Wisconsin MROs have once again been foiled in their attempt to get the state legislature to exempt private aircraft maintenance and modification from the 5.5-percent state sales tax. While the tax does not apply to aircraft operated under Part 121 or 135 certificates, it does apply to those operating under Part 91.
Sales taxes in the United States
Aircraft operations in Indiana are about to become more affordable after state legislators approved a slate of aviation tax exemptions and restructurings. The measures, adopted at the urging of the Aircraft Owners & Pilots Association (AOPA) and other aviation groups, remove state sales tax on jet fuel and 100LL avgas and restructure the previously existing excise tax on aviation fuel to a fixed total state tax rate.
Operators of Bombardier jets are dismayed because they now have to pay state sales taxes on parts purchased through Bombardier’s Smart Parts program. Several operators who spoke to AIN on condition of anonymity said one of the primary reasons they participate in Smart Parts is to control and budget annual operating costs. “This adds a new dimension to overhead we didn’t budget for 2010,” one said.
Although some operators expressed concern because Bombardier has begun charging sales tax for parts covered under its Smart Parts program, this is a fairly normal requirement, according to tax expert Nel Stubbs, vice president of Conklin & de Decker. “If an aircraft is based in a state that has a sales/use tax,” she explained, “and the part is brought into that state and installed on an aircraft, that state’s tax rules apply.
A recent announcement by Bombardier Aerospace is causing a stir among Smart Parts customers. The company is going to begin charging state sales tax on all parts ordered through the hourly program; the tax is not included in the hourly program cost. The change will apply only to sales in those states that require vendors to charge tax. The exact number of states involved was not readily available but is believed to be fewer than 10.
At press time, NBAA and other aviation alphabet groups continued to fight a proposed bill in the Washington state legislature that would impose a 0.5-percent excise tax on aircraft in the state. House Bill 3176 and accompanying Senate Bill 6873 would base this annual tax on the most recent sales price, depreciated via a state-mandated schedule.
A 21-day sales tax exemption provision for out-of-state residents bringing newly purchased aircraft into Florida failed to pass the Florida Legislature last month. The bill passed the state’s House in late April, but the Senate refused to hear the bill based upon language that “allegedly created a negative revenue impact on the state budget.”
In addition to the costs of acquisition, prospective buyers must consider the costs–especially insurance and taxes–they will incur once they own the aircraft. To that end, aircraft management contracts with well thought-out insurance provisions should be integral to the aircraft acquisition process, said Bill Kingsley, an account executive with the Addison, Texas-based brokerage AirSure.
Business aviation operations in Arizona stand to benefit from new legislation that returns certain aviation tax revenues to the state’s airport improvement programs. Arizona governor Jane Dee Hull signed SB1251 into law on May 2, authorizing the deposit of 100 percent of flight property tax revenues into the state aviation fund starting in fiscal year 2004.
Conklin & de Decker last month released the 2008 State Tax Guide for General Aviation. The guide contains the latest taxes and fees for all 50 states, as well as sales and use tax applicable to aircraft sales, ownership, lease, parts and labor.
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