California has proposed an update to its tax code to account for commercial space travel. Although routine passenger spaceflights remain at least a year away, the state is preparing rules that mirror existing transportation taxes. The Franchise Tax Board’s plan would tax space travel by the mile, with rates structured so that higher-mileage operations face a lower per-mile tax.
Companies such as Virgin Galactic, which has indicated plans to carry its first paying passengers next year, would fall under the proposal when they begin flying. The draft regulation covers all forms of space transportation departing from California, not only passenger services but also cargo and other launches. Any company that launches a spacecraft from California would be subject to the space-mile tax, regardless of whether the firm is headquartered in the state; by contrast, California-based companies that launch from other states would be exempt from these space-mile provisions.
To address situations where mileage information is confidential, the proposal sets a clear default: contracts that withhold distance data will be treated as if each launch covered 310 statutory miles. The tax would therefore be calculated by multiplying 310 miles by the number of launches under the confidential agreement.
California is the first state known to move toward explicitly including commercial spaceflight in its tax framework, but lawmakers elsewhere are expected to consider similar measures as the industry grows. The Franchise Tax Board has noted that uncertainty about how space transportation will be taxed in California could push companies to base more activity in other jurisdictions, so the proposed rules aim to provide clarity and predictability for businesses preparing to operate in the state.