Sales Tax Question

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T Bird

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T Bird
So my home state (MA) exempts aircraft from sales/use tax entirely but I’m looking at a plane (private sale) in Pennsylvania and it appears they do tax aircraft sales and have no exemptions for “fly-away” or “casual sale.” I talked briefly to an aviation tax specialist who seemed to confirm that but said a possible work-around would be to complete the sale in a state outside of PA that wouldn’t tax the sale — I.e. NY or Ohio, which he said would require the seller getting the plane to that other state and basically doing the transaction there. I asked him about logistics and he said his company offers the service to coordinate all that but at a flat rate which would be about the same as the potential sales tax for me anyways so he couldn’t help me any further. I did ask about using an escrow service for the transaction to be based on where the escrow company is based but he said that wouldn’t work and the plane would have to physically be in a different state when the sale was completed.

Does anyone have any experience with something like this, or any insight? Either specific to PA or another state. How would this logistically be done even, like what proof is there to the state of PA that the sale took place in another state so they don’t come after me later with interest and penalties too? Didn’t look like on the AOPA bill of sale or any other closing docs that location of sale is even mentioned or referenced, but PA would know the plane was based in PA and sold… Is this a legit work-around? Not sure if the seller would even consider it but would it be as simple as doing pre-buy, etc. at his home base then flying it to an airport out of state to “complete the purchase” and then I fly him back to his home base as the owner?

Any help is much appreciated. Even if no one personally has any experience with this, if anyone knows an aviation tax specialist who would help for a more reasonable fee (the guy I talked to dealt more with business jets), I’m happy to pay for help with this from an expert but not the $5k that guy said they’d charge when that’s roughly what the sales tax would be anyways.
 
just have the closing docs reference the state you want to close in. the actual physical location isnt usually an issue.
 
Write an agreeable contract that both of you agree to. have a pre buy done where ever you two agree on. Final point is contingent on delivery and your acceptance in MA. All in contract, everybody safe as escrow company is gate keeper of money and acts in compliance with contract.
 
I’ve done this with a motor home purchase. The coach was in North Beverly Hills and the California taxes were significantly higher than Louisiana. A ferry driver drove it across the state line to a truck stop in AZ where a local Notary completed the paperwork. I then drove to PHX and dropped the ferry driver at the terminal to catch a flight back to LAX. I saved a significant amount on a $400K+ purchase. I would pursue your current thinking.
 
Line 1
PURCHASER AND SELLER IDENTIFICATION
Enter the name and complete address of purchaser, along with the date of purchase. If the address of the purchaser is in Pennsylvania, or if the aircraft is used in Pennsylvania after purchase, the 6 percent (0.06) tax rate applies. The 7 percent (0.07) tax rate applies to Allegheny County addresses or use and the 8 percent (0.08) tax rate applies to Philadelphia County addresses or use.
Line 4
SALES TAX DUE -Multiply Line 3 by 6 percent (0.06), 7 percent (0.07) or 8 percent (0.08). See PURCHASER AND SELLER IDENTIFICATION to determine tax rate.
 
It is easy and reasonably straightforward, I have done this multiple times as a ferry pilot.

You hire a ferry pilot to fly the plane to your desired closing state. When the plane is on the ground, you send the wire or release escrow to complete the purchase. Buy gas in your flyaway state to prove that the aircraft was there at the time of the closing. Don’t bring the plane back to the sellers state, fly it home. File whatever tax exemption forms are required by the fly away state and your home state.
 
I am in MA and bought a FL airplane. Here's how my deal went... I put money in escrow and had a ferry pilot bring the airplane to me (my shop does prebuy for no charge on your 1st airplane if you got your PPL with them) If the deal fell thru it was on my dime to get the airplane back to its owner. Prebuy complete I beat him up for a few thousand off he accepted I released funds paperwork signed TADA I'm an airplane owner.

IMHO if the paperwork says the transaction took place outside of PA no one is going to know the difference except you and the owner.

It still amazes me in the wonderful state of Taxachusetts the GA is tax exempt for sales and property tax.
 
Kitch said:
IMHO if the paperwork says the transaction took place outside of PA no one is going to know the difference except you and the owner.
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I would not take that risk... it takes very little time and effort to do the closing in a fly-away state. Some states are VERY aggressive at coming after airplane owners for sales and use taxes. Do it the right way and save yourself the heartache of an audit and a tax bill later.
 
Thunderbird83 said:
It is easy and reasonably straightforward, I have done this multiple times as a ferry pilot.

You hire a ferry pilot to fly the plane to your desired closing state. When the plane is on the ground, you send the wire or release escrow to complete the purchase. Buy gas in your flyaway state to prove that the aircraft was there at the time of the closing. Don’t bring the plane back to the sellers state, fly it home. File whatever tax exemption forms are required by the fly away state and your home state.
Click to expand...

Also... in your case, since you say your home state doesn't charge sales or use tax... you can save a step, skip the fly away state. Just have the ferry pilot fly the plane to your home state and do the closing there. You could even ask the owner to fly it, and then put him on a commercial flight home.
 
A few have given the general answer - the parties to a sales transaction for personal property can indicate the state in which "delivery" is to take place. Keep in mind that "delivery" in this context means passage of ownership and risk of loss, so there are other ramifications which should be dealt with in the sales contract. Pretty standard stuff in sales transactions, not just aircraft. With aircraft, as @Thunderbird83 indicates, often done with a ferry pilot, but there are other ways.

And no, the best way is not to play "can I get away with it since the state won't know"
 
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Thunderbird83 said:
Also... in your case, since you say your home state doesn't charge sales or use tax... you can save a step, skip the fly away state. Just have the ferry pilot fly the plane to your home state and do the closing there. You could even ask the owner to fly it, and then put him on a commercial flight home.
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Thanks for the insight, this sounds like it may be the play.. so you would just put in the purchase agreement that the sale will be based upon delivery of the aircraft in MA? New to the whole process so not 100% clear on exactly what is done to close -- is it essentially: offer/written purchase agreement pending pre-buy, deposit in escrow, title search, pre-buy (assuming all checks out), then escrow company coordinates bill of sale, title/registration, and releases funds upon delivery of aircraft in MA if say seller flew it here? I guess one question is how does one differentiate "where the closing is done" if it's through an escrow company? What is the "proof" the transaction actually occurred in MA in this scenario? To your other point, I would like to do everything I can (i.e. have some proof the sale isn't subject to PA tax) to avoid PA aggressively coming after me for sales tax along with interest/penalties. Sure it doesn't seem likely that happens based on what others are saying and their experiences but it's possible if I don't address it upfront it could come back to me.
 
I’m confused. The quote in post #5 reads,

Racerx said:
. If the address of the purchaser is in Pennsylvania, or if the aircraft is used in Pennsylvania after purchase, the 6 percent (0.06) tax rate applies.
Click to expand...

Since the purchaser lives in MA, not PA, this whole discussion seems moot. The tax does not apply.

What am I missing?
 
Half Fast said:
I’m confused. The quote in post #5 reads,



Since the purchaser lives in MA, not PA, this whole discussion seems moot. The tax does not apply.

What am I missing?
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probably the difference is sales tax vs use tax. Sales tax applies to a sale taking place in a state (PA here). Use tax is if the purchaser is in or the airplane is used in the state (here PA), regardless of where the sale takes place.
 
midlifeflyer said:
probably the difference is sales tax vs use tax. Sales tax applies to a sale taking place in a state (PA here). Use tax is if the purchaser is in or the airplane is used in the state (here PA), regardless of where the sale takes place.
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So does PA think they can tax any plane that is “used” in that state, regardless of where the plane is based or the residence of the owner? What does “use” mean in this circumstance?
 
In my home state of WA, if a resident buys a vehicle (car, airplane, boat) in another state, he must pay the sales tax if he brings it back to WA within 6 months of purchase. This means paying the difference in sales tax between WA and the state in which you bought it. If you already paid more sales tax in the other state than you would have paid in WA, you don't have to pay any tax to WA.

This was 15 years ago when I bought my plane (in Oregon, which has no sales tax, so I paid the entire WA state sales tax). The law may have changed since then. But I think several other states have similar laws.
 
Half Fast said:
I’m confused. The quote in post #5 reads,



Since the purchaser lives in MA, not PA, this whole discussion seems moot. The tax does not apply.

What am I missing?
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So, here's the document that blurb is quoted from:


That section seems to possibly imply that the tax only applies for PA residents, but the general information also says all aircraft transfers are subject to sales/use tax unless qualified for exemptions, which are listed out and non-resident or buying and leaving the state with it are NOT listed.


Pennsylvania

State and local advocacy for the state of Pennsylvania
www.aopa.org

AOPA also indicates there is no "Fly away rule" which is what that would be if the tax didn't apply to non-resident. And no casual sale exemption that many other states also have.

In addition, the aviation tax expert who gave me 5 minutes of his time but wouldn't give me much more to explain further did say the tax would apply if the sale is completed in PA. I'm just trying my best to cover my ass upfront here. I'd love for the tax to not apply and yes that blurb you quoted one would think indicates the tax doesn't apply to me as a non-resident, however I don't want to take the chance if I don't have to that PA comes after me and says that interpretation is incorrect. I've heard from others about other states coming after them so it's not like it doesn't happen... $5k isn't necessarily a significant amount of $ in the long run but it's certainly enough that I'm not going to pay it if I don't have to, and half of it is the principle of the matter -- really no reason PA should be getting a dime from me in this transaction.
 
Not directly related, but of interest... I sold an airplane to a buyer in California. From Wisconsin, I delivered it to his ferry pilot in Minnesota. A few months later, I received a letter from the California revenue department, asking me the selling price. I contacted the buyer and learned he had declared the price $30,000 less than actual to reduce the tax.
 
A word of advice: File proof of payment of the sales tax in your permanent files. I bought my plane in Virginia and moved to Maryland about 6 years thereafter. Maryland asked to provide proof of payment of the sales tax else I would have to pay sales tax in Maryland. Luckily, I still had those records.
 
T Bird said:
…In addition, the aviation tax expert who gave me 5 minutes of his time but wouldn't give me much more to explain further did say the tax would apply if the sale is completed in PA. ….
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So the opposite is true. Tax does not apply if sale is not completed in PA. In the purchase agreement state sale completed in MA.

If you want an ironclad guarantee that PA won’t attempt to hunt you down (I don’t know how they would anyways), travel to PA, complete the sale there, then pay the $5K and be done with it. Personally though, I’d have the plane ferried and contingent upon acceptance, sale completed in Mass and not worry about PA.
 
Gilbert Buettner said:
Not directly related, but of interest... I sold an airplane to a buyer in California. From Wisconsin, I delivered it to his ferry pilot in Minnesota. A few months later, I received a letter from the California revenue department, asking me the selling price. I contacted the buyer and learned he had declared the price $30,000 less than actual to reduce the tax.
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When I bought a plane and the seller received a similar letter, he just forwarded the letter to me so I could fill out of the data and mail it in. :)

That was nice of him because the most sensible option would have been to throw in in the trash - there is no obligation to respond.
 
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kshaw said:
A word of advice: File proof of payment of the sales tax in your permanent files. I bought my plane in Virginia and moved to Maryland about 6 years thereafter. Maryland asked to provide proof of payment of the sales tax else I would have to pay sales tax in Maryland. Luckily, I still had those records.
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I had the same issue. I paid sales tax in Michigan on my Bonanza, moved to Minnesota and had to show proof. Then moved back to Michigan and had to remind them I had already paid them. Then moved to Wisconsin to a county with an additional .5% that I had to pay.
 
My experience with PA was with a boat, that I temporarily had registered using my parents PA address because I didn’t have a physical residence as I was cruising (living) on the boat. They apparently were checking the federal registry and sent me a letter wanting the tax on it. I sent a letter back explaining the situation and reregistered it using a Florida address.
 
T Bird said:
Thanks for the insight, this sounds like it may be the play.. so you would just put in the purchase agreement that the sale will be based upon delivery of the aircraft in MA? New to the whole process so not 100% clear on exactly what is done to close -- is it essentially: offer/written purchase agreement pending pre-buy, deposit in escrow, title search, pre-buy (assuming all checks out), then escrow company coordinates bill of sale, title/registration, and releases funds upon delivery of aircraft in MA if say seller flew it here? I guess one question is how does one differentiate "where the closing is done" if it's through an escrow company? What is the "proof" the transaction actually occurred in MA in this scenario? To your other point, I would like to do everything I can (i.e. have some proof the sale isn't subject to PA tax) to avoid PA aggressively coming after me for sales tax along with interest/penalties. Sure it doesn't seem likely that happens based on what others are saying and their experiences but it's possible if I don't address it upfront it could come back to me.
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If you're using an escrow company, they do not release the funds to the seller until the plane is on the ground in MA and you tell them that it is ok to release. The "proof" is a paper trail with time stamps. You have flightaware tracking of the airplane, personal logbooks for the flights, fuel receipts from MA, and a timestamp on the escrow release. All of this together should be sufficient proof should PA ever decide to come after you.
 
Half Fast said:
So does PA think they can tax any plane that is “used” in that state, regardless of where the plane is based or the residence of the owner? What does “use” mean in this circumstance?
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It doesn't mean visiting. As with all states, and without getting into the weeds, in the mobile property situation (cars, boats, airplanes), it means it's based in the state. There are credits for sales tax paid to avoid double taxation.

If you want the weeds, there are plenty of articles in the subject. This is neither a "Pennsylvania thing" (your state does it too) nor an "aviation thing."
 
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midlifeflyer said:
It doesn't mean visiting. As with all states, and without getting into the weeds, in the mobile property situation (cars, boats, airplanes), it means it's based in the state. There are credits for sales tax paid to avoid double taxation.

If you want the weeds, there are plenty of articles in the subject. This is neither a "Pennsylvania thing" (your state does it too) nor an "aviation thing."
Click to expand...


That’s what I thought. So in this case, the purchaser is not a PA resident, nor will the plane be “used” in PA since he’ll base it in MA.

So - why would he owe sales tax or use tax in the first place, even if he completes the purchase in PA?
 
Does anyone here know where I can get the forms for California? I checked the FTB site a couldn't find anything.. May as well get in front of it before they come knocking.

kshaw said:
A word of advice: File proof of payment of the sales tax in your permanent files. I bought my plane in Virginia and moved to Maryland about 6 years thereafter. Maryland asked to provide proof of payment of the sales tax else I would have to pay sales tax in Maryland. Luckily, I still had those records.
Click to expand...

This is true with all taxes... Did an ePayment with the state on their system and they said nothing was logged... Went to the local office with the bank statement showing the withdrawal and the emailed confirmation. Got the feeling I was guilty and to prove my innocence..
 
Half Fast said:
That’s what I thought. So in this case, the purchaser is not a PA resident, nor will the plane be “used” in PA since he’ll base it in MA.

So - why would he owe sales tax or use tax in the first place, even if he completes the purchase in PA?
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Back to the earlier comment.
midlifeflyer said:
probably the difference is sales tax vs use tax. Sales tax applies to a sale taking place in a state (PA here). Use tax is if the purchaser is in or the airplane is used in the state (here PA), regardless of where the sale takes place.
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Sales tax where you buy something. If you pass through Georgia on your way to South Carolina, you will pay Georgia sales tax on whatever you buy there. Use tax where it's used.
 
midlifeflyer said:
Back to the earlier comment.

Sales tax where you buy something. If you pass through Georgia on your way to South Carolina, you will pay Georgia sales tax on whatever you buy there. Use tax where it's used.
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Nope.

