How do aircraft sales work?

[tsts4]

I've never sold anything of any real value to a non-dealer so I'm totally ignorant on the process. I'm curious as to the general machinations of a private, person-to-person aircraft sale and unique peculiarities for a sale in Florida. Anyone have a primer or a step-by-step outline on the subject?

 

[frfly172]

Use an escrow company to help you along the way. Remember that Florida has a sales tax on airplanes. Find a good mechanic to do a thorough pre purchase inspection.

 

[Rich Holt]

AOPA has you covered. Mostly.

Selling an Aircraft

Instructions for selling an aircraft.

www.aopa.org

 

[455 Bravo Uniform]

When a buyer is serious, you two sign a contract and they put a deposit down that goes into escrow. Only then will they do their due diligence, like title search (liens) and prebuy inspection, and at their cost. If all is well, they transfer the rest of the funds and you transfer the plane. If not all well, some discussions take place about compromises (price concessions, who fixes what) - then when and if all good, swap money and plane. If not good, then deal is cancelled, and deposit kept or returned. The contract will lay out all the if-then statements above. If you want, PM me your email address and I can dig up my contract and send - I had a lot of issues (some mechanical and some paperwork) that were 100% amicably resolved with seller because all this was clear at the start.

 

[ateamer]

Selling:
- Know what your plane is worth, and what the minimum price is that you’re willing to accept for it. It’s hard to know what the actual sale price is of planes, but reading the different sites can give you a pretty decent idea.
- Have the logs, manuals, STCs, and other documents organized, up to date, and available as PDFs.
- Post it for sale with the relevant info, standard abbreviations, times, equipment list. No personal anecdotes.
- Be honest. The N in NDH means “no”; that is none, ever.
- Be realistic. A pair of KX-170s, ADF, and a 3LMB is IFR-capable, sure, but it doesn’t justify pricing the plane like it has six 10” G3Xs and dual HUDs. If the avionics are older than the buyer is likely to be, bite the bullet and price accordingly. The goal is to sell, not spend months wondering why it’s still sitting there.
- Post good photos. Wash the plane first, clean the interior - no headsets and cables cluttering the panel, no bug spatters on the windshield, clean the belly. Take the photos outdoors, frame them decently, review them before posting - make sure they’re in focus, well-lit, and that they can be zoomed in without losing detail.
- Respond to inquiries promptly.
- Don’t take low offers as an insult. It’s just business. Counter, or just say “it’s too low, but we’re not done - let’s keep going and see where we can meet.”

Buying:
- Define your mission. If 95% of your flying is you and sometimes one passenger going half an hour to lunch or just local sightseeing, you don’t need a twin with a redundant IFR glass panel.
- Once you settle on a few particular makes and models - or maybe just one - learn everything you can about that plane. Differences from year to year, known issues, ADs, parts availability, maintenance and operational problems, factory, aftermarket, and type club support.
- Have a firm budget. Know how much you’re willing to spend and do not exceed it.
- Budget for taxes. That varies from state to state. In Florida, it’s 6%, plus some counties add their tax. It’s dependant on what county the plane will be based in. Get the info you need online from official websites.
- Pay for a prebuy evaluation. Define exactly what will be looked at, what level of detail, what specific things need to be given extra attention.
- Budget for squawks, airworthiness issues, upgrades and catch-up from pencilwhipped annuals. From your research, you’ll get a picture of how much a typical annual costs. Plan for double that on the first one after you own it.
- Don’t fall in love with a plane before it’s gone through a prebuy and you’ve seen it in person, and preferably flown it.
- Make sure you can get, and afford, insurance. If transition training will be needed, arrange it in advance.

 

[tsts4]

Use an escrow company to help you along the way. Remember that Florida has a sales tax on airplanes. Find a good mechanic to do a thorough pre purchase inspection.

Is remitting the sales tax the buyers or sellers responsibility?

 

[cowman]

Is remitting the sales tax the buyers or sellers responsibility?

Normally it's the buyer's.

From a pure bare minimums perspective I believe all you HAVE to do is the person the airplane is currently registered to fill out the bill of sale form, then the buyer fills out the registration application along with the fee($5 IIRC). All that goes to the FAA. Then your state will probably have a form to fill out and you pay them your sales tax.

Most of the other stuff like doing a pre-buy or using escrow service is more along the lines of recommended than being required. I've bought 2 airplanes and sold one and never messed with escrow- cashiers check in one case and IIRC personal checks were fine for the other 2 cases. However you want to do it that is probably down to your trust and comfort level with the other party and amount of money on the line. Pre-buys are a good idea but be aware there is no standard for them- it's whatever the mechanic you happen to use wants to do/you ask him to do.

