California proposes plan to tax rocket launches by miles

California proposes plan to tax rocket launches by miles

As the technology sector is increasingly investing bigger amounts of money into the aerospace start-ups, California has proposed a noteworthy plan to tax space rocket launches from its coast. Many private companies are working on technology to reduce cost of space missions and make them commercially viable for many organizations planning to launch satellites.

As per the proposed plan, the Golden State’s tax payments will be determined by how rockets fly the 62 miles or 100 kilometers from a launch pad at the state’s coast to the edge of space to transport tourists or goods.

After 62 miles, the space companies are considered to be in space, and any further foray would not incur additional taxes.

The proposal comes as Elon Musk-led homegrown space firm SpaceX is displaying itself as the leader in low-cost access to space.

In a recently-written letter to the California Franchise Tax Board, SpaceX CFO Bret Johnsen stated, “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.”

The proposed rocket tax will apply only to SpaceX and United Launch Alliance (ULA) at the moment as only these two companies are launching space flights regularly. A third California firm called Virgin Galactic is also preparing to fly space tourists. However, it may take it more than a year for the company to start commercial operations.

According to a statement read by SpaceX Vice President Patricia Cooper, SpaceX plans to begin launching satellites in 2019. The company will gradually increase the number of launches per year until all the satellites are launched by 2024.

California tax rules require companies operating there to calculate their taxable revenues based on a number of factors, including what market generates the revenue. The new rules, based on formulae used for terrestrial transport industries, appear to ensure that a California-based company like SpaceX won’t be excessively taxed for revenue generated by launches in other states, while Colorado-based ULA pays its fair share for using California spaceports.

As per Ars Technica report, "SpaceX is uniquely positioned to pull this off due to its reusable Falcon 9 rockets, but this is a tall order even for the pioneering rocket maker. SpaceX is excellent at building rockets but so far has little experience in designing satellites, and the company would have to contend with placing so many satellites in an already crowded region of space."