Sales tax!

[rwabdu]

I was wondering if anyone has any advice to share on sales tax for airplane purchases, done a lot of research and had some trouble figuring it out. It seems very state specific, hard to know who I owe for what. Is it possible that I could have to pay sales tax in two states like pay sales tax in one state and use tax in another? How does a state decide to charge you sales tax. Also, how do the states even find the airplane to send you a tax bill if its moving around? If for example the aircraft existed in Maryland at the time of a purchase (although the buyer was not in state when signing the documents), it is owned by an LLC in New Hampshire but will spend a few months in Michigan this winter also... Seems like things could get very costly depending on what state I have to pay taxes in...  I cant find anything about a fly away exemption in Maryland which makes me concerned they don't have one. If I just do nothing what will happen?

[GeeBee]

You're right, it is VERY state specific and it is something you want to research prior to purchase and prior to basing for longer than 30 days. States pay services to use the FAA data base to notify them when registration changes. States like Maryland also make sure they are very close to airport operations sometimes even running them...like KMTN so they know who is there. Point is.....you can't fly under the radar (or ads-b), big data is on to you. Usually, (but not always) you pay sales tax in the state in which the airplane was sold, then you take that receipt to the state where it will be based and if it was less than what they would have charged, you owe a "use tax" to fulfill your obligation. I say "usually" because you can get yourself into a situation where you can get gigged twice for the full freight. 

Let me give you my example. I purchased an airplane based MS. I had the seller deliver the airplane to TX for a pre-purchase. TX is a fly away state so I completed the sale and took title in TX. I flew the airplane to my home in GA. Now if a broker or dealer had been involved according to GA law, I would have owed sales tax. However, since it was a direct buyer to seller transaction, "casual sale" provision applied and I owed.......nothing. I do however pay about 1% of its value each year in ad-valorem tax.

Structure your sale carefully, but if you live in MD......they are sharpening the gig for you! I would suggest you consult a sales tax attorney.

[KLRDMD]

Or just move to Arizona and never pay sales tax or use tax regardless of where or who you bought the airplane from.

[MooneyMitch]

I strongly suggest consulting with an aviation tax attorney.  

[GeeBee]

1 hour ago, KLRDMD said:

Or just move to Arizona and never pay sales tax or use tax regardless of where or who you bought the airplane from.

That is true, but if you buy an airplane from an owner in CA, I guarantee the CA State Franchise Tax Board will want to talk to you. Automatic 50% penalty too.

https://msdtaxlaw.com/uncategorized/california-sales-use-tax-guide-for-aircraft/

 

 

[PT20J]

Sales/Use tax rules vary according to the laws of the states that collect it. Generally, if you are a resident of a state that collects such tax on airplanes, you will owe it. States usually have reciprocal agreements that prevent you from having to pay tax to two states and non-residents are generally not taxed on purchases if the airplane is promptly removed from the state after purchase. It is pretty easy to check the rules and should be part of your purchase process. For instance, in California see https://www.cdtfa.ca.gov/formspubs/pub61.pdf. Below is a screen shot from this document showing that non-residents are exempt. 

[ArtVandelay]

It depends, but generally where the plane is hangared, in some states airports report long term lease airplanes to state, they’ll send you a bill, with additional 10% or more interest or late fee on top of bill. Ditto for boats.
Maybe they’ll go high tech and start using ADSB.

[EricJ]

2 hours ago, KLRDMD said:

Or just move to Arizona and never pay sales tax or use tax regardless of where or who you bought the airplane from.

It may depend on where in AZ.   The City of Scottsdale sent me a letter inquiring about my purchase, but since I let them know I bought it in TX (which is a fly-away state) and keep it in Phoenix they haven't bugged me about it since.

But, yeah, $25/year to a register it and that's pretty much it.

[KLRDMD]

4 hours ago, GeeBee said:

That is true, but if you buy an airplane from an owner in CA, I guarantee the CA State Franchise Tax Board will want to talk to you. Automatic 50% penalty too.

https://msdtaxlaw.com/uncategorized/california-sales-use-tax-guide-for-aircraft/

I bought my current airplane from an owner in California. The sale occurred in AZ as he delivered the airplane to me.

[Guest]

Sure glad I live in highly taxed Canada where we generally don’t have any of these tax issues.

Clarence

[JWJR]

I bought my plane in PA. I got a bill about a month after I took delivery. I paid it (7%) and was mailed a receipt. I keep the receipt with my log books. My first plane I kept at a private airport that changed hands. The new owner wanted state and federal funding for improvements. Shortly there after all the old timers hangered there started getting inquiry letters/tax bills. I assume the state did a walk through and made note of N numbers and started researching. I recall an American Greed show on CNBC about a billionaire from NY that was destroyed. They started with evading state taxes on rare art. If your going to to do anything other than pay get an attorney’s blessing first. BTW I hate attorneys every freakin last one of them!


Sent from my iPhone using Tapatalk

[MooneyMitch]

22 minutes ago, JWJR said:

BTW I hate attorneys every freakin last one of them!

