Missouri needs money and who has it?

[Dean]

Missouri is hurting for money and the state had to use the Presidents Stimulus money to pay income tax returns. So looking for another source of income they have sent all aircraft owners in the state letters saying they must pay back sales tax, penalties and interest or a usage tax. Under RSMO 144.043, light aircraft are exempt from ales tax, so most light aircraft registered in Missouri never paid sales tax. The only tax we have been paying is our county personnel property tax.

So owners that purchased years ago are having to pay thousands, one owner was hit with 20 years worth of penalties and interest. The state has threatened to file liens against owners aircrafts if they don't pay up.

 

[EdFred]

Sounds like a lawsuit waiting to happen. Isn't this an ex post facto deal that is, well, illegal?

 

[RotorAndWing]

Simple. Create a Delaware (or Nevada) Corporation and re-register your aircraft there. Also do not give your local airport manager your registration number if you keep the plane in an enclosed hangar.

 

[RotorAndWing]

Sounds like a lawsuit waiting to happen. Isn't this an ex post facto deal that is, well, illegal?

It's all in the wording.

Remember, aircraft owners are the evil rich. Good luck on getting the general public to give any support to aircraft owners. When they start "user fees" on pickup trucks and bass rigs you'll see the uprising.

Just more "change you can believe in".

 

[flyingcheesehead]

Just more "change you can believe in".

Uhhh, yeah, 'cuz Obama is governor of Missouri and all.

 

[RotorAndWing]

Uhhh, yeah, 'cuz Obama is governor of Missouri and all.

Just making fun of an idiotic slogan. Sorry you don't get it.

 

[ScottM]

Missouri is hurting for money and the state had to use the Presidents Stimulus money to pay income tax returns.

Why did they 'have to' pay income tax returns? There were no hooks on that money from the feds to use it only for tax refunds. That is something the state decided to do on their own. If the state pols did this and it was wrong, hold them responsible. What I don't understand then is how this then links into the next part.

So looking for another source of income they have sent all aircraft owners in the state letters saying they must pay back sales tax, penalties and interest or a usage tax. Under RSMO 144.043, light aircraft are exempt from ales tax, so most light aircraft registered in Missouri never paid sales tax. The only tax we have been paying is our county personnel property tax.

So owners that purchased years ago are having to pay thousands, one owner was hit with 20 years worth of penalties and interest. The state has threatened to file liens against owners aircrafts if they don't pay up.

If you have a law on the books stating an exemption what exactly is the state doing to say that the exemption is not valid? Then how are they also applying penalties? Something smells funny here.

BTW and I am not trying to justify airplane taxes at all but it seems as though more and more states are using an usage tax on both planes and boats. Florida is really being creative with their usage tax. You do not even need to be a resident of the state to be hit with it. Own your plane for less than 6 months and fly into Florida and they can hit you with the tax.

 

[RotorAndWing]

Florida is really being creative with their usage tax. You do not even need to be a resident of the state to be hit with it. Own your plane for less than 6 months and fly into Florida and they can hit you with the tax.

Only if the plane remains there for a certain amount of time. Right now the state doesn't have the resources to go to every airport and track each and every plane. What they are doing is asking airport managers to report aircraft that are "based" at that airport. The next trick is defining "based".

Thankfully many airport managers have better things to do with their time. What I have seen is the AM's asking the FBO's to supply registration numbers which even they are reluctant to do.

 

[Dean]

Why did they 'have to' pay income tax returns? There were no hooks on that money from the feds to use it only for tax refunds. That is something the state decided to do on their own. If the state pols did this and it was wrong, hold them responsible. What I don't understand then is how this then links into the next part.

I was just making a statement that Missouri is almost broke, to the point they did not have the money to pay it's citizens their tax refunds. If it was'nt for the federal stimulus money people would still be waiting.
Missouri being almost broke has caused them to look for other means of income, thus the RICH private aircraft owner is now being targeted.

I do see this going to court sooner or later!

 

[ScottM]

I do see this going to court sooner or later!

Good, it should.

I don't want to start a whole discussion on the philosophy of the rebates here in FF. In fact I did start a conversation in SZ on that topic just in case anyone wants to discuss it. So I'll drop it from further comment here.

 

[kkoran]

Missouri is hurting for money and the state had to use the Presidents Stimulus money to pay income tax returns. So looking for another source of income they have sent all aircraft owners in the state letters saying they must pay back sales tax, penalties and interest or a usage tax. Under RSMO 144.043, light aircraft are exempt from ales tax, so most light aircraft registered in Missouri never paid sales tax. The only tax we have been paying is our county personnel property tax.

So owners that purchased years ago are having to pay thousands, one owner was hit with 20 years worth of penalties and interest. The state has threatened to file liens against owners aircrafts if they don't pay up.

Dave,

It appears to me that the exemption only applies to aircraft that are removed from the state within 10 days of purchase.

