Taxes on Airplane

7 Replies

Taxes on Airplane

Posted by Philip Jacobs on Mar 4, 2019 5:02 pm

I bought a T182T new in 2005 and based it in Texas until July 2018. In August, I moved to Tennessee. Last week, I received a sales/use tax bill from the Tennessee Department of Revenue based on a Blue Book plane value. I was not aware that  taxes were assessed in Tennessee. What experience do you have with sales/ use taxes in your state and in Tennessee in particular? Sales tax did not have to be paid previously and I was able to negotiate with the State of Tennessee to reduce the valuation. 
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Re: Taxes on Airplane

Posted by Brennan Callan on Mar 5, 2019 10:29 pm

Hi Philip, et al.,
in the maritime and aviation industry, one method used in dealing with finding "friendly" places to register your boat, ship, vessel, aircraft, spacecraft is called "flags of foreign conveniens" and this means you can find a nation that does not charge ANY taxes and has many fewer laws burdening your craft/vessel.  This means that you might have your plane in the USA, but it would be registered in Bermuda or Panama as a couple of possible examples.

Involving an aviation attorney who has experience is vital for you getting actual legal advice.  This note is NOT to be construed as legal advice as I am not an attorney and I do not practice law in any state.  I have two undergraduate degrees that deal with the law and I studied at Tulane Maritime Law Schools.  I am slowly researching and writing an Admiralty and Maritime Law Dictionary as this is the oldest form of law in the world.

Start searching for attorneys on:
1. www.martindale.com
2. www.findlaw.com
3. www.lawyers.com

Understand that these attorneys paid for their profile listing.  You need to read and compare profiles to find someone that claims they already have the skills you need and not waste time on a General Practitioner that just got a J.D. degree, but they never handled the first aviation case.  In many/most states, the only two types of lawyers that can list a "specialization" are Admiralty and Maritime Lawyers (called "Proctors in Admiralty" in England) and Patent Lawyers.  These are additional degrees beyond the J.D. degree.  They often earn a "LLM" which is a Masters Degree.

Everyone should know that Aviation and Space Law are extensions of Admiralty and Maritime Law pursuant to 18 USC section 7 "United States Territorial Jurisdiction of the USA defined."  Each of you pilots might want to read that entire code.  "USC" stands for "United States Code."  In practice, Admiralty and Maritime Law, Space Law, and Aviation Law are "international law."  You can research that topic back to the Judiciary Act of 1798 when the colonies relinquished their sovereignty over having different control over international law for our new centralized federal government to have that authority vested into it as a singular body.

This is all why about a month ago, I urged someone to just ask a question of the FSDO because the information could be found with the FSDO and the person who objected to my suggestion showed he had no familiarization with 18 USC section 7 "Special Maritime and Territorial Jurisdiction of the United States defined."  The reason to send someone to the FSDO was not over the topic of "jurisdiction," rather just for researching the question that person had last month.

SEE: https://www.law.cornell.edu/uscode/text/18/7

If you have the AOPA legal protection plan, they help on a limited scope of topics and not necessarily on other questions.  For example, I am researching and designing aviation safety equipment and none of the aviation attorneys I reached through that program could address the aviation-manufacturing questions that were part of my project and none of them to deal with the patent process for aviation technologies.  Therefore, when my membership renewal came up the following year, I did not continue the legal protection services.  The limited scope of topics were not problems for me and I could not see paying for those that year.

Best wishes,
Brennan

DISCLAIMER: nothing in this note is to be construed as LEGAL ADVICE.  I do not even play an attorney on TV. 



 

Re: Taxes on Airplane

Posted by Ronald Levy on Mar 6, 2019 8:44 am

Brennan Callan:
Hi Philip, et al.,
in the maritime and aviation industry, one method used in dealing with finding "friendly" places to register your boat, ship, vessel, aircraft, spacecraft is called "flags of foreign conveniens" and this means you can find a nation that does not charge ANY taxes and has many fewer laws burdening your craft/vessel.  This means that you might have your plane in the USA, but it would be registered in Bermuda or Panama as a couple of possible examples.