No need to sugar coat it! 

[GeeBee]

4 hours ago, KLRDMD said:

I bought my current airplane from an owner in California. The sale occurred in AZ as he delivered the airplane to me.

That is the way to do it. I have bought several airplanes out of state, brought them into CA on an Air Carrier certificate. Even went so far as to get the Reno FSDO to do the compliance check, then fly them in on revenue flights.......and still got audited by the CSFTB. They make the IRS look like amateurs. 

 

[PT20J]

2 hours ago, JWJR said:

BTW I hate attorneys every freakin last one of them!

Some of the nicest MS contributors are attorneys. 

[amillet]

Thank you Skip. I appreciate the compliment 

[jaylw314]

On 10/9/2021 at 9:14 AM, PT20J said:

Sales/Use tax rules vary according to the laws of the states that collect it. Generally, if you are a resident of a state that collects such tax on airplanes, you will owe it. States usually have reciprocal agreements that prevent you from having to pay tax to two states and non-residents are generally not taxed on purchases if the airplane is promptly removed from the state after purchase. It is pretty easy to check the rules and should be part of your purchase process. For instance, in California see https://www.cdtfa.ca.gov/formspubs/pub61.pdf. Below is a screen shot from this document showing that non-residents are exempt. 

A couple nuances:

• Sales tax = use tax generally, and even if you live in a state where there's no sales tax, if you operate the plan to a "significant" degree in another state (or move there), you can later get hit with use tax no matter when you bought the plane.  What "significant" means again depends on the state, but if you search MS you can find some particularly egregious states that attempt to levy use tax (I vaguely recall Maine, Indiana?).  In CA, use tax is based on where you "principally hangar or store" the aircraft.
• You are generally exempt from paying sales or use tax ALREADY PAID to another state.  So if you live in a state with a high sales/use tax and paid it off, and another state attempts to hit you with use tax at a lower rate, you just show them your receipt for sales tax and tell the to f*** off.  However, if another state hits you with use tax at a higher rate, then you may have to pay off that use tax, but it would be reduced by the amount of tax you've already paid to another state.  Either way, if you pay sales or use tax, it's vital to keep your receipt for the future.
• Flyaway exemptions generally have some sort of limitation where the plane cannot be brought back into the state within a certain time.  If you do, you lose the exemption and are liable for the sales tax.  In CA it's 12 months with some caveats.

Edited October 10, 2021 by jaylw314

[carusoam]

20 hours ago, JWJR said: BTW I hate attorneys every freakin last one of them!


Sent from my iPhone using Tapatalk

Let’s see… it is the weekend, and weekend rules are up in effect…

Hmmmm… look left, look right…. One of these folks is either a dentist, or an attorney….

How do you feel about dentists?

Hate is a strong word…. Are you sure you didn’t mean strongly dislike?

 

Goofy post of the day… has been awarded to… 

On the other hand… it is really hard to take back spoken words….

goofy phrases typed on the internet disappear quickly….? (Don’t they?)

 

PP thoughts only, I have written plenty of goofy posts…

Best regards,

-a-

[Rwsavory]

No one likes attorneys until they need one, or until their child graduates from law school.  

[PT20J]

This is one of those areas where there are few transactions and the dollar amount is high so the states look for this revenue pretty aggressively. Way back in 1986 when I was living in California, I purchased an airplane and tied it down at KWVI and paid the use tax. A tiedown became available at KRHV and I moved the airplane three weeks later. I didn't even think about the fact that the use tax rate was higher in Santa Clara County where KRHV is located than in Santa Cruz County where KWVI is located. Sure enough, a couple of months later I got a bill in the mail. This was before the Internet and all the means that the government now has to track airplane ownership and location. So, it is best to understand the rules. I should have waited a bit longer to move the airplane.

On the other hand, the Internet is rife with stories about terrible tax consequences and many I suspect are exaggerated. We bought a home in Washington State in 2010 and for several years we spent winters in our home in California and summers in Washington. In 2016 we decided that we would eventually sell the California home and move to Washington, and I declared Washington State our "tax home" and began filing California non-resident income tax returns. The all knowing Internet warned of all sorts of terrible consequences because supposedly so long as you owned property in California, the state would claim you were still a resident and make your life hell. We researched all the rules, carefully followed them, and never heard a peep from the state. So, do your research, and don't lose sleep over Internet horror stories that may have left out significant details of a specific situation.

Skip

[carusoam]

For sales tax questions… I contacted my accountant…. He seams to know the tax rules of my state…

Not sure if a tax attorney would be the first step… (?) 

