends section 6009 to treat accessing, downloading, and similar acts as use of a "digital product," defined as prewritten computer software (Rev. and Tax. Code section 6016.1), which changes nothing in the tangible-property transit analysis this article covers.

Both definitions are written broadly on purpose. Nearly anything a company does with property while it sits in California, from warehousing it to moving it from one dock to another, is "storage" or an exercise of a right over the property, and so falls within the definitions before any exclusion is applied. That is why section 6009.1 has to do real work: without it, a truck driven through California on the way to Arizona, or a container unloaded at a California port and reloaded onto a train bound for Texas, would be "stored" or "used" in California in the plain statutory sense, even though nothing about the trip has anything to do with California.

The transit exclusion: Revenue and Taxation Code section 6009.1

Section 6009.1 supplies the exclusion. It removes from "storage" and "use" the keeping, retaining, or exercising of any right or power over property for either of two purposes: transporting it outside California for use solely outside the state, or processing, fabricating, or manufacturing it into, attaching it to, or incorporating it into other property that will itself be transported outside California and used solely there. The second branch matters for anyone doing light assembly, component installation, or manufacturing work in California on goods bound for an out-of-state buyer, not only for goods passing through unchanged.

Two structural features matter. First, the exclusion is framed around purpose, not merely outcome: the property has to be kept for the purpose of subsequent out-of-state transport, which is why documentation of intent at the time of the California stop matters as much as documentation of what eventually happened to the goods. Second, both branches end the same way, with the words "solely outside the state." Any use in California, even a brief one unrelated to the transit or fabrication purpose, is inconsistent with the exclusion on its face. That is the seed of most disputes in this area: a company treats a California stop as purely transitional, and the state reads something in the stop as evidence it was not.

Section 6009.1's scope was tested and narrowed in the state's favor once already, then corrected by the courts. Regulation 1620(b) had limited the exclusion, for vehicles transported out of state, to property "passively carried" out of California, which the State Board of Equalization applied to deny the exclusion to trucks driven out of state under their own power. In Stockton Kenworth, Inc. v. State Board of Equalization (1984) 157 Cal.App.3d 334, the Court of Appeal rejected that limitation, holding that a truck driven out of California under its own power was still "transported" outside the state within the meaning of section 6009.1, and that the Board of Equalization's regulation was an unwarranted abridgement of an express statutory exemption. The case stands for a point worth carrying into every fact pattern here: the statute controls, and a regulation or audit position adding a requirement the statute does not contain is vulnerable.

Regulation 1620: presumptions, first functional use, and interstate commerce

Regulation 1620 is where the exclusion becomes administrable. Subsection (a) governs the sales tax side (when a sale is treated as complete, and destined, outside California); subsection (b) governs use tax and is the operative subsection for a stopover question.

The general purchased-for-use-in-California presumption sits in subsection (b)(3): property delivered outside California to a purchaser the retailer knows to be a California resident is regarded as purchased for use in California unless the purchaser gives the retailer a signed statement that the property was purchased for use at a point outside the state. Separately, property first used outside California and brought in within 90 days of purchase is presumed bought for use here unless it is used or stored outside the state one-half or more of the time in the six months after entry (Regulation 1620(b)(3)).

Vehicles, vessels, aircraft, and locomotives get their own, more specific tests in subsections (b)(4) through (b)(6). The test that applies today still opens by treating a vehicle, vessel, or aircraft purchased outside California as purchased for use here if its first functional use is in California, but the work is done by a presumption: property brought in within 12 months is presumed acquired for use here if, among the triggers the regulation lists, the purchaser is a California resident, the vehicle is registered here, or the property is used or stored here more than half the time during the first 12 months; the presumption is rebutted by documentary evidence of purchase for use outside California, and the tax does not apply where one-half or more of the property's miles or flight time in the six months after entry are commercial travel in interstate or foreign commerce (Rev. and Tax. Code section 6248; Regulation 1620(b)(5)). The earlier 90-day test, which applied before October 2, 2004 and again from July 1, 2007 through September 30, 2008, turned on first functional use outside California and entry within 90 days (Regulation 1620(b)(4)). For these three classes of property the statute is the primary authority alongside the regulation. First functional use, the regulation's term for the moment property starts doing what it was bought to do, matters most as a lens for property outside the vehicle, vessel, and aircraft presumptions: a stop that precedes first functional use looks like transit; a stop that includes it does not.

Subsection (b)(2) states the general rule for property already in interstate or foreign commerce before it reaches California: use tax does not apply if the property was purchased for, and used in, interstate or foreign commerce before entering California, and continues in such commerce both inside and outside California rather than exclusively within the state afterward. Subsection (b)(7) lists examples of what counts as interstate or foreign commerce, giving a menu of fact patterns the regulation already treats as safe. Subsection (b)(8) addresses imports: use tax applies to imported property once the process of importation has ceased and sales tax does not apply, regardless of whether the property remains in its original package, the relevant test for goods that clear a California port and sit briefly before being forwarded. Subsection (b)(9) restates the section 6009.1 exclusion in regulatory form.

