Does a stopover in California trigger use tax on goods in transit?
Edvin Givargis Published 12 minute read
The short answer
Not by itself. California's use tax reaches property that is stored, used, or consumed in the state (Rev. and Tax. Code section 6201), and "storage" and "use" are defined broadly (Rev. and Tax. Code sections 6008, 6009). But section 6009.1 carves both definitions back: keeping or exercising a right over property in California for the purpose of subsequently transporting it outside the state for use solely outside California, or for the purpose of processing, fabricating, or manufacturing it into other property that will be shipped outside the state and used solely there, is not "storage" or "use" at all. Regulation 1620 of Title 18 of the California Code of Regulations implements that exclusion and supplies the mechanics: a presumption that property brought into California within a set period after an out-of-state purchase was bought for use here, rebuttable by keeping the property moving; specific "first functional use" tests for vehicles, vessels, aircraft, and locomotives; and a list of what counts as interstate or foreign commerce. A stop for loading, unloading, inspection, or the kind of packaging that gets goods ready for onward shipment generally stays inside the exclusion. A stop where the goods are put to their intended function, or where the work done in California goes beyond preparing the property for shipment and instead finishes or substantially changes it, generally does not. The distinction is fact-intensive, decided stop by stop, and it is won or lost on the same records an auditor will eventually ask to see: bills of lading, warehouse logs, work orders, and the dates and duration of everything that happened while the property sat in California.
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 for periods on and after January 1, 2027, SB 122 (Stats. 2026, ch. 23) amends section 6009 to extend "use" to digital products accessed or downloaded remotely, 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 literally "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's regulation could not narrow a statutory exclusion for administrative convenience. 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. Where that presumption applies, a 90-day window and a follow-on six-month period do the work of testing whether the property actually stayed out of California use, consistent with the purpose the purchaser claimed.
Vehicles, vessels, aircraft, and locomotives get their own, more specific tests in subsections (b)(4) through (b)(6), built around whether the "first functional use" of the property occurred in California. A vehicle brought into California within the relevant window (90 days under the earlier test period, 12 months under the test period that applies today) is presumed purchased for use in California if its first functional use happened here, rebuttable by showing the required share of subsequent use or mileage occurred in interstate or foreign commerce during the six months after entry. First functional use is the regulation's term for the moment property starts doing what it was bought to do, and it is the conceptual hinge for every stopover question in this area, vehicles or not: 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 actually 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 harder fact pattern, discussed in practice in connection with older Board of Equalization appeals, involves goods imported through a California port and substantially modified there before being shipped on to their final buyers, most commonly vehicles that received accessories or equipment installed in California before leaving the state. The principle those appeals are understood to stand for is that installing functional components changes the character of the California stop: it is no longer preparation for shipment, it is the property being made into what it is going to be, in California, before it leaves. That reading tracks the statute closely. 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, or when the California work is the last functional step before the property does what it was bought to do. The exact case names behind that principle could not be confirmed while preparing this article and should be verified before they are relied on as citable authority; the underlying rule, drawn directly from the statute and Regulation 1620, does not depend on which appeal first stated it.
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 stay within the exclusion under subsection (b)(8) 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, labeling, kitting, or light assembly performed in California before outbound shipment is generally treated as preparation for shipment, consistent with section 6009.1 and the dock-storage letter ruling described above, as long as the work does not itself constitute the property's first functional use and the property leaves the state promptly once the work is done.
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 and the aircraft refurbishment letter ruling, provided the work produces the finished, shippable product rather than the property's actual entry into service.
Vehicles or equipment modified in California with functional accessories, options, or components before onward shipment sit closest to the line the modification-based principle addresses, 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, well established, and regularly upheld, 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 genuine 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.
This article states the law as of September 19, 2026
Statutes, rates, thresholds, and agency practice change, and a different set of facts can change the answer. Before acting on anything discussed above, contact G&G State Tax Group to confirm what has changed since this was written and how the rules apply to a specific situation.
G&G State Tax Group, LLC is a state and local tax advisory firm. The firm provides state and local tax consulting and representation in state and local tax controversies. G&G does not prepare or file tax returns, perform attest services, or provide bookkeeping, and is not a CPA firm.