AlphaWhiskey
Pre-Flight
Thinking of using Daniel Cheung from Aviation Tax Consultants for purchase of a new aircraft. Any pireps? Like any others? I live in PA and hangar in NJ.
Thanks!
Thanks!
Aviation tax consulting is a thing? Maybe that's what I should do with my life instead of this normal tax stuff.
Additionally, my attorney's OPINION was that we would still be responsible for the tax in most cases anyway. The only way to avoid it would be to lie or do something illegal. If you read the Aviation Tax Advisor's agreement any of this means they do not have to defend you.
For example:
"Should any portion of this Agreement be found to be unenforceable, illegal, or in conflict with applicable federal, state, and/or local laws, such portions shall be considered severed from this Agreement. The remaining portions of this Agreement shall not be affected."
Or take delivery of the aircraft in a state without sales tax and fly it home. That's what most of my fortune 1000 clients do.
I hear Illinois is active checking out tail numbers to assess for use tax.
NC has a $1500.00 sales/use tax cap on aircraft purchases.
I have paid it three times and cannot write the check fast enough.
I thought about using them twice and didn't in either case. I was buying piston singles and the fees for that are $8500 for 3 years. Of course we all want to avoid sales/use tax and in Texas that is 6.25% so not a small number. I'm sure that is the primary reason most people hire them. In the end I just paid the tax and moved on and I'm glad I did.
One of the main issues was that even if I avoid paying sales tax initially that doesn't stop other states from going after me. For example I spend a lot of time in New Mexico and my aircraft sits on the ground there for extended periods. They tried to invoice me for sales tax, it went away easily with no attorney involvement after I proved to them I had already paid sales tax in Texas. I've also had Texas come after me twice, even though I had already paid sales tax here. I believe plenty of other states do this as well. Point being states can still come after you past the three years with aviation tax experts and then you are on your own AND out the $8500.
Additionally, my attorney's OPINION was that we would still be responsible for the tax in most cases anyway. The only way to avoid it would be to lie or do something illegal. If you read the Aviation Tax Advisor's agreement any of this means they do not have to defend you.
For example:
"Should any portion of this Agreement be found to be unenforceable, illegal, or in conflict with applicable federal, state, and/or local laws, such portions shall be considered severed from this Agreement. The remaining portions of this Agreement shall not be affected."
I'm sure if you are considering a turbine, business aircraft, leaseback, etc. then there is a lot more to consider and structure.
Just my .02.
Or take delivery of the aircraft in a state without sales tax and fly it home. That's what most of my fortune 1000 clients do.
Avoiding sales and use tax can be done legally. Sure, it requires a bit more work (like a foreign LLC) ....
Would a foreign LLC result in a non "N" tail number?
Maybe Texas lets you dodge the sales/use tax if you buy out of state, but that's not universal. In the case of Pennsylvania (the posters apparent location), a use tax is due when an aircraft owned by a Pennsylvania resident enters Pennsylvania (if within the first six months, the use tax is computed on the sales price, if afterwards, the buyer can depreciate it down to the actual value at the time it's moved into the state).
If PA is anything like Virginia, they're trolling the FAA records and poking around the airports looking for people to bill for use tax.
Maybe Texas lets you dodge the sales/use tax if you buy out of state, but that's not universal.
In the case of Pennsylvania (the posters apparent location), a use tax is due when an aircraft owned by a Pennsylvania resident enters Pennsylvania (if within the first six months, the use tax is computed on the sales price, if afterwards, the buyer can depreciate it down to the actual value at the time it's moved into the state).
If PA is anything like Virginia, they're trolling the FAA records and poking around the airports looking for people to bill for use tax.
Avoiding sales and use tax can be done legally. Sure, it requires a bit more work (like a foreign LLC) and a bit more time, but it can be done. The cost adds up and is worthwhile when you're buying a citation instead of a 172. I wasn't suggesting anyone break the law, just suggesting that aviation tax is no different from tax in other industries.
As long as you have a competent accountant, he should be able to help you with all of that. You just need to be willing to pay for the qualified accountant in general. Most aren't willing to pay for the advice on the front end. They either do it themselves or get bad advice from an internet forum and pay more in the end to fix the problems.
A foreign LLC will not help in Pennsylvania. It matters NOT who owns the aircraft. The fact that it is brought into the Commonwealth for a resident's use triggers the tax liability.
Again, while you what you are stating MIGHT work in Texas, it has no bearing on Pennsylvania and reinforces the earlier advice to seek out someone competent in the STATE (and in certain circumstances, COUNTY) laws regarding aircraft and taxation.
North Carolina requires marinas to report boats so they can get their taxes, wouldn't be surprised if they required FBOs to report airplanes as well, other states probably do this too
I wasn't trying to start an internet argument here. Yes, I meant foreign as in out-of-state. The point I was trying to make is that aviation is such a small part of your tax picture, you need someone who can give advice on everything including aviation. Do you go hire an automobile tax expert because you own a car? Of course you don't.
If you want tax advice, hire a good tax accountant. He'll understand what happens when you depreciate something inside or outside an LLC. He'll understand whether you should sell the asset inside or the interest in the LLC or partnership. Here's a hint - it's different for everyone depending on everything else going on. That's not an aviation issue, that's just a tax issue.
Sales tax is just one kind of tax. As someone mentioned, you have to understand income tax, franchise tax if you're in an LLC, property tax, and excise taxes.
Again, my original point was that you need a tax expert, not an aviation tax expert. Unless you're actually in the aviation industry, your life is more complicated than just aviation tax. Even then, you're just layering in more rules and opportunities, so it still makes sense to get a good tax accountant and then have that guy get advice on those issues when they come up.
There is so much misinformation on use of corporate entities to own aircraft. An amazing number of otherwise-intelligent people believe that, if they own the aircraft through a foreign LLC or corporation (most often, Delaware or Nevada), the Tax Fairy anoints them with I'm-a-Not-a-Gonna-Paya-Taxa juice. Ends up feeding lawyers, is what it usually does. A noble enterprise.