 

[Dana]

On the other hand, it can be as simple as a handshake, cash or check, and a bill of sale ("1.00 & ovc"). All the planes I've bought and sold have been that way.

Sales tax, where applicable, is usually paid by the purchaser to the state where the plane will be based.

 

[tsts4]

On the other hand, it can be as simple as a handshake, cash or check, and a bill of sale ("1.00 & ovc"). All the planes I've bought and sold have been that way.

Sales tax, where applicable, is usually paid by the purchaser to the state where the plane will be based.

I’m gonna ask a real stupid question— on the bill of sale what’s the benefit of listing as $1 and OVC vs the actual sales price?

 

[Half Fast]

Remember that Florida has a sales tax on airplanes.

Yes, but while the state tax is on the entire sales price, any county tax is limited to the first $5000 of the price.

Florida has an exemption for sales tax on airplane parts, so if you can talk the seller into removing the engine and selling it to you seperately you might be able to dodge a chunk of tax....

https://floridarevenue.com/Forms_library/gt800009.pdf

 

[2-Bit Speed]

I always thought sails were more of an old boat thing... Y'know, before engines.

 

[Let'sgoflying!]

How do aircraft sales work?​

Find the perfect airplane, write a big check.
Take it home, discover all the things about it that are wrong or you want different, start writing more checks.
That is all.

 

[tsts4]

How do aircraft sales work?​

Find the perfect airplane, write a big check.
Take it home, discover all the things about it that are wrong or you want different, start writing more checks.
That is all.

I would be the seller in this case, not the buyer. I don’t know the sales process because my plane is E-AB and I built it and didn’t buy it already completed and flying.

 

[pfarber]

I would be the seller in this case, not the buyer. I don’t know the sales process because my plane is E-AB and I built it and didn’t buy it already completed and flying.

E/AB doesn't change a thing.

 

[tsts4]

E/AB doesn't change a thing.

I know that. I only mentioned it to explain how I became an aircraft owner without going through the normal sales process to begin with, hence my ignorance on the process.

 

[EdFred]

Are there any states that don't have the sales tax on planes brought into the state. Most have a "if the plane is take out of state in xx days, no tax is due in the state in which the seller resided." Michigan has an end around for not paying any sales/use tax, but you need a trusted and willing family member, and a place to park it for a couple months.

 

[TCABM]

Are there any states that don't have the sales tax on planes brought into the state. Most have a "if the plane is take out of state in xx days, no tax is due in the state in which the seller resided." Michigan has an end around for not paying any sales/use tax, but you need a trusted and willing family member, and a place to park it for a couple months.

Texas has an occasional sales exemption. Private party to private party transaction is exempt from sales tax; if a broker is involved, then sales tax (6.25-8.25%) applies.

 

[Half Fast]

Are there any states that don't have the sales tax on planes brought into the state.

Well, as noted above, FL has a tax exemption for aircraft parts, so in theory one could use the Johnny Cash method:

 

[midlifeflyer]

Are there any states that don't have the sales tax on planes brought into the state. Most have a "if the plane is take out of state in xx days, no tax is due in the state in which the seller resided." Michigan has an end around for not paying any sales/use tax, but you need a trusted and willing family member, and a place to park it for a couple months.

Yes. A number of states have "casual sales" exemptions when the airplane is not being purchased through a dealer. @TCAMB mentioned Texas. My state, North Carolina has one also.

 

[Salty]

Step one to selling an aircraft. Find someone that wants your plane more than they want a pile of money big enough that you'd rather have the pile of money than your plane.

 

[EdFred]

Yes. A number of states have "casual sales" exemptions when the airplane is not being purchased through a dealer. @TCAMB mentioned Texas. My state, North Carolina has one also.

But NC does the yearly state/county property tax on airplanes (and other vehicles), right?

I wonder how it all shakes out after 10/15/20 years of ownership.

 

[brcase]

I’m gonna ask a real stupid question— on the bill of sale what’s the benefit of listing as $1 and OVC vs the actual sales price?

it used to be a way to dodge sales tax. but I have heard states have caught on and will access what they think the value of the aircraft is and then you have to provide documentation to refute it if you don't agree with it. Probably better to just put an accurate # there and pay the sales tax. Sometime using a dealer can help especially if you going to essentially be trading the airplane in for another. I know a few guys with dealer licenses only because they buy/sell airplanes frequently and help out friends to do it also.

But the rules are likely different for every state.

