California has long been considered fairly aggressive when it comes to how far they’re willing to go to impose taxes – now, the state may literally be reaching for the stars. The state has introduced a proposal that would make it the first state to tax commercial space transportation companies.
(You can read the proposal, which downloads as a pdf, here.)
The proposal would impose a tax on a “space transportation company” which is defined as a taxpayer which generates more than 50% of its gross receipts from the provision of space transportation activity in a taxable year. “Space transportation activity” means the movement or attempted movement (emphasis added) of people or property, including without limitation, launch vehicles, satellites, payloads, cargo, refuse, or any other property to space.
To clarify, you don’t have to successfully maneuver into space – the attempt is enough to subject you to the tax. The proposal also clarifies that the journey (or attempt) doesn’t necessarily have to be just from Earth to space but also includes the “movement or attempted movement of people or property from space to Earth.” For the tax to apply, however, the starting point must be in California.
The proposal defines space as an altitude of 62 statute miles or more above the surface of the Earth. The distance is purposeful: it’s the internationally recognized point at which space begins. Interestingly, in the US, we typically consider the point at which space begins to be 50 miles, or 264,000 feet. That’s because the National Advisory Committee for Aeronautics (which later became NASA), determined that was the point at which atmospheric pressure was less than one pound per square foot and airplane control surfaces could no longer be used.
To put that distance into perspective, a typical airplane cruises at 6 miles up, or around 30,000 feet. According to NASA, large planes can only fly as high as about 7.5 miles.
The proposal suggests a sophisticated calculation for the tax which is largely dependent on mileage. As with automobile or any other form of transportation mileage, the key is to keep good records.
That said, what about those top secret space trips? That doesn’t give companies a pass. According to the proposal, “If the Internal Revenue Service or the Franchise Tax Board is prevented by reasons of secrecy or confidentiality imposed by governmental authorities from determining the projected mileage of any launch contract, the mileage ratio denominator of such contracts shall be conclusively presumed to be 310 statutory miles multiplied by the number of launches pursuant to that contract.”
The only private company ever to return a spacecraft from low-Earth orbit is SpaceX, a private company founded in 2002 by Elon Musk. According to its website, SpaceX is the world’s fastest-growing provider of launch services. The company is headquartered in California.