Where the line falls: handling versus modification

CDTFA's own informal guidance illustrates both sides. In one Legal Division letter ruling addressing a California dock warehouse used to stage property before shipment to offshore drilling platforms, the exclusion applied because the sole California activity was storage in aid of the planned out-of-state shipment. In another, involving an aircraft purchased out of state and flown into California under its own power for an interior refurbishment before being flown back out for exclusive out-of-state use, the exclusion still applied, because the work performed was the kind of fabrication the second branch of section 6009.1 contemplates, and arrival under its own power did not defeat the exclusion any more than it did in Stockton Kenworth. These are non-precedential Legal Division correspondence, not formal opinions or published decisions, and are cited here only for the principle they illustrate, not as independent authority. The statute itself now reaches the same result for aircraft and vessels: property brought into California exclusively for repair, retrofit, or modification by a licensed or certified facility is not treated as acquired for use here (Rev. and Tax. Code section 6248; Regulation 1620(b)(5)(D)). For vehicles, the presumption can be rebutted where the vehicle was in California only for warranty or repair service lasting 30 days or less, supported by the facility's work order and the owner's statement of travel dates (Rev. and Tax. Code section 6248(f); Regulation 1620(b)(5)(B)). Senate Bill 1406 (Stats. 2026, ch. 1036), effective September 30, 2026, widened the residency trigger's entity rule: a closely held corporation or limited liability company was already a California resident for this purpose when 50 percent or more of its interests were held by California residents, the rule now reaches partnerships, limited partnerships, and limited liability partnerships as well, and a shell company used to evade the tax is a resident if any owner is (section 6248(a)(1)(A) to (C)). The act carries no transition rule of its own. The binding purchase contract rule in section 6248(d) dates from the 2008 amendments (Stats. 2008, ch. 763), and whether it shelters a purchase or contract made on or before September 30, 2026 is an open question that the library's article on SB 1406 takes up.

The harder fact pattern involves goods imported through a California port and substantially modified there before being shipped on to their final buyers, most commonly vehicles that receive accessories or equipment installed in California before leaving the state. Installing components in California does not by itself defeat the exclusion, because section 6009.1 covers property attached to or incorporated into other property that is shipped out and used solely outside the state. Section 6009.1's second branch protects processing, fabrication, or manufacturing that produces property to be shipped out and used solely outside California; it does not, on its face, protect the same activity when the resulting property is put into service, sold, or delivered to its end customer while still inside the state.

Common fact patterns

A handful of recurring scenarios illustrate where the analysis lands.

Goods imported through a California port and forwarded to buyers in other states typically remain outside the use tax under section 6009.1 and subsection (b)(9) once importation has concluded, provided the California activity is limited to customs clearance, staging, and reshipment, and the goods are not put into service, sold at retail, or otherwise functionally used before they leave.

Packaging and labeling that only ready property for outbound shipment, and assembly into products shipped out, generally fit within section 6009.1, but storing and assembling a company's own promotional displays into prepacks in California was held a taxable use even for displays shipped out of state (Parfums-Corday, Inc. v. State Board of Equalization (1986) 187 Cal.App.3d 630).

Vehicles or equipment stopped in California for repair, calibration, or refurbishment before continuing to an out-of-state buyer or lessee sit closer to the fabrication branch of section 6009.1, provided the work produces the finished, shippable product rather than the property's entry into service. For aircraft and vessels, the repair, retrofit, and modification rule of section 6248 and Regulation 1620(b)(5)(D) decides the question directly when the work is done by a licensed or certified facility and the property came into California exclusively for that purpose; for vehicles, the 30-day warranty and repair rebuttal in Regulation 1620(b)(5)(B) is the first provision to check.

Vehicles or equipment modified in California with functional accessories, options, or components before onward shipment sit closest to the line, and deserve the most conservative documentation before the position is taken that the exclusion still applies.

Documentation that wins these audits

Every fact pattern above is decided on the same kind of record. Bills of lading and shipping instructions that show the property's origin and destination, and that the California stop was on the route rather than the destination, matter from the start of the transaction rather than reconstructed afterward. Warehouse and yard logs showing dates in and out establish the duration of the stop and help rebut any applicable presumption period. Work orders and specifications for anything done to the property in California should describe the work in terms that map onto the statute, preparation for shipment or fabrication into a finished product, rather than installation, activation, or commissioning, when that is not in fact what occurred. Purchase orders and sales contracts stating the property's destination and intended place of use, obtained at or before purchase, support the purpose requirement built into section 6009.1, and the signed out-of-state-use statement contemplated by subsection (b)(3) should be collected as a matter of routine wherever the general presumption could apply. Correspondence describing the reason for the California stop in contemporaneous terms is worth more than any explanation developed after an audit begins, because the statute and the regulation both test purpose, and purpose is easiest to prove when it was written down before anyone needed it to be true.

Practice notes

The exclusion in section 6009.1 is available and well established, but it is not self-executing. A company that treats a California stop as a pure formality, without building the paper trail that shows it was one, gives an examiner room to argue that the stop was something more. The safest posture for any regular pattern of California stopovers, port transfers, or in-state finishing work is to build the documentation described above into the operational process itself, not into the audit response, and to review any step performed on the property in California against the plain language of section 6009.1 before assuming the exclusion applies. Where a stop involves modification, installation, or finishing work rather than handling, packaging, or transit-related fabrication, that step deserves a dedicated review before it becomes a pattern, since a single adverse audit position can reach every transaction that followed the same process. G&G State Tax Group provides sales and use tax analysis and audit representation for transit, import, and in-state finishing activity alongside its state and local tax practice.