Franchise Tax Board Seeks Public Comment On The Proposal

The California Franchise Tax Board is seeking public comment on a proposal to compute taxes on commercial space transportation companies, according to a report from the San Francisco Chronicle.

The board says that it created the proposed rules to give space entrepreneurs "confidence" that when their still-small businesses start to take off, the tax code for the state of California will be ready to accommodate them.

The code would apply to any company that derives at least half of its revenue from "space transportation" ... which is the movement of goods or people above an altitude of 62 miles ... and launches from California. CA companies that launch from other states, such as Florida or Texas, would not be subjected to the tax.

In the document, the state provides the following example: Taxpayer is a space transportation company that has entered into three launch contracts that result in the recognition of revenue in taxable year 201X. The first contract ("Contract A") is for two launches outside this state where the launch vehicles will each travel 1,000 miles from launch to separation. Taxpayer will recognize $2,000,000 of revenue in taxable year 201X from this contract. The second contract ("Contract B") is for one launch from outside of this state where the launch vehicle will travel 10,000 miles from launch to separation. Taxpayer will recognize $500,000 of revenue in taxable year 201X from this contract. The third contract ("Contract C") is for one launch from within this state where the launch vehicle will travel 1,000 miles from launch to separation. Taxpayer will recognize $1,000,000 of revenue in taxable year 201X from this contract. Taxpayer also has $500,000 of revenue from other than space transportation activities. 

The Franchise Board said that it got input from private space companies on the proposed rules. SpaceX is headquartered in Hawthorne, CA, but conducts many launches from Florida.

Currently, California is the only state considering such a tax on space launch activities.

(California launch image from file)

FMI: Proposal