Aircraft purchase & tax

sdflyer

sdflyer

Pre-takeoff checklist
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sdflyer
I have purchased 172 in September of 2013 (California). Recently I got latter from FAA reminding me about purchase/sale tax. I thought there would be some kind of bill or 1099 at the end of the year, but nothing like that have been ever sent to me.

So now I'm scratching my head and thinking where to find information about purchase/sale tax? Any tips ?
 
The FAA reminded you of sales tax? Or the state did?
 
I don't know about cali but in most places it's entirely your responsibility to report & pay.

We don't notice this for most purchases- with other things like cars they normally get you when you go to register it but since you're registering your aircraft with a federal agency(FAA) it doesn't go through the state tax man automatically. They apparently do have ways of finding you though.

Personally I don't think it's right that a state can charge sales tax on used items... aircraft, cars, whatever that have already been taxed when purchased new but it is what it is.
 
cowman said:
I don't know about cali but in most places it's entirely your responsibility to report & pay.

We don't notice this for most purchases- with other things like cars they normally get you when you go to register it but since you're registering your aircraft with a federal agency(FAA) it doesn't go through the state tax man automatically. They apparently do have ways of finding you though.

Personally I don't think it's right that a state can charge sales tax on used items... aircraft, cars, whatever that have already been taxed when purchased new but it is what it is.
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I already put aircraft purchase on state and federal tax returns via tax software, so I'm wondering what else to pay?
 
Here in Georgia, I asked around and could not find the right entity to pay the tax to, after a lot of leg work. Finally my friends who are owners said "wait, they will find you." Sure enough, six weeks after purchase they sent me a form. Most states scour the FAA registry looking for new registrations in their state, and your address is conveniently right there. :)
 
Most states do charge a sales or use tax on purchase and sale of a motor vehicle (including aircraft). If you paid sales tax in the state of sale, you may be entitled to a credit against use tax in your home state (California, in your case), up to the amount of tax you would owe had you paid nothing.

If you've paid nothing so far, you're likely to owe the sales/use tax to the State of California. I doubt the FAA would have mentioned anything about sales tax to you, but the State Comptroller in CA or the FTB would have.

It's your duty to report and pay, and if tax is owed and you fail to do so, in all likelohood, you'll owe interest and penalty as well.

Some states (I call Texas home) have an exemption for "Occasional Sales" - essentially, sale of an aircraft by someone who has not sold more than (I think) 2 a year, and neither buyer nor seller hold a sales tax permit. Not likely any use to you in CA, but concept may apply.

Get good and knowledgeable advice before penalty tags you.

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Edit:

see: http://www.boe.ca.gov/sutax/faqtrans.htm
 
sdflyer said:
FAA sent letter
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That makes no sense. FAA shouldn't care about tax. When I bought my 170 in SoCal and I was living in San Diego, I got a letter from the CA BOE for the tax. Never anything from the FAA.
 
bullwinkle said:
Here in Georgia, I asked around and could not find the right entity to pay the tax to, after a lot of leg work. Finally my friends who are owners said "wait, they will find you." Sure enough, six weeks after purchase they sent me a form. Most states scour the FAA registry looking for new registrations in their state, and your address is conveniently right there. :)
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Yep, same thing they did with me in Georgia. They'll find ya eventually.
 
Don't know why the FAA would be involved with the sales tax. If you owe the state that's due the money will find you. If you are a snow bird two states will try to tax you.
 
They did this to me in Illinois. They will find you. The lady I spoke with was not happy they had to find me in order for me to pay this. She told me the amount owed would be more for being late.

Tony
 
1600vw said:
They did this to me in Illinois. They will find you. The lady I spoke with was not happy they had to find me in order for me to pay this. She told me the amount owed would be more for being late.

Tony
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when we moved to IL I made the cut-off for having my plane reside in our previous state by 3 days. of course that was by design. it took me months of correspondance back and forth with springfield to get to the end of it. That situation is now gone, you owe no matter where you came from.
 
bullwinkle said:
Here in Georgia, I asked around and could not find the right entity to pay the tax to, after a lot of leg work. Finally my friends who are owners said "wait, they will find you." Sure enough, six weeks after purchase they sent me a form. Most states scour the FAA registry looking for new registrations in their state, and your address is conveniently right there. :)
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Even if you use an out of state (Delaware) corp.;)
 
sdflyer said:
I already put aircraft purchase on state and federal tax returns via tax software, so I'm wondering what else to pay?
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In Florida it is the Florida Department of Revenue; Sales & Use tax division.

I paid 6.5% use tax when I purchased my plane. And just another point of information, if you trade planes (buy and sell in one transaction), you only have to pay sales tax on the extra. ie, if you sell one for $50k and buy one for $60k you only pay tax on $10k. At least that is the way it is in Fl.
 
cowman said:
Personally I don't think it's right that a state can charge sales tax on used items... aircraft, cars, whatever that have already been taxed when purchased new but it is what it is.
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Around these parts they get around that complaint by calling it a use tax. Yup, it sucks big time but that's the law. There are some states which don't have the tax for casual sales.
 
sdflyer said:
I already put aircraft purchase on state and federal tax returns via tax software, so I'm wondering what else to pay?
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So this is a purchase to be used in a business?
 
Clark1961 said:
Around these parts they get around that complaint by calling it a use tax. Yup, it sucks big time but that's the law. There are some states which don't have the tax for casual sales.
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Yeah now that I think of it, that's what WI calls it... plus a registration fee which I suspect is for tracking purposes. I believe on cars they still call it sales tax but I may be mistaken.

It's more money out of my pocket whatever they call it.
 
sdflyer said:
I have purchased 172 in September of 2013 (California). Recently I got latter from FAA reminding me about purchase/sale tax. I thought there would be some kind of bill or 1099 at the end of the year, but nothing like that have been ever sent to me.

So now I'm scratching my head and thinking where to find information about purchase/sale tax? Any tips ?
Click to expand...

Most likely it was probably the state. Here in my state, Illinois requires a use tax to be paid and they will track you down.
 
SCCutler said:
Some states (I call Texas home) have an exemption for "Occasional Sales" - essentially, sale of an aircraft by someone who has not sold more than (I think) 2 a year, and neither buyer nor seller hold a sales tax permit. Not likely any use to you in CA, but concept may apply.

Get good and knowledgeable advice before penalty tags you.

---

Edit:

see: http://www.boe.ca.gov/sutax/faqtrans.htm
Click to expand...



Whew! I was beginning to sweat bullets. I feel better now. Thank you. :)
 
SCCutler said:
Most states do charge a sales or use tax on purchase and sale of a motor vehicle (including aircraft).
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I don't know if I would say most sales apply though, there are typically a lot of exceptions for sales or use/property taxes. Like age of aircraft (KS for example)
 
RotorAndWing said:
There's nothing that says you can't use a Delaware Corporation for aircraft registry.
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Of course not, however the state of registry for an aircraft does not (generally?) enable you to avoid sales/use tax in states that charge it. It simply removes one avenue of the state finding out that they have another sucker to demand payment from (and probably with a "you didn't pay us on time" penalty).

Now... if you have a private air strip to park at, and you register out of state, you may be able to evade the tax man. If you tie down or hangar at an airport where someone else wants to record your tail number, your odds of a successful evasion go down significantly.
 
RotorAndWing said:
There's nothing that says you can't use a Delaware Corporation for aircraft registry.
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True, but that doesn't relieve you the obligation of paying the local state tax rate where the aircraft is actually domiciled. State tax divisions have gotten wise to these kinds of practices and use other means to track down ownership than simply perusing the FAA registry.
 
RotorAndWing said:
There's nothing that says you can't use a Delaware Corporation for aircraft registry.
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I know, mine are registered in Delaware and I got a sales tax bill 6 weeks after purchase.:rolleyes: I was just pointing out, the states will still collect, no matter where it's registered. :rolleyes:
I asked a broker who called me 3 weeks after buying my Conquest, how she got my number, very nice woman, sent me a list of all Conquest owners with owners names and phone numbers. About 60-70% where registered to companies or some type of LLC/corporation, all had name, address and phone numbers of principle owners!!:eek: So, the tax man has no issue figuring out who owns what. :rolleyes:
 
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N747JB said:
I know, mine are registered in Delaware and I got a sales tax bill 6 weeks after purchase.:rolleyes: I was just pointing out, the states will still collect, no matter where it's registered. :rolleyes:
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They will not be denied.

Opinions vary, but in most instances, creating a corporate entity in another state to hold an aircraft is principally valuable to the taxing authorities, because now, you get to pay (1) tax on the airplane; (2) minimum franchise / corporate tax in the state of incorporation along with the burden (minimal in most instances, but there nonetheless) of annual status reporting in that state; and (3) the cost/burden of securing authority for your foreign state corporation to poperate in the state of domicile (yes, you are supposed to have done that), minimum franchise / corporate tax in the state of domicile, and annual status reporting in that state.

Just don't get it.
 
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