Recent Developments in Florida Aircraft Sales Taxhttps
June 14,2010
I. Relief for temporary visitors, aircraft returned to Florida within 6 months of purchase:
- Two new use tax exemptions, codified at FL Stat 212.08(7)(ggg), effective 07/01/2010:
- 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:
- Days do not have to be contiguous;
- Must be supported by “specified documentation”: Fuel, tie-downs, or hangar charges issued by out-of-state vendors or suppliers, or similar documentation;
- “Residency” is a function of domicile, business presence
- Burden of proof to show the aircraft was not in FL
- Unlimited exemption for specified purposes:
Used “exclusively” for:- Flight training
- Repairs
- Alterations
- Refitting
- Modification
- Requires documentation from in-state vendors or suppliers identifying the aircraft
- Burden of proof to show what was done while here.
- Cumulative with existing sales and use tax exemptions for commercial and large aircraft, aircraft returned to Florida after six months after purchase, etc.
- 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:
II. “Exclusively For Resale”
- Recent FL DOR attacks on FBOs and aircraft businesses that use aircraft for multiple purposes – retail sale, flight training and leasing;
- 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:
- Charter
- Rental
- Flight training
- Demonstration
- 1% use tax based on book value of the aircraft.
III. FL DOR Position
- Federal income tax treatment defines “exclusively for resale” for Florida sales / use tax purposes – no authority;
- Use by the dealer for flight training falls outside of the “exclusively for resale” definition and renders the plane taxable:
- Aircraft first used for flight instruction by a bona fide aircraft dealer are not held “exclusively for resale” and are therefore taxable;
- 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;
- Artificial timing or “first use” requirement:
- 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”.
- No authority – statute / code contains no “first use” or “intent” element. Proper view is to look at the character of the business.
IV. Planning
- Sale for resale – Purchase aircraft into single-purpose entity and have all activity be “leasing”;
- Document “first use” leasing even if this is not the legal standard.