I would probably contact the accountant that flys a Mooney for his insight first…. @Danb

Best regards,

-a-

[Bravoman]

On 10/9/2021 at 8:42 AM, GeeBee said:

You're right, it is VERY state specific and it is something you want to research prior to purchase and prior to basing for longer than 30 days. States pay services to use the FAA data base to notify them when registration changes. States like Maryland also make sure they are very close to airport operations sometimes even running them...like KMTN so they know who is there. Point is.....you can't fly under the radar (or ads-b), big data is on to you. Usually, (but not always) you pay sales tax in the state in which the airplane was sold, then you take that receipt to the state where it will be based and if it was less than what they would have charged, you owe a "use tax" to fulfill your obligation. I say "usually" because you can get yourself into a situation where you can get gigged twice for the full freight. 

Let me give you my example. I purchased an airplane based MS. I had the seller deliver the airplane to TX for a pre-purchase. TX is a fly away state so I completed the sale and took title in TX. I flew the airplane to my home in GA. Now if a broker or dealer had been involved according to GA law, I would have owed sales tax. However, since it was a direct buyer to seller transaction, "casual sale" provision applied and I owed.......nothing. I do however pay about 1% of its value each year in ad-valorem tax.

Structure your sale carefully, but if you live in MD......they are sharpening the gig for you! I would suggest you consult a sales tax attorney.

I don’t believe you are correct as to how the law currently stands in Ga. Sales tax has been due on so called casual sales for some time now. What you say used to be the case and in fact  I used to buy new cars through a friend in South Carolina which didn’t charge sales tax on new cars and take title from him there thus avoiding the Ga sales tax. Can’t do that anymore, and when they catch up to folks that forget to pay the use tax on airplane purchases they bust them real hard with penalties and interest. I’ve seen it happen. 

[GeeBee]

6 hours ago, Bravoman said:

I don’t believe you are correct as to how the law currently stands in Ga. Sales tax has been due on so called casual sales for some time now. What you say used to be the case and in fact  I used to buy new cars through a friend in South Carolina which didn’t charge sales tax on new cars and take title from him there thus avoiding the Ga sales tax. Can’t do that anymore, and when they catch up to folks that forget to pay the use tax on airplane purchases they bust them real hard with penalties and interest. I’ve seen it happen. 

Sales Tax on cars is a whole different issue now that ad-valorem tax on cars has been eliminated. 

Here it is from the State revenue web site

https://dor.georgia.gov/taxes/business-taxes/sales-use-tax/what-subject-sales-and-use-tax#field_related_links-486-17

Can the sale of an aircraft or watercraft be excluded from the tax when the transaction meets the requirements of a casual sale? 

Yes. The sale of aircraft or watercraft is not subject to sales tax when the sales transaction meets the requirements of a casual sale. Ga. Comp. R. & Regs. r. 560-12-1-.07.

 

What does 560-12-1-.07 say?

 

http://rules.sos.ga.gov/GAC/560-12-1-.07?urlRedirected=yes&data=admin&lookingfor=560-12-1-.07

 

Rule 560-12-1-.07. Casual Sale

 

 

(1)	Invoking the rule of de minimis and because of the difficulties of administration and enforcement, no sales or use tax liability will be enforced against either the sellers or the purchaser in a casual sale transaction as herein defined, except as hereinafter provided.

(2)

A "casual sale transaction" is:  (a) A sale in which the tangible personal property involved was not acquired or held by the seller for use in the operation of his business or for resale; or (b) A sale of tangible personal property acquired or held by the seller for use in the operation of his business (not acquired or held for resale) if the total selling price of such sale and all such sales made during the calendar month of such sale and the preceding eleven calendar months does not exceed $500; or (c) A sale of tangible personal property acquired or held by the seller for use in the operation of his business (not acquired or held for resale) if such sale is made in a complete and bona fide liquidation of a business of the seller. For purposes of this paragraph the term "business" means a separate place of business subject to registration under the Act; the term "a complete and bona fide liquidation" means the sale of all the assets of such business conducted over a period of time not exceeding thirty days from the date of the first sale of such assets, or a longer time if approved by the Commissioner as a bona fide liquidation.

(3)

Notwithstanding any other provision of these regulations, when any seller sells tangible personal property for use or consumption through an agent, broker or other person who is regularly engaged in making sales of tangible personal property, either as a principal or as an agent, then, such a sale will not be deemed a casual sale transaction.

(4)

Notwithstanding any other provision of these regulations, if a sale is made by an individual who is employed by or associated with another person who is regularly engaged in the business of selling the same type of tangible personal property involved in such sale, then, such transaction will not be deemed a casual sale transaction and such individual shall register and comply with the obligations and liabilities of a dealer under the Act.

Cite as Ga. Comp. R. & Regs. R. 560-12-1-.07

[skydvrboy]

Every time I see one of these tax threads it makes me glad I live in Kansas.  Aircraft are exempt from sales or use tax when bought from another individual.   They're are also exempt from property tax if over 30 years old and recreational.  There's no tax on maintenance, neither parts nor labor and no state registration.  We're definitely one of, if not the most aviation friendly state.

Edited October 12, 2021 by skydvrboy

[dlthig]

Time to move to Kansas!

[ArtVandelay]

Time to move to Kansas!

I’ve been to Kansas, I’ll pay the taxes, thanks. ;-)