There is no practical way for a US citizen keeping an aircraft in the USA to do that.  The cost and paperwork (including getting a pilot certificate from that other country) would be far more than any US state's taxes.  In fact, European private aircraft owners register their planes in the US and get FAA pilot certificates because there is no cheaper place in the world to do that.

That said, a lot of US aircraft owners establish a Delaware corporation to own the plane due to the favorable tax situation in that state.  However, the cost and effort to maintain a Delaware corporation is usually more than it's worth in tax savings for a typical light airplane.  In addition, many (most?) states will tax a plane based in their state (usually defined by how many days a year it spends in the state) regardless of where it is registered, thus defeating the purpose for registering elsewhere.


 

 

Re: Taxes on Airplane

Posted by Philip Jacobs on Mar 6, 2019 8:45 am

Thanks Brennan. I had the plane’s LLC organized in Delaware, which worked great in Texas, as Texas did not require the sales tax. Tennessee takes a whole different approach and is very aggressive about tax collections on planes. If the plane is physically based in Tennessee, they will track its flights to justify the taxes. I have spoken with the AOPA attorneys, who recommended some local attorneys who are partners in the Legal Plan. I’ll keep you appraised. 

Re: Taxes on Airplane

Posted by Jimmy Wright on Mar 6, 2019 11:42 am

I had the same thing when I moved to Georgia to Indiana and of course moved my plane from Georgia to Indiana. All that I had to do was to show that I had owned the plane for a time while I lived in Georgia before I moved to Indiana. The proof that I used was the hanger lease I had in Georgia along with the Bill of sale when I bought the plane.  

Re: Taxes on Airplane

Posted by Ronald Levy on Mar 6, 2019 1:32 pm

BTW, Admiralty and Maritime Law has nothing to do with this issue.  It's strictly a matter of state tax law, not even Federal.  There isn't even a Federal preemption issue since there is no Federal aircraft sales/excise/use tax.  If you go to an attorney, make sure it's one who knows tax law in your state (and the state where the aircraft is based/registered, if different than where you have residence), preferably one who also has aviation experience, but it's primarily a state tax issue, not an aviation issue.

Re: Taxes on Airplane

Posted by Ronald Herold on Mar 11, 2019 10:36 am

HI,

Just to add insult to injury - many states are also adding personal property tax to aircraft which gives these states an annual stream of tax income.  That number may not be too much on a $100K airplane - but those who have warbirds like a P-51 which could be valued in the multi-millions are having their aircraft appraised and fighting the outrageous numbers that are being placed on these aircraft.  Just a thought.

Other states are imposing a "fly away" tax.  For example a Florida airplane privately sold and immediately moved out of state is taxed 6%.  There are ways around that tax but you have to know them.  Hire a knowledgeable person to assist when buying an airplane.  I know - in this case he was just moving it.  In many cases of just moving it the accepting state will reduce the tax by the amount you paid in the previous state.  If you didn't pay any tax due to your Delaware Corporation - well - then you may just have to pay the tax.

As a member of the Lawyer-Pilots Bar Association, I can put you in touch with a qualified attorney in Tennessee.  Of course using AOPA Pilot Protection to get an attorney may work.

Best,

Ron

-Ronald L. Herold, Ph.D., NSCA, MEII
Senior Certified Aircraft Appraiser
USPAP Qualified
Sustaining Member – Lawyer-Pilots Bar Association
EAA Lifetime Member
AOPA Lifetime Member

http://www.airplane-appraiser.com
(703) 573-2222

Check out the new Airplane-Appraiser group on FaceBook
https://www.facebook.com/groups/1884233435215877/

 

Re: Taxes on Airplane

Posted by Alan Wieder on Mar 11, 2019 8:22 pm

Similar in Wash state.  Tax is based on kit cost for experimental or sale price.  Due within 30 days of relocating the plane into the state iirc.