Out of the numerous types of transactions that are usually subject to tax, aircraft sales and use tax issues can be ranked among the most complicated and convoluted. First, and putting aside the fact every state views aircraft sales tax issues differently, aircraft have very specific exemption provisions. The exemptions can be monumentally beneficial for saving a good amount of money. However, the slightest misstep can cause the painful realization tax is owed. Second, an aircraft owner can find himself in the tax fight of his life when using the aircraft in multiple states, as each state will want to fully tax the aircraft. These are just two of the potentially numerous problems aircraft owners must navigate. This article will discuss a couple of common exemptions aircraft purchasers have available in Texas.
The general rule is the purchase or use of an aircraft in Texas is subject to sales tax. However, some aircraft purchases can be exempt from tax, pursuant to Tex. Tax. Code Ann. § 151.328.
One exemption available is for aircraft sold, leased, or rented to individuals who are “a certified or licensed carrier” of people or property. Tex. Tax. Code Ann. § 163.001(a) defines “certificated or licensed carrier” as one who has been authorized by the Federal Aviation Administration (“FAA”) to operate an aircraft to transport people or property under Parts 121, 125, 133, or 135 of Title 14 of the Code of Federal Regulations. Think “Uber” of the friendly skies. Thus, if you purchase an aircraft and are engaging in transportation services under any of these Parts, then your purchase can be exempt from Texas sales and use tax!
Another exemption involves purchases outside of Texas but the aircraft is brought into Texas. If this is the case and the reason the aircraft is brought into Texas is solely for the aircraft to be “completed, repaired, remodeled, or restored” can come into Texas tax free. Tex. Tax. Code Ann. § 163.003. If you plan on having the interior restored or some repairs being done on the aircraft, you can come in tax free, so long as the presence of the aircraft in Texas is solely for this purpose.
There are other aircraft exemptions. These exemptions are very fact specific. Before conducting any aircraft transactions in Texas or bringing your aircraft into Texas, you should contact an individual that is familiar about aircraft sales and use tax issues and discuss your specific circumstances to see whether you could be inadvertently creating a tax liability.
About the Author: Gerald “Jerry” Donnini II is a partner of the Law Offices of Moffa, Sutton, & Donnini, P.A. Mr. Donnini concentrates in the area of Florida and Federal tax matters, with a heavy emphasis on the tobacco, convenience store and petroleum industries . He also handles a myriad of multi-state state and local tax issues. Mr. Donnini is a co-author for CCH’s Expert Treatise Library: State Sales and Us Tax and writes extensively on multi-state tax issues for SalesTaxSupport.com.