Brian

 

[Salty]

it used to be a way to dodge sales tax. but I have heard states have caught on and will access what they think the value of the aircraft is and then you have to provide documentation to refute it if you don't agree with it. Probably better to just put an accurate # there and pay the sales tax. Sometime using a dealer can help especially if you going to essentially be trading the airplane in for another. I know a few guys with dealer licenses only because they buy/sell airplanes frequently and help out friends to do it also.

But the rules are likely different for every state.

Brian

In Florida this is definitely true. A buddy of mine had the state come after them a couple years after he bought the plane demanding taxes. He truly did pay $1 for the plane from a friend of his that was dying and his friend wanted him to have the plane. He basically said "you can try to contact the seller if you want, but I hope you're have a good medium for the seance." Another year later they finally dropped it.

 

[midlifeflyer]

But NC does the yearly state/county property tax on airplanes (and other vehicles), right?

I wonder how it all shakes out after 10/15/20 years of ownership.

Property tax, definitely.

Over 10/15/20 years of ownership, I guess it depends on what you bought. But assuming a $200,000 aircraft and 6% sales tax, there's a difference between a conceptual $600/year over the course of 20 years and $12,000 added to the purchase price.

Bottom line is aircraft buyers are always looking for a way to (legally) minimize or avoid sales tax. Without even getting to sales tax exempt "casual/isolated/occasional/non-business" sales, you can find transactions where one buys and airplane based in a high sales tax state contractually taking delivery in a nearby "fly-away" state, so the only sales/use tax they have to worry about is lower sales tax in their "home" state.

 

[midlifeflyer]

I’m gonna ask a real stupid question— on the bill of sale what’s the benefit of listing as $1 and OVC vs the actual sales price?

It's not stupid. "$1 and OVC" has been around for a long time. Its legal roots go back to the concept that an enforceable contract requires "consideration" - something in exchange for the purchase. In the modern transaction, is really just a way of saying to the world, "I bought this and it's none of your business what I paid" on a potentially publicly-available ownership document. You can find it on real estate deals tool. I doubt if it's been much of a successful tax dodge.

 

[EdFred]

Property tax, definitely.

Over 10/15/20 years of ownership, I guess it depends on what you bought. But assuming a $200,000 aircraft and 6% sales tax, there's a difference between a conceptual $600/year over the course of 20 years and $12,000 added to the purchase price.

Bottom line is aircraft buyers are always looking for a way to (legally) minimize or avoid sales tax. Without even getting to sales tax exempt "casual/isolated/occasional/non-business" sales, you can find transactions where one buys and airplane based in a high sales tax state contractually taking delivery in a nearby "fly-away" state, so the only sales/use tax they have to worry about is lower sales tax in their "home" state.

I was just going through Michigan's this weekend. If you buy it as a resident but don't bring it into AS THE NEW OWNER, you owe no tax. If you buy it from a parent/child/grandparent/sibling you owe no tax. So, I'll just have them buy it, never bring it to the state, sell it to me within the fly away window, and I'm golden. Checking with Tennessee, there is no tax on relative transfer on motor vehicles or boats, but it appears an aircraft is not defined as a motor vehicle. Might have to make a call. See which way saves some coin.

 

[robin ardoin]

Are there any states that don't have the sales tax on planes brought into the state. Most have a "if the plane is take out of state in xx days, no tax is due in the state in which the seller resided." Michigan has an end around for not paying any sales/use tax, but you need a trusted and willing family member, and a place to park it for a couple months.

Louisiana does not collect tax on occasional sales of aircraft.

 

[Dana]

It's not stupid. "$1 and OVC" has been around for a long time. Its legal roots go back to the concept that an enforceable contract requires "consideration" - something in exchange for the purchase. In the modern transaction, is really just a way of saying to the world, "I bought this and it's none of your business what I paid" on a potentially publicly-available ownership document. You can find it on real estate deals tool. I doubt if it's been much of a successful tax dodge.

Sometimes there will be two bills of sale: one copy stating $1&ovc for the FAA, and one showing the actual sales price for the buyer's records.

 

[EdFred]

Sometimes there will be two bills of sale: one copy stating $1&ovc for the FAA, and one showing the actual sales price for the buyer's records.

"Actual" sales price.

I've had the sales price to match a copy of the cashier's check I gave the seller that I presented to the state. And that is ALL I gave the seller for money.

 

[midlifeflyer]

Sometimes there will be two bills of sale: one copy stating $1&ovc for the FAA, and one showing the actual sales price for the buyer's records.

If there was an escrow, there would be a closing statement. Assuming just about anything other than cash and a handshake, there will usually be some kind of paper trail.