Month: May 2009

Aircraft Sales and Use Tax – The States Take a Bite

It’s nothing new that the states, like our federal government, are looking at very serious budgetary shortfalls now and for the foreseeable future.  This has put aircraft-friendly exemptions on the chopping block in popular aircraft states such as Florida, California, New York and elsewhere.  Aside from preferring not to pay more tax (who does), aviators should be asking a very legitimate question:  will it pay?  Are the states cutting off their nose, so to speak, to spite their face?

Consider the following:

Job Losses:

  • Cessna has announced that it is suspending development of a midsize corporate jet, the Citation Columbus, closing the factory in Bend, OR where the plane was being created;
  • Cessna is eliminating almost 5000 posts, or 30 percent of the workforce;
  • General Dynamics to eliminate 1200 jobs at Gulfstream and cut production by one-fifth;
  • Canada’s Bombardier, maker of the Learjet, is cutting almost 4500 jobs.

Not only are the numbers troubling, but also the type of jobs that are being cut.  Unlike, say, a services business or a retail store, once you shutter a manufacturing facility it is very difficult to restart without a major reinvestment of time, effort and capital.  Reducing the demand for aircraft by increasing the tax burden on the buyer and operator finds its way up the chain to executives who, once they move on, may be gone for good.  With them go skilled engineers, tradespeople and professionals who make the operation work.

The states also seem to be missing that aircraft are, believe it or not, somewhat movable.  If you live in New York, which charges up to 8.5% sales or use tax in some areas, it only makes sense to hangar in (mostly) tax-free Connecticut.  If you cut the exemption for repairing and maintaining an aircraft, how can you expect aircraft owners not to go elsewhere for annuals, to say nothing of more costly modifications?

Taxes are what they are, and they’re going up.  What politicians need to understand, however, is that by using a sledgehammer instead of a scalpel anti-aircraft legislation is driving away business that relies on fixed facilitites and highly-skilled employees.  If one state doesn’t want them, perhaps another will

Mr. Ari Good, JD LLM practices in aviation taxation, corporate and partnership tax, international taxation and in representing clients before state and federal taxing authorities.  He has closed over one hundred aircraft transactions involving everything from light sport aircraft to Fortune 100 business jets.  Mr. Good supports aircraft dealers, brokers, flight schools and commercial operators worldwide in operational, regulatory and compliance matters.  Call (239) 216-4106 and visit www.goodattorneysatlaw.com.