"SALES TAX DUE -Multiply Line 3 by 6 percent (0.06), 7 percent (0.07) or 8 percent (0.08). See PURCHASER AND SELLER IDENTIFICATION to determine tax rate."​
​
"PURCHASER AND SELLER IDENTIFICATION​
Enter the name and complete address of purchaser, along with the date of purchase. If the address of the purchaser is in Pennsylvania, or if the aircraft is used in Pennsylvania after purchase, the 6 percent (0.06) tax rate applies."​

Not a word about where the transaction takes place. The address of the purchaser is NOT in PA.
 
Half Fast said:
Nope.

"SALES TAX DUE -Multiply Line 3 by 6 percent (0.06), 7 percent (0.07) or 8 percent (0.08). See PURCHASER AND SELLER IDENTIFICATION to determine tax rate."​
​
"PURCHASER AND SELLER IDENTIFICATION​
Enter the name and complete address of purchaser, along with the date of purchase. If the address of the purchaser is in Pennsylvania, or if the aircraft is used in Pennsylvania after purchase, the 6 percent (0.06) tax rate applies."​

Not a word about where the transaction takes place. The address of the purchaser is NOT in PA.
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I think you are misreading it and I'll go with what the statute says, but YMMV.
 
This was over 20yrs ago. A club based outside of Taxifornia sold an aircraft to a business in Taxifornia. Months later the club received a letter from the Taxifornia Tax Bureau asking for information on the sale and the amount of the sale. The club ignored the request for information and never responded. Never got another letter.
 
BillTIZ said:
This was over 20yrs ago. A club based outside of Taxifornia sold an aircraft to a business in Taxifornia. Months later the club received a letter from the Taxifornia Tax Bureau asking for information on the sale and the amount of the sale. The club ignored the request for information and never responded. Never got another letter.
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Lucky. The other option would be a tax lien on the airplane.
 
BillTIZ said:
This was over 20yrs ago. A club based outside of Taxifornia sold an aircraft to a business in Taxifornia. Months later the club received a letter from the Taxifornia Tax Bureau asking for information on the sale and the amount of the sale. The club ignored the request for information and never responded. Never got another letter.
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Very common. As per my earlier post on the same subject, the seller does not owe any taxes to anybody regardless of the sale price and as a result has no obligation to respond to these requests. It's just a request for info sent in the hope of a response, based on whatever level of intimidation applies.

In my similar situation, the aircraft sales price was $6,000 and that low price was why the letter was sent to the seller. I paid sales tax on $6K and also in due course the local California county established annual personal property tax on that value (about $70 a year), for the next 19 years that I owned and flew the aircraft in California. I answered their annual questionnaires but never explicitly told them that I'd restored it completely in the meantime. As a result they never raised the appraised value. This likely also reflects that if I'd wanted to display the aircraft monthly I could have filed for the historic aircraft exemption that's currently available for any aircraft made before 1988 and paid them nothing regardless of value. $70 is better than nothing.

www.pilotsofamerica.com

Aircraft Sale - CA Request

This past Feb I sold my plane to someone in CA. I live in MA, the plane was handed over in MA. I got a letter from California asking all sorts of information about the transaction (sale price, owner address, etc). I"m thinking about just sending them nothing at all, or sending them the bill...
www.pilotsofamerica.com www.pilotsofamerica.com
 
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BillTIZ said:
This was over 20yrs ago. A club based outside of Taxifornia sold an aircraft to a business in Taxifornia. Months later the club received a letter from the Taxifornia Tax Bureau asking for information on the sale and the amount of the sale. The club ignored the request for information and never responded. Never got another letter.
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Better to not respond than lie. Lying can come with serious consequences in a transaction where there is almost always a paper trail.
 
PA has a use tax. They monitor FAA registrations. If you have a PA address they will catch up to you. I’m speaking from experience.
 
Dennis M Carleton said:
PA has a use tax. They monitor FAA registrations. If you have a PA address they will catch up to you. I’m speaking from experience.
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I live in MA; aircraft is in PA. Well aware of use taxes as well -- MA fortunately doesn't have any sales or use tax for aircraft.
 
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