The cost of acquiring an aircraft can be extremely high; however, there are ways to lessen the impact of sales and use taxes.
Transaction Highlights
Negotiated the purchase of one of the first Boeing Business Jets and Bombardier Global Express aircraft, and the first operational Eurocopter EC 155B VIP-configured helicopter delivered in the United States.
Represented aircraft owner in connection with the simultaneous fleet transition involving the acquisition and trade in of 12 business aircraft.
Sales and Use Tax
The cost of acquiring an aircraft can be extremely high. One of the largest upfront costs during the acquisition is the payment of sales and/or use tax on the aircraft purchase. Fortunately, there exist planning opportunities that can defer or even eliminate the imposition of sales and use taxes in almost every state.
Typically, an aircraft is located in a tax neutral jurisdiction at the time of closing or a jurisdiction that has an exemption when the aircraft is to be relocated to another State (a “flyaway exemption”). However, States with sales tax also typically have a companion “use tax” which applies when the aircraft repositions to the State in which it will be based. Unless proper planning is implemented, a State will charge “use tax” on the value of the aircraft. Even though the aircraft registration may reflect an out-of-State address (Delaware, for example), use tax is applicable at the aircraft’s home base unless proper planning is implemented.
Sometimes use tax can be applied even if you do not base your aircraft in a particular State. For nonresidents who do not base their aircraft in Florida, Florida will tax a non-resident on the value of its aircraft even if the aircraft is based elsewhere if it is brought into Florida within the first six months of purchase and spends more than an aggregate of 20 days in Florida in those first 6 months.
Proper planning is the order of the day for State sales and use tax relating to aircraft.
AVIATION RESOURCES
KEEPING YOU ON COURSE
We are experienced in working with tax, legal and financial advisors of companies of all sizes in addition to family offices, to implement appropriate operating structures and planning objectives. For first time business aircraft buyers, we can quickly assemble a team of experienced industry professionals and others to assist the client with business, technical and other aspects of an aircraft purchase and ongoing aircraft management under Parts 91 and/or 135 of the Federal Aviation Regulations.
One of the challenges of using aircraft in business is understanding the effect of personal use on an executive and the company, and strategies for addressing income tax issues.
Personal Use
Letters of intent are an important start to most aircraft transactions, and failing to give them the proper attention can create costly misunderstandings.
Letters of Intent
Understanding the aircraft acquisition process is important in order to avoid common pitfalls and costly mistakes.
Aircraft Acquisition Process
In order to register an aircraft with the FAA, an individual or company must meet specific requirements. There are methods available for non-U.S. citizens to register aircraft with the FAA.
Aircraft Registration
Public Companies have unique concerns when purchasing corporate aircraft and structuring their operations, including from the perspective of SEC disclosure of non-business use, security and confidentiality.
Public Companies
Acquiring an aircraft currently registered outside the United States takes careful planning and requires answering some fundamental threshold questions. Exporting aircraft may not require the payment of duty, but failure to make appropriate customs entries can be costly.
Import / Export
Planning opportunities exist that can defer or even eliminate the imposition of sales and use taxes in almost every state.
Sales and Use Tax
In addition to aviation counsel, a successful transaction requires having experienced aviation professionals and tax advisors.
The Right Team
Our attorneys are experienced with helping clients navigate the often counter-intuitive rules of the FAA and other regulatory authorities.
The Dilemma of Single Purpose Entities
When acquiring an aircraft, several financing alternatives are available. Which is right for you?
Financing Options
THE RIGHT TEAM. THE RIGHT DEAL.
Business aviation is our passion. We closely guide foreign and domestic clients through the purchase, sale and financing of corporate aircraft, including regulatory compliance.
- Stewart Lapayowker