Purchasing tax implications

[N201MKTurbo]

I could tell you all the things I’ve done to avoid paying airplane taxes, but we are all cool right now and I don’t want to poke the bear.

[jaylw314]

8 hours ago, Jerry 5TJ said:

I purchased a turboprop in 2012 while a resident of California.  The FTB then permitted either a 6 or 12 month test period to document a business use exemption.   It was a major documentation effort but ultimately we passed the hurdle and after 18 months received the letter from the FTB accepting our exemption claim.     

To pass the threshold over 50% of the flight hours in the test period must be for business and must be interstate.  

The FTB seemed fine to deal with.  They were just administrators of the state tax collection.  

You do have to plan ahead if you wish to utilize the exemption.  The use of a tax advisor service is an option, tho I read the requirements and did all the steps myself. It probably took me 50 hours of work to complete the process.  

California Sales Tax is collected from the buyer.    

Ah, yes, I wasn't thinking of aircraft for business...

As to who pays the sales tax to the Tax and Fee people (from their website):

• In general, if you purchase your aircraft from a dealer who has a California seller's permit, the dealer is responsible for paying the sales tax to the CDTFA, unless the dealer is acting as a broker. However, if you purchase your aircraft through a broker, the broker may, but is not required to, collect and report tax to the CDTFA. If the broker does not collect any amount for sales or use tax from you, you are required to report and pay use tax to the CDTFA.

[Jerry 5TJ]

Ah, true. Intra-state the dealer/reseller collects it from the purchaser.  

[RobertGary1]

11 hours ago, Jerry 5TJ said:

Ah, true. Intra-state the dealer/reseller collects it from the purchaser.  

In which case its use tax exempt but you just paid sales tax so it doesn't feel any better.  You have to be careful when someone says its tax exempt from use tax because usually it just means there is sales tax instead. The rate is the same, same horse, different color.

-Robert

[Jerry 5TJ]

5 minutes ago, RobertGary1 said:

In which case its use tax exempt but you just paid sales tax so it doesn't feel any better.  You have to be careful when someone says its tax exempt from use tax because usually it just means there is sales tax instead. The rate is the same, same horse, different color.

-Robert

Intra-State. As in within the same state.  

[jaylw314]

On ‎10‎/‎27‎/‎2019 at 10:47 AM, chriscalandro said:

here’s the email thread of the AZ Garbage. At the end of the day it was decided I did not need to re-register or pay the tax. 

 

 

On Aug 27, 2019, at 2:32 PM, azdot.gov> wrote:

 

 

Good afternoon Mr. Calandro,

 

Thank you for your email regarding aircraft N111MR.  The letter we sent did not state that the aircraft needed to be registered in Arizona it stated that it maybe required to be registered.  We typically do send out this type of letter to aircraft owners that appear on our airport tie-down reports and are not registered in Arizona.  Generally we attempt to get traffic patterns on the aircraft from various sources but, when we can not we will send a informational letter similar to the one you received. If your aircraft is going to be flying in and out of Arizona in the future, pursuant to Arizona Revised Statutes 28-8322, 8327 and 8336 a notarized exemption affidavit should be filed annually stating the number of days anticipated in Arizona.  (See Attached).

 

We are merely trying to enforce the statues without causing undue hardship on aircraft owners.

That part made me laugh out loud.  How many of us have a notary fly with us when we fly somewhere?  I know I've flown up to Washington on a lark at times, if I needed to find a notary before any such flight I wouldn't do it.  The only I hate wasting more than money is time.

[RobertGary1]

1 hour ago, Jerry 5TJ said:

Intra-State. As in within the same state.  

Yes, in some cases intra-state purchases get the use tax treatment instead of sales tax. It depends on the seller.

 

-Robert

[jaylw314]

31 minutes ago, RobertGary1 said:

Yes, in some cases intra-state purchases get the use tax treatment instead of sales tax. It depends on the seller.

 

-Robert

Technically, the only typical time sales tax would apply would be if you were a CA resident and bought an aircraft from a dealer in California (are there any??).  The dealer would owe the sales tax to the state, and typically would pass the cost to you at the time of the sale.

All other times, the seller would not owe sales tax to the state.  Any such tax that applies is now the buyer's responsibility.  That's really the only difference--use tax the buyer pays to the state after the purchase, while sales tax the seller owes the state and collects it from the buyer.  The amounts and exceptions are pretty much the same otherwise.

To clarify, if you are a CA resident, and a private party (non-dealer) sells you a plane, they are not authorized to collect sales tax from you.  That is your responsibility to pay the state later.  I imagine there may be some scams out there where sellers claim to do so.

For average Joe's like us, "sales" and "use" taxes are pretty much interchangeable.