How and where to register my plane? IL or TN?

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Thunderbird83

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Thunderbird83
Sorry for the rudimentary nature of this post, but I am a first time airplane buyer looking for guidance.
I am buying an airplane next month. The airplane is currently located in Illinois and titled in an LLC.

I am a Tennessee resident, but I also have a house in Illinois. The plane will primarily be hangared in Illinois and I will use it to go back and forth to TN. I don’t have a hangar in TN, only IL.

Should I register the plane where it spends most of its time (IL) or where I am a resident (TN)? What about sales tax and LLC formation?
 
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AOPA has resources to help with this. You'll need to look into the nuance of the USE tax in both states. Planes will fall under a use tax, but they may each have requirements for time spent in-state etc. LLC formation is up to you. Also planes don't have titles, they just simply are registered under your name/address.
 
I paid the sales [EDIT: or USE tax whatever - same cost so for me only difference in terminology] tax in the state in which I reside and where the aircraft is primarily hangered. The LLC is in another state friendly to LLC but otherwise no reason to choose that other state.

I figured I could have avoided the sales tax for some time. Run and hide. Make them chase me. The effort was not worth my energy. Just paid the sales tax upfront to my actual home state of residence and place of hanger and didn't have to worry about it after that. EDIT: My home state charges no additional annual tax on the aircraft as property tax or something similar. I understand other states do that for automobiles so expect it is possible some states also do that for aircraft. I do not have to deal with that.

If you can argue the case for either TN or IL then I would choose the one that costs less. That is me and my risk tolerance.
 
You will pay the tax where the plane is hangared. Many airports report what planes are based there to the local tax office anyway. If they try to give you a tax bill for TN just show them you have it listed with IL.
 
If you hangar in IL, I suspect they will eventually find you and want their 6.5%. Depending on the value of the plane, it might be worth getting a hangar near your TN home and hangaring there 51% of the time. That said I have no idea of the tax rules in TN, or if 51% would be enough to keep IL off your back, but something to look into. If you intend to base the plane in IL, I'd suggest paying the tax on your own as the penalties and interest are significant IIRC. The tax is due within 30 days of bringing the plane into the state, and they'll send you the form about day 29, so you basically have to do it on your own to avoid the late fees.

I didn't bother setting up an LLC for my plane, but I wish I had. I believe I could've then rented the plane to myself and taken a bigger deduction for my charitable flying. It would also make it easier to set up a partnership or lease if I ever want to do that. IL considers "selling" you plane to even a single member LLC a change in ownership that triggers the use tax again.

ETA: Looks like TN gets 7%...yikes! Never thought they would be worse than IL. Congratulations, BTW. We expect pictures.
 
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If the airplane is currently in an LLC, you could buy the LLC instead of transferring the title of the airplane. Then you wouldn’t have to change anything (the aircraft would not incur sales tax), however you would be responsible for any risks and liabilities of the LLC prior to you buying it so you’d need to do your due diligence on the LLC.
 
Thunderbird83 said:
The airplane is currently located in Illinois and titled in an LLC.
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The registration is at the federal level and requires the physical address of the legal owner. Technically there is no title on an aircraft. Where you domicile the aircraft is another matter. States and other jurisdictions normally pursue the federal registration lists looking for potential tax revenue based on the owners physical address. However, some states have exemptions if you domicile the aircraft outside the physical address state. Whether you use your name or a LLC is specific to your state and your tax liabilities which to be 100% certain you should consult a tax professional.
 
LLC formation is easy but incurs annual fees. Further, if you later decide to change from LLC to your name, TN treats that as a second sale with sales tax due a second time.
 
So here's an interesting thought: What if instead of buying the aircraft, instead you buy the LLC which owns the aircraft?
 
Bell206 said:
The registration is at the federal level and requires the physical address of the legal owner. Technically there is no title on an aircraft. Where you domicile the aircraft is another matter. States and other jurisdictions normally pursue the federal registration lists looking for potential tax revenue based on the owners physical address. However, some states have exemptions if you domicile the aircraft outside the physical address state. Whether you use your name or a LLC is specific to your state and your tax liabilities which to be 100% certain you should consult a tax professional.
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There is also a state registration for Illinois if that's where he will base it.
 
donjohnston said:
So here's an interesting thought: What if instead of buying the aircraft, instead you buy the LLC which owns the aircraft?
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It would be a transfer of shares, it would not be a taxable event. Some jurisdictions may have a fee for transferring shares (usually this is very small if it does exist). The seller would of course be responsible for any profits tax, however it is unlikely especially given the costs put in.
 
Worth knowing for IL: if you paid sales/use tax in another state they credit you for what you paid elsewhere. IDK how TN works but on a 100k airplane IL tax would be $6500 but if you already paid 5,000 to TN(and have a receipt to prove it) you’ll only pay IL the difference of $1500.

IDK what TN does but if it’s not terrible I’d see if I could claim myself based in TN and avoid IL fees and taxes altogether. IL has its own plane AND pilot registration which isn’t particularly expensive (I think something like $20 every other year). But it’s utterly pointless and kind of annoying- I don’t even understand how it’s legal when these things are already done on the federal level but IL does it’s own thing.
 
A shares sale of the existing LLC is a roll of the dice. Personally, I wouldn't want to assume the potential debts and liabilities of the LLC prior to your ownership of it.

What if someone did something stupid in the airplane previously, and has been kicking around the idea of a lawsuit, but doesn't file until after you've purchased the LLC's shares? The likelihood is fairly low, but even that is more risk than necessary, in relation to a simple single asset like an airplane.

Just buy the airplane in your own name (or your new LLC), pay the tax, and move forward with peace of mind.

With that said: I am not a lawyer, CPA, or much of anything else, for that matter.
 
HornedFrogGrant said:
A shares sale of the existing LLC is a roll of the dice. Personally, I wouldn't want to assume the potential debts and liabilities of the LLC prior to your ownership of it.

What if someone did something stupid in the airplane previously, and has been kicking around the idea of a lawsuit, but doesn't file until after you've purchased the LLC's shares? The likelihood is fairly low, but even that is more risk than necessary, in relation to a simple single asset like an airplane.

Just buy the airplane in your own name (or your new LLC), pay the tax, and move forward with peace of mind.

With that said: I am not a lawyer, CPA, or much of anything else, for that matter.
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Could have the Seller sign an affidavit if any issues occurred since the formation of the LLC and supply proof of insurance which would cover any issues while insured. It’s something to be aware of but not something to write off.
 
IL will claim if the plane is in the state greater than 14 days, in any year, it is subject to the IL use tax.
 
masloki said:
IL will claim if the plane is in the state greater than 14 days, in any year, it is subject to the IL use tax.
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I guess it was a good thing icing kept me from flying the lawnmower from TX to MDW last spring and just took yonited to the windy city. And then I thought having taken the public phallic tube short notice was the expensive option...better lucky than good!
 
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