California Considers Tax on Launches Within the State

A United Launch Alliance (ULA) Atlas V rocket carrying the WorldView-4 spacecraft lifts off from Space Launch Complex-3 at Vandenberg Air Force Base. (Credit: ULA)

California’s Franchise Tax Board is seeking public comment on a proposed new tax that would fall upon ULA, SpaceX, Virgin Galactic and other companies launching spacecraft from within the state.

The levy would apply to companies “that generates more than 50 percent of its gross receipts from the provision of space transportation activity for compensation in a taxable year,” the proposal states. Space is defined as 62 statute miles (100 km) or more above Earth.

The plan’s structure is similar to that used by California and other states to levy taxes on terrestrial transportation and logistics firms.

In what’s known as a market-based approach, companies tally sales — and then the taxes based on those sales — in the state where the good or service is received. But in the borderlessness of space, precisely where a product gets delivered is difficult to define.

According to the proposal, California will collect tax from space transportation companies based on a formula factoring in how often a company launches spacecrafts out of the state, and, most importantly, how far a commercial spacecraft travels from California soil. Between May and mid-October, there were eight launches from Vandenberg Air Force Base, in Santa Barbara County about 50 miles south of San Luis Obispo.

In short, the amount of tax on commercial spaceflight companies will decrease the farther the spacecraft travels from California. “More mileage will mean less tax, and less mileage will mean more tax,” Grossman said.

The Franchise Tax Board says it received input from the private space companies on the proposed rules, which largely resemble a draft submitted by SpaceX, perhaps the industry’s most recognizable company. SpaceX, which is headquartered in Hawthorne (Los Angeles County), declined to comment.

ULA launch the Atlas V and Delta IV boosters from Vandenberg Air Force Base. It also operates these boosters from Cape Canaveral Air Force Station in Florida.

SpaceX operates its Falcon 9 rocket from Vandenberg and launch complexes in Florida. It plans to begin launching larger Falcon Heavy boosters from Florida later this year. Falcon Heavy rockets might also be launched from Vandenberg in the future.

Virgin Galactic plans to launch satellites with its LauncherOne booster using a modified Boeing 747 that would operate out of the Mojave Air and Space Port.  The aircraft would fly from Mojave to the Pacific Ocean to launch its payloads.

Virgin Galactic is building and testing its SpaceShipTwo suborbital vehicle in Mojave. However, it plans to move operational flights with customers and scientific payloads to Spaceport America in New Mexico. Another issue is whether SpaceShipTwo will fly to 62 miles and above. Flights may end up going below those altitudes.

Stratolaunch is building a carrier aircraft at the Mojave spaceport that would air launch boosters carrying satellites. However, it is not clear whether the massive airplane would conduct launches from Mojave or facilities in other states.

Orbital ATK stores the aircraft that it uses to air launch Pegasus boosters in Mojave. However, the aircraft typically operates out of other locations such as Cape Canaveral in Florida when it launches spacecraft.

The proposal includes the following example of how taxes would be assessed on launch companies operating in California.


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 taxpayer’s sales factor numerator from launch-related revenue in the taxable year shall be determined as follows:





  • JamesG

    Keep digging California…

  • Mr Snarky Answer

    Well when your political leaders are Governor Moonbeam and Gavin “Blue Steel” Newsom that explains a lot. Berkley police can’t even figure out how they should arrest people for breaking the law. Great state being ruined.

  • windbourne

    I seriously doubt that this is more than 1 idiot throwing the idea out.
    I seriously doubt that CA would tax it esp when really getting started.

  • Arthur Hamilton

    Launch prices just jumped by California’s estimated taxes on lainches for the year for ULA & SpaceX. That is my opinion.

  • JamesG

    Never underestimate the power of a Gud Idea Fairy’s turd. And… Rockets have been launching from Kalifornia for fifty years. I’m surprised its taken them this long to try to shake Vandy down.

  • WhoAmI

    Seems everyone who has commented so far is confused about taxes. Like most states, California taxes income as well as sales and services within the state. There has been confusion as to how much a space launch company should be taxed, as a portion of the benefit their customer receives is after they’ve left the borders of the state (or into space, whichever came first). This provision is a clarification which mostly borrows from a proposal by SpaceX. This is not a new tax nor is it unique to California. In fact, it shows how California doesn’t act unilaterally, but instead gets input from the industry.