Light aircraft, definitions--exemption from sales tax, when.
144.043. 1. As used in this section, the following terms mean:

(1) "Light aircraft", a light airplane that seats no more than four persons, with a gross weight of three thousand pounds or less, which is primarily used for recreational flying or flight training;

(2) "Light aircraft kit", factory manufactured parts and components, including engine, propeller, instruments, wheels, brakes, and air frame parts which make up a complete aircraft kit or partial kit designed to be assembled into a light aircraft and then operated by a qualified purchaser for recreational and educational purposes;

(3) "Parts and components", manufactured light aircraft parts, including air frame and engine parts, that are required by the qualified purchaser to complete a light aircraft kit, or spare or replacement parts for an already completed light aircraft;

(4) "Qualified purchaser", a purchaser of a light aircraft, light aircraft kit, parts or components who is nonresident of this state, who will transport the light aircraft, light aircraft kit, parts or components outside this state within ten days after the date of purchase, and who will register any light aircraft so purchased in another state or country. Such purchaser shall not base such aircraft in this state and such purchaser shall not be a resident of the state unless such purchaser has paid sales or use tax on such aircraft in another state.

2. In addition to the exemptions granted under the provisions of section 144.030, there shall also be specifically exempted from the provisions of sections 144.010 to 144.525, sections 144.600 to 144.748, section 238.235, RSMo, and from the provisions of any local sales tax law, as defined in section 32.085, RSMo, and from the computation of the tax levied, assessed or payable under sections 144.010 to 144.525, sections 144.600 to 144.748, section 238.235, RSMo, and under any local sales tax law, as defined in section 32.085, RSMo, all sales of new light aircraft, light aircraft kits, parts or components manufactured or substantially completed within this state, when such new light aircraft, light aircraft kits, parts or components are sold by the manufacturer to a qualified purchaser. The director of revenue shall prescribe the manner for a purchaser of a light aircraft, light aircraft kit, parts or components to establish that such person is a qualified purchaser and is eligible for the exemption established in this section.

 

[Dean]

Dave,

It appears to me that the exemption only applies to aircraft that are removed from the state within 10 days of purchase.

Light aircraft, definitions--exemption from sales tax, when.
144.043. 1. As used in this section, the following terms mean:

(1) "Light aircraft", a light airplane that seats no more than four persons, with a gross weight of three thousand pounds or less, which is primarily used for recreational flying or flight training;

(2) "Light aircraft kit", factory manufactured parts and components, including engine, propeller, instruments, wheels, brakes, and air frame parts which make up a complete aircraft kit or partial kit designed to be assembled into a light aircraft and then operated by a qualified purchaser for recreational and educational purposes;

(3) "Parts and components", manufactured light aircraft parts, including air frame and engine parts, that are required by the qualified purchaser to complete a light aircraft kit, or spare or replacement parts for an already completed light aircraft;

(4) "Qualified purchaser", a purchaser of a light aircraft, light aircraft kit, parts or components who is nonresident of this state, who will transport the light aircraft, light aircraft kit, parts or components outside this state within ten days after the date of purchase, and who will register any light aircraft so purchased in another state or country. Such purchaser shall not base such aircraft in this state and such purchaser shall not be a resident of the state unless such purchaser has paid sales or use tax on such aircraft in another state.

2. In addition to the exemptions granted under the provisions of section 144.030, there shall also be specifically exempted from the provisions of sections 144.010 to 144.525, sections 144.600 to 144.748, section 238.235, RSMo, and from the provisions of any local sales tax law, as defined in section 32.085, RSMo, and from the computation of the tax levied, assessed or payable under sections 144.010 to 144.525, sections 144.600 to 144.748, section 238.235, RSMo, and under any local sales tax law, as defined in section 32.085, RSMo, all sales of new light aircraft, light aircraft kits, parts or components manufactured or substantially completed within this state, when such new light aircraft, light aircraft kits, parts or components are sold by the manufacturer to a qualified purchaser. The director of revenue shall prescribe the manner for a purchaser of a light aircraft, light aircraft kit, parts or components to establish that such person is a qualified purchaser and is eligible for the exemption established in this section.

Yes you are correct, the biggest complaint is from owners that purchased their aircraft out of state years ago and have no record of paying Sales Tax when it was purchased. So the state is going back years and adding penalties and interest. I have heard that one owner got a bill for over $12K on a J3 Cub he purchased 20 years ago.

 

[kkoran]

Yes you are correct, the biggest complaint is from owners that purchased their aircraft out of state years ago and have no record of paying Sales Tax when it was purchased. So the state is going back years and adding penalties and interest. I have heard that one owner got a bill for over $12K on a J3 Cub he purchased 20 years ago.

So the reference to the RSMO 144.043 exemption was just a red herring. It's more productive if we just stick with the facts.

 

[Gary]

Yes you are correct, the biggest complaint is from owners that purchased their aircraft out of state years ago and have no record of paying Sