Sales tax on buying a plane?

[Chesterspal]

If I purchase a plane sitting in another state from my own, where do I pay the sales tax?

Also, in terms of the local/sate property tax, is it the same as buying a car... whereas (in the case of a car) when you go to register the DMV does not accept the price on the Bill of Sale, they go by what their system says it's worth... which is usually more?

In the end, you pay way more in property tax than the vehicle was worth at the time of sale.

 

[weilke]

If I purchase a plane sitting in another state from my own, where do I pay the sales tax?

That depends on which states are involved and how the transaction is structured. The answers can be 'A', 'B', 'both' and 'neither'.

Most of the time, it is going to be the state where your plane is based. If they don't charge you a 'sales tax' (because the transaction closed outside of their jurisdiction) they may charge you a 'use tax' for basing it in state. Typically (but not always), if you had to pay sales tax in state A, state B will credit you that tax when they come for their pound of flesh. Sometimes there is a time limit on how long you can claim that credit. There are a few oddball situations where you dont owe sales tax in either state. e.g. state A has a 'fly away exemption' and your home state has a 'casual sales exemption'. So while both states have a sales tax on aircraft, you may just get away with not paying on either end.

In some states (like NY), if the plane is owned through a corporation, you can opt not to pay sales tax on the purchase price. The hook is that you have to charge yourself sales-tax on the hourly rate that you use to rent the plane from your corp. In some situations (expensive plane, shortish holding period, low operating cost), this can be preferable over paying sales tax on the entire purchase price. In other situations (cheap plane, high operating cost, longer holding period), you would be better off paying the tax up front.

 

[AnthonyS1]

Live in NJ and bought a plane in NY. No sales tax. NJ has a rule where if you buy a used plane from an individual it is not susceptible to sales tax. If I bought a plane from a dealer or a broker that ran the price of the aircraft through his or her books then you have to pay sales tax. If you buy a plane that is brokered for an individual and the broker just takes a small share for his services then there is still no sales tax. These are just the rules for NJ. Your state will most likely be different.

 

[NordicDave]

Most people buy through an escrow company. Many are in Oklahoma. The transaction takes place there, and you're just flying it out of one state into another. Most jurisdictions require tax where the plane is primarily parked. The % of time parked that triggers sales and use taxes are dictated by statute per state.

I used to have a FlightAware link to Elon Musk's jet. Every flight originated from Reno Nevada, then to California to pick him up, then to whenever he's traveling. This escapes CA sales and use taxes since the plane is parked in CA at least a day less than 6 months to trigger the taxes.

-David

 

[chemgeek]

Check your state laws or contact the state tax department for the most current information. In some states, if you buy a plane out of state, you owe a "use tax" equivalent to the sales tax. If you pay sales tax in the state of origin, you may be required to pay the difference in use tax between your state and the origin state. Laws change frequently, so do check. For example, NY state now exempts aircraft and aircraft parts from sales or use tax. Yay.

One thing is for sure: state tax departments do track down aircraft owners for all applicable taxes using the FAA database. Early in my flying days, a colleague lost his plane in NY state by ignoring notices to pay back use tax, interest, and penalties.

 

[Kelvin]

NC has perhaps the most favorable sales and use tax on planes and boats anywhere.

$1500.00 is the max sales/use tax.

As the Governor says, "We are open for business."

 

[C-1 PILOT]

One thing is for sure: state tax departments do track down aircraft owners for all applicable taxes using the FAA database. Early in my flying days, a colleague lost his plane in NY state by ignoring notices to pay back use tax, interest, and penalties.

The above was once true, but as of September 1, 2015, has changed.

https://www.tax.ny.gov/pdf/memos/sales/m15_3s.pdf

 

[hindsight2020]

TX has a casual sale exemption for parties who are not considered dealers/brokers. I don't deal with dealers/brokers for that reason. My monkey my circus. Sales tax amounts can often times overshadow the negotiating slop in purchase price at the price points I usually look at, making the transaction a non-starter. None of these things are that precious to me to have to have it from a dealer/broker. To each their own.

 

[Jamie Kirk]

When I bought mine I had my father in law take delivery in Arizona which doesn’t tax personal sale of aircraft.

Maybe later this year he’ll decide to gift it me in California which just so happens to be tax free.

 

[Lachlan]

NC has perhaps the most favorable sales and use tax on planes and boats anywhere.

$1500.00 is the max sales/use tax.

As the Governor says, "We are open for business."

If Kelvin's reference of $1500.00 max includes brand new airliners and LSAs alike, then, well, he wins overall title.

 

[cowman]

Lots of information here including links to tax info for a bunch of states
https://www.aopa.org/go-fly/aircraft-and-ownership/buying-an-aircraft/the-pilots-guide-to-taxes

In the 2 states I've lived and bought an aircraft in, you had to mail in a tax form with bill of sale to prove purchase amount and a check when you bought the airplane. You usually get so many days to do it in before it's late. Then that's all, you're done. The problem is every state kind of does it's own thing so there's not really a standard answer unfortunately.

 

[Chesterspal]

Lots of information here including links to tax info for a bunch of states
https://www.aopa.org/go-fly/aircraft-and-ownership/buying-an-aircraft/the-pilots-guide-to-taxes

In the 2 states I've lived and bought an aircraft in, you had to mail in a tax form with bill of sale to prove purchase amount and a check when you bought the airplane.

The check was for the tax or did you mean a photocopy of the check you used to buy the plane to prove what you actually paid for it?

 

[cowman]

The check was for the tax or did you mean a photocopy of the check you used to buy the plane to prove what you actually paid for it?

Check was for tax. If you’re not sure what to do there’s probably a phone number to call the tax authority in your state and I’m sure they’ll help. I can give you good details for WI or IL as I’ve had to do it in both. IL is kind of obnoxious in their procedure but the people are at least easy to deal with.

 

[3393RP]

I used to have a FlightAware link to Elon Musk's jet. Every flight originated from Reno Nevada, then to California to pick him up, then to whenever he's traveling. This escapes CA sales and use taxes since the plane is parked in CA at least a day less than 6 months to trigger the taxes.

-David

Typical green hypocrite, and in his inimitable style, Musk goes all out.

 

[Chesterspal]

Interesting how some states, mine included, do not charge property tax on small planes... only a minimal annual registration fee. So, in one way they have enough common sense to realize aviation helps the local economy, but on the other hand, many cities want their GA airports shuttered.

It's truly insane.

 

[Kelvin]

NC has perhaps the most favorable sales and use tax on planes and boats anywhere.

$1500.00 is the max sales/use tax.

As the Governor says, "We are open for business."

If Kelvin's reference of $1500.00 max includes brand new airliners and LSAs alike, then, well, he wins overall title.

I was wrong on aircraft and 'qualified' jet engines. This fee has gone up $1000.00 over the last few years...
https://www.ncdor.gov/taxes-forms/sales-and-use-tax/aircraft-and-qualified-jet-engines

Boats are still $1500.00 max.
https://www.ncdor.gov/taxes-forms/sales-and-use-tax/boats