  • Steve Ksiazek

    Good thing that Vandenberg is actually Federal property, and doesn’t belong to the State of California. I think there would be some issues trying to collect tax revenue from there. Of course, maybe SpaceX just whispered this into someone’s ear, just to kill any possibility of commercial sub-orbital flights from the left coast.

  • JamesG

    I think the only confusion is on your part. If heretofore a tax was not collected on an activity, then it is a “new tax”. This will be added to the assorted other taxes already paid, gross sales tax, corporate income, payroll, etc. etc. etc.

    I’m sure SpaceX, like most Musk Inc. businesses gamed out their proposal vs. alternatives to find their maximum benefit, perhaps even giving them an advantage vs. competitors (ie; does ULA do a higher percentage of launches out of VAFB to lower altitudes and thus will get socked with a higher tax bill?)

  • WhoAmI

    Try to do a little research before pretending to be an authority on the subject, otherwise you continue to hurt your reputation on this site. All states collect taxes on activity except for non-profits and churches. Unless you think praying for a rocket to reach space successfully qualifies SpaceX as a religious institution, it gets taxed just like all businesses in states all across ‘Merica.

    Notice the word “have” in the quote below? That means taxes “have” been collected.

    “the standard allocation and apportionment provisions of UDITPA have proven difficult to apply to this emerging business model. Consequently, the Board has worked with industry to promulgate a special industry regulation similar to other transportation industry regulations (trucking, railroad, air, and sea transportation) so that the apportionment of the income of space transportation companies fairly reflects the activities of such businesses in this state.”

  • Jacob Samorodin

    Pretty soon, there will be a tax on everything in California.
    MARGARET THATCHER: “The problem with socialism is that you soon run out of other people’s money.”

  • JamesG

    Except of course, rocket launches were not taxed as transportation until this proposal.

    Your premise is incorrect.

  • JamesG

    Pretty soon? CA literally taxes the air and water.

  • Mr Snarky Answer

    Orbit class rockets launch from federal range into FAA controlled airspace. What this has to do with California is beyond me.

  • Larry J

    Currently, there aren’t very many launches each year out of Vandenberg. Most of them are for the US government, so I don’t know if they would be subject to state taxation. However, if SpaceX is serious about building their large constellation of communications satellites, they’ll have to conduct dozens (if not hundreds) of launches, most to high inclination orbits. Things will get busy at Vandyland.

    However, if the tax is too high, SpaceX will have the incentive to look at alternatives. They can’t launch into high inclination out of their Texas launch site under construction. They can launch into high inclination from the Cape by doing dog-leg maneuvers during powered flight, but that extracts a significant performance penalty. The only other likely alternative would be to build the necessary facilities at the Kodiak launch site in Alaska. That would be an expensive option because, AFAIK, Kodiak was only set up to launch relatively small solid-fuel rockets. They’d need to build not only one or more launch pads but also all of the necessary rocket and payload integration buildings, propellant handing and storage systems, water deluge system, etc. Make the taxes high enough and the Kodiak option could become economically viable. As a bonus, Kodiak would have a small performance advantage over Vandenberg for satellites being launched into retrograde sun-synchronous orbits.

  • WhoAmI

    Businesses and individuals operating or residing on military bases pay state taxes on their activities no matter what state they reside. Airlines operating in FAA controlled airspace pay state taxes too. It isn’t clear why you feel this is unique or unusual.

  • JamesG

    They will just do what any other company does when a tax is levied against them, pass it onto the customer. Either the satilite operator, the government, or investors. All of which will turn around and pass that cost on to whom always ultimately bears the cost of government demands, you and I the end consumer. That’s what we are here for. Baaaaaa

  • WhoAmI

    Nice straw man argument attempt. No premise was advanced of the existence of a transportation tax on rocket launches. My assertion was income from rocket launches have always been taxed.

    Additionally, you are confused into thinking this is a transportation tax. It is not. The title clearly identifies it as an income tax. As stated ad nauseam, this regulation simply clarifies how to determine the amount of business income attributable to sources within the state of CA.

    If you feel otherwise, feel free to point out a “” source. I have pointed out the document identifying the reasons for the proposed code. It is unfortunate Doug described it as a “proposed new tax”, but his link to the code indicates no additional taxes.

  • Larry J

    In the case of that big communications satellite constellation, the customer is SpaceX itself. It’s possible SpaceX will spin off the satellite system to another company like Motorola did with Iridium.

  • George Turner

    [sarc] California needs to tax space launches because they emit CO2 and water vapor. Not only that, California needs to tax space launches at much higher rates than SUV’s because rockets dump CO2 and water vapor directly into the atmosphere over your head, causing an immediate increase in back radiation and eventually causing catastrophic global warming that will destabilize the San Andreas fault. More common heavily taxed CO2 emitters, such as SUVs, emit CO2 within a foot or two of the ground, where it might make your feet a little warmer but won’t effect the air you breathe. [/sarc]

    *Sarcasm supplied by the Virginia, Florida, and Texas departments of commercial space launch.

  • Mr Snarky Answer

    Airlines don’t pay state tax by the mile they fly over the state. This business of commercial launch is nascent back from near extinction in the 1990s for the US. Very competitive with global players that are “helping” not “punishing” entities competitiveness. In general places like CA continue to squeeze until the golden goose is strangled. My own firm moved lots of resources out of CA to TX just to avoid that squeeze. Anyhow SpaceX must launch certain missions from Vandy, they don’t have a choice. Therefore I think the state can abuse that monopoly rather easily and does in other circumstances.

  • Jacob Samorodin

    Californians literally better learn to control their breathing. Jerry Brown will surely tax the CO2 exhaled by people of the Golden State; a true Carbon Tax!! LOL!

  • redneck

    Then the customers of that satellite constellation foot the bill eventually. The end user always pays one way or another.

  • windbourne

    you may wish to learn the difference between figuratively and literally, since CA taxes neither air nor water.

  • WhoAmI

    Is this what you mean about CA squeezing commercial launch?

    That is a Sales And Use Tax Exclusion worth $30M provided to SpaceX.

    Or how about this section of the CA tax code exempting launch providers from state property taxes:

    They really know how to squeeze!

  • WhoAmI

    Luckily it isn’t a new tax nor is it an idiot throwing up an idea. It is simply SpaceX working with the CA FTB to nail down how to determine the amount of business income attributable to sources within the state of CA.

    Here is an example of the advantage they receive by this income tax clarification. If they do $1B in non-launch business revenue (e.g. satellites) and $1B in launch revenue out of Vandenberg (skip out of the state for now) where the spacecraft leaves the launcher at 1,000 miles, they are only recognized on $0.5B in revenue out of the $2B total revenue. That isn’t income but sales revenue, where they then apply the same rules for income of everyone else doing business in California.

    I would love for someone to point out in the tax code where I’m mistaken, but I read it over and used the example they provided as the basis for the above calculation.

    Unfortunately, Doug described it as a new tax as do other sources in the news.

    In doing research, I also discovered SpaceX received a Sales and Tax exclusion of $85M ($30M for 2016) and benefit from a Property Tax exclusion (AB 777 — which may be well justified). Either way, CA is definitely helping space launch businesses in California, though perhaps not all space industry companies are benefiting equally.

  • JamesG

    LOL. You pointed to the wording of the proposed tax and then argued that it doesn’t mean what it says it means. I guess there is no arguing with your “logic”.

  • JamesG

    Go look up the various municipal (and I think State) “clean air and water” fees, taxes, and assessments that are levied against…. just about anyone with enough money to make it worth while.

  • Not Invented Here

    WhoAmI may be correct, it looks like this new rule has launch companies’ support:

    Yet all three companies have backed the new tax rule in meetings with the California government, according to government records and sources familiar with the matter, because the change would clarify their tax status.
    In a letter to the California Franchise Tax Board obtained by Quartz, SpaceX CFO Bret Johnsen writes that “without the proposed regulation the standard apportionment rules are unclear as applied to space transportation companies. The proposed regulation provides certainty for us, as well as other taxpayers in the industry, for our California franchise tax filings going forward.”

  • OldCodger

    If you build it,
    They will come,
    and tax it!

  • WhoAmI

    Your logic: New tax regulation that more fairly recognizes income generated from a space launch company rather than the past, unfair method is the same as a new tax, even when it reduces the tax burden of the target of the tax regulation.

    And you question my logic?

  • JamesG

    Welcome to the Internet. We are here to help.

  • WhoAmI

    You meant to say “Welcome to the world of JamesG”. Fortunately, you do not represent the internet nor are you helpful.

  • JamesG

    And you are an unpleasant person. Good day.

  • WhoAmI

    In the world of JamesG, I have to agree.

  • publiusr
  • WhoAmI

    > They are backpedaling

    Who is?