Florida’s Non-Resident Exemption – Florida Aircraft Sales Tax Explained

Recent Developments in Florida Aircraft Sales Tax

June 14,2010

I. Relief for temporary visitors, aircraft returned to Florida within 6 months of purchase:

1. Two new use tax exemptions, codified at FL Stat 212.08(7)(ggg), effective 07/01/2010:
   1. Temporary presence of non-resident owners: Aircraft purchased by non-residents, for which sales tax not already paid, returned to Florida for fewer than 21 days (i.e. 20 or less) within 6 months of purchase exempt from use tax:
      1. Days do not have to be contiguous;
      2. Must be supported by “specified documentation”: Fuel, tie-downs, or hangar charges issued by out-of-state vendors or suppliers, or similar documentation;
      3. “Residency” is a function of domicile, business presence
      4. Burden of proof to show the aircraft was not in FL
   2. Unlimited exemption for specified purposes:
      Used “exclusively” for:
      1. Flight training
      2. Repairs
      3. Alterations
      4. Refitting
      5. Modification
      6. Requires documentation from in-state vendors or suppliers identifying the aircraft
      7. Burden of proof to show what was done while here.
   3. Cumulative with existing sales and use tax exemptions for commercial and large aircraft, aircraft returned to Florida after six months after purchase, etc.

II. “Exclusively For Resale”

1. Recent FL DOR attacks on FBOs and aircraft businesses that use aircraft for multiple purposes – retail sale, flight training and leasing;
2. FL law provides that an aircraft “dealer” (broadly defined) is exempt from sales or compensating use tax where the dealer purchases the aircraft “exclusively for resale” (“showroom floor” / “inventory”), but also provides for “use by the dealer”, including:
   1. Charter
   2. Rental
   3. Flight training
   4. Demonstration
3. 1% use tax based on book value of the aircraft.

III. FL DOR Position

1. Federal income tax treatment defines “exclusively for resale” for Florida sales / use tax purposes – no authority;
2. Use by the dealer for flight training falls outside of the “exclusively for resale” definition and renders the plane taxable:
   1. Aircraft first used for flight instruction by a bona fide aircraft dealer are not held “exclusively for resale” and are therefore taxable;
   2. Impossible to read this provision consistently with the provision that explicitly permits flight training as a “use by a dealer”, subject only to the 1% use tax regime;
   3. Artificial timing or “first use” requirement:
      1. DOR: “If an aircraft is first used for flight training purposes, then it falls within the flight instruction rules. If it is used first for non-instruction leasing, then it can still be considered as held exclusively for resale”.
      2. No authority – statute / code contains no “first use” or “intent” element. Proper view is to look at the character of the business.

IV. Planning

1. Sale for resale – Purchase aircraft into single-purpose entity and have all activity be “leasing”;
2. Document “first use” leasing even if this is not the legal standard.