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 expert recommendations?
- Thread starter AlphaWhiskey
- Start date
N747JB
Final Approach
Sadly, with our complex tax laws that vary from state to state, it's probably a good idea to hire someone that knows the ins and outs of aviation. Sales tax alone on a new airplane is 7% in Georgia, if there is a way to legally defer that on a million dollar airplane, that's pretty big money!!
Alexb2000
En-Route
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.
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.
AlphaWhiskey
Pre-Flight
Thanks Alexb, helpful insight!
Flying Viking
Pre-takeoff checklist
That quoted provision from the agreement does not mean what you think it means. It's a boilerplate provision called a severance clause, which ensures that if one provision in the agreement between you and the attorney is found by a court to be illegal, then that provision is disregarded but the rest of the contract remains enforceable. For example, if there is a late payment provision that includes an interest rate that is found usury under applicable law, then the interest provision is stricken from the contract, but the remainder is still in force and effect.
Again, the provision is limited to the interpretation of the contract between you and the attorney in case there is a dispute, and does not address any illegal conduct you or the attorney would be engaged in during the course of the representation.
JimNtexas
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Jim - In Texas!
My wife is a very experienced Enrolled Agent, she has many transportation industry clients, from local truck drivers and CFI's to Captains of Great Big Airlines, domestic and foreign.
She prefers to meet clients in person, but she's taken clients from the interwebs.
What ever you do, DO NOT CALL ONE OF THOSE 800 NUMBER TAX SERVICES YOU SEE ON LATE NIGHT TV!!!! Every single one of those are total ripoffs.
She prefers to meet clients in person, but she's taken clients from the interwebs.
What ever you do, DO NOT CALL ONE OF THOSE 800 NUMBER TAX SERVICES YOU SEE ON LATE NIGHT TV!!!! Every single one of those are total ripoffs.
asgcpa
En-Route
If you're a member of AOPA they have legal services available for a modest fee which entitles you to 2 hours free (I believe but don't quote me) and reduced rates. Just a suggestion.
In my opinion, pay the darn sales tax. Consider setting up a llc and put aircraft in the llc so ownership can be transferred without having to pay use tax again. But consult with a CPA in your state and familiar with your facts, and do not rely on my advice as I may not know all the facts in your circumstance. If you don't pay they can and will catch up to you eventually.
In my opinion, pay the darn sales tax. Consider setting up a llc and put aircraft in the llc so ownership can be transferred without having to pay use tax again. But consult with a CPA in your state and familiar with your facts, and do not rely on my advice as I may not know all the facts in your circumstance. If you don't pay they can and will catch up to you eventually.
Daniel Chueng is the best in business. He is extremely well regarded in the Cirrus Community and an avid poster on the COPA forums even though he himself is not a pilot. I would highly recommend someone specializing in aviation taxes as they can become complicated extremely quickly.
N747JB
Final Approach
When you get "home" in many states, you owe use tax, which is the equivalent of sales tax in most states. In Georgia and most states, the sales/use tax is based on where the airplane is kept. So, you can buy it in Montana with 0 sales tax, but when you base it in Georgia, sales tax is due.
If you buy it and base it in a low or no tax state for 6+ months, you might be able to get around the tax, but don't get caught trying to evade it.
A good aviation tax accountant should be able to figure this out and give the legal ways to minimize the tax and best way to configure ownership to minimize income tax as well. I just pay the sales tax and don't depriciate the airplanes, so you should probably ignore the above!
N747JB
Final Approach
I think a lot of states are doing that, tax collectors must have forum similar to this one to discuss ideas on how to collect more taxes!
N747JB
Final Approach
And SC is $300, I think. I don't think anyone would have an issue paying a flat or capped amount. It's the 6-10% that keeps tax experts in business!
AlphaWhiskey
Pre-Flight
That's what I wanted to know Barrettaj, thanks so much!
I assume that your purchase did not qualify for the Occasional Sale exemption?
Just asking to ensure that you are familiar with it for future reference.
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.
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.
aggie06
Line Up and Wait
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.
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.
In fact, aviation TAX is DIFFERENT in Pennsylvania. There's a whole section of the Pennsylvania Code that specifically applies to Aircraft which is different than the rules for motor vehicles (which have their own section of the code) and boats (which are lumped in with other merchandise subject to sales/use tax).
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.
In fact, aviation TAX is DIFFERENT in Pennsylvania. There's a whole section of the Pennsylvania Code that specifically applies to Aircraft which is different than the rules for motor vehicles (which have their own section of the code) and boats (which are lumped in with other merchandise subject to sales/use tax).
Badger
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Badger
Would a foreign LLC result in a non "N" tail number?
If by foreign, he meant non-US, that would be true. A foreign LLC or corporation can't register an aircraft in the US.
However, I suspect he meant "foreign" in the legal sense which means "not established in the state we're talking about here."
MooneyDriver78
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Tom
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
It is not a "dodge" (which implies something "dodgy" or underhanded); rather, it is a specific provision in the Tax Code which exempts certain transactions from Sales or Use Tax. It is a fairly narrow provision, and if challenged, the burden is on the purchaser to prove that it applies.
Texas does the same (trolling), and is very aggressive in collecting Sales and Use Tax. Of course, each state's tax laws are different - never claimed (or implied) otherwise.
Yep.
Foreign LLC ownership virtually never works to avoid Sales or Use Tax in the basing jurisdiction - but it will often delay the assessment and, thus, give you the opportunity to pay a substantial interest and penalty bill. In Texas, it will create the presumption that the asset is a business asset and will then expose the owner to the further privilege of paying Business Personal Property Tax assessments annually.
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.
aggie06
Line Up and Wait
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.
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.
JimNtexas
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Jim - In Texas!
When our club bought an airplane a few years ago from an individual the nice ladies at the Texas Comptroller Officer sent us a sales tax bill. I think they send a bill for every airplane change of ownership they find out about.
It turned out that because we are a non-profit corporation, and because we bought the plane from an individual not in the business of selling airplanes, our purchase qualified as an 'occasional sale', so we had no tax due.
The Comptroller's staff was really helpful, they helped us with the paperwork to get the exemption.
With respect to 'Aviation Tax Consulting', there is such a thing. Mostly that involves helping commercial airline crews deal with the fairly complex transportation worker tax code. Truck drivers are pretty much in the same boat, as are mariners.
The IRS tends to cast a skeptical eye on transportation worker returns, a lot of plain 'ol CPAs, Enrolled Agents, and IRS Revenue Officers are not real familiar with the details of the transportation worker section of the tax code.
So transportation workers tend to be audited at a higher rate then us regular W-2 wage slaves.