California is looking to levy a new tax on rocket launches that would tax companies for each mile traveled from the surface up to the official limit of outer space, set at 62 miles above the earth.
Over the last 10 years, the rocket launch industry has undergone a revolution with the cost of space travel dropping dramatically as a result of innovations largely driven by California-based SpaceX. The company recently completed the first reuse of an orbital launch booster which promises to further slash the cost of commercial space flight. As a result, SpaceX aims to dramatically decrease the time between launches to less than 24 hours. It is this increase in activity that presumably catalyzed the proposed regulation as lawmakers seek to get their hands on a piece of profits generated from the new industry.
Regulation Section 25137-15 reads:
“Space transportation company” means a taxpayer that generates more than 50 percent of its gross receipts from the provision of space transportation activity for compensation in a taxable year.
The Vandenberg Air Force Base launch site in California is the only site in the continental US where satellites can easily be launched into a polar orbit. The state must walk a fine line to apply a fair and reasonable tax while ensuring it is not so drastic that it would chase the lucrative space launches and all of the industries supporting them out of the state.
Only two companies currently perform launches out of California: SpaceX and the United Launch Alliance, while Virgin Galactic plans to begin space tourism flights out of the state in the next few years. In a curious twist, SpaceX, the United Launch Alliance, and Virgin Galactic all support the tax, citing that it adds clarity and stability to their tax status. Without the tax, trips to space are financially vulnerable to a sudden spike in cost in the event that a tax was added in the future.
Quartz obtained a letter sent to the California Franchise Tax Board from SpaceX CFO Bret Johnsen who clarified why the company is supportive of the new tax. “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.”
California has long been a hub for aerospace activities. Corporate players like Boeing and Lockheed Martin each have several facilities in the state that serve as support to industry hubs like NASA’s Ames research center in Mountain View, California and the Jet Propulsion Laboratory facility in Pasadena, California.
Looking forward, SpaceX has another six launches on its launch manifest in the remainder of the year out of Vandenberg while ULA has 2 more flights expected this year. In addition to the pace of launches that will increase year-over-year for the foreseeable future and a lucrative new business model hanging out as bait, competition is surely not too far behind. This increase in competition is expected to further drive costs down and increase the frequency of rocket launches.
SpaceX recently confirmed its plans to launch 4,425 satellites into low earth orbit over the next 4 years that, if approved, would represent a three-fold increase in the number of satellites orbiting the earth.
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Space X is welcome to launch rockets from my home state of Florida. No state income tax either! Come, bring us the rest of your rockets!
The tax is literally the same as the taxes on aircraft, but instead of going from state to state/country to country, it's an Earth to Space travel tax. By setting this BEFORE the first commercial travel of a spacecraft, you are preventing a price hike if a tax is implemented later. This later tax would be likely on a federal scale, hence it would be subject to the people in power and their views on space travel.
This tax curbs the damage BEFORE it actually hurts companies and consumers looking to leave the earth or looking to trade between human space colonies and the earth itself.
The legal definition herein provides a clear cut idea as to rules and regulations for future use. This means any issues that could come up in a court of law are more or less covered before they happen.
Taxes suck, yes, but this particular tax and the legal info going with it are incredibly helpful and innovative.
Or am I misunderstanding something here?
Isn't SpaceX planning on having most of their funds come from being an internet provider? According to the definition in this article, SpaceX wouldn't actually qualify as a "Space Transportation Company", so the proposed taxes wouldn't apply to them.
Or am I misunderstanding something here?
The big thing here is that IF Space-x began to offer transportation of people or goods into space, they would be subject to this tax, like taxing airplane tickets. By implementing a regulation law, which is what this tax would be, you have a clear cut minimum from the get go that would prevent customers from suffering a later hike due to a new tax introduced. So what it does here is beats the FAA to the punch and will allow for better growth in the future as Space-X expands their horizons.
TL;DR- Space-X may become a ferry to space, people and things ready for space colonization protected from tax hike.
