Florida sales and use tax audits are on the rise, and, like most states, auditors are looking for the “big ticket” items like aircraft. A long-term client of mine lamented to me the other day: “No one is turning wrenches on large aircraft in Florida anymore”. Why?
(a) Aircraft buyers and sellers, operators and services companies may be unaware of the exemptions available to them, and
(b) Auditors are often similarly unaware of the laws they are trying to enforce. Florida, however, actually has a fairly robust “menu” of sales tax exemptions that should be exploited in the event you face a sales tax or use tax audit in Florida.
Florida Sales Tax Exemptions:
- The export exemption (sales to out of state or country buyers are exempt from Florida sales and use tax when the goods are manufactured or acquired for this purpose and are shipped to the buyer “uninterrupted” (i.e. not first used by the dealer or manufacturer)).
- The in-state repair and maintenance exemption (aircraft repair and maintenance is exempt from Florida sales and use tax).
- The non-resident modification exemption (non-residents that come to Florida for the purpose of upgrading, repairing or refurbishing their planes are not subject to Florida sales or use tax on those activities).
- The sale for resale exemption (aircraft “dealers” may purchase and sell aircraft and aircraft parts without having to pay Florida sales or use tax).
- The supplemental type certificate exemption (work performed in connection with a major upgrade under authority of an STC exempt).
Importantly, these exemptions are cumulative, rather than exclusive.
Documentation and Business Use
It goes without saying that the more documented business use you’ve had for your plane, the more sound will be your defense against a federal income tax or state tax audit. That said, most of us try and enjoy our lives, and our businesses, without spending most of the day recording what we are doing, and records are imperfect. Think of ways that you might prove up, for example, that a specific trip was for business. If your flight log doesn’t necessarily document the business purpose of the trip, review your email to meeting participants, business partners and others that support your claim that you flew to a business destination.
A qualified aviation tax lawyer in Florida can make the difference between hundreds of thousands of dollars – or more – in alleged sales tax due versus a favorable result utilizing the Florida sale and use tax exemptions listed above.
Contact me, Ari Good, Esq., for other practical tax tips. I serve as a tax lawyer in Naples, Florida and worldwide in aircraft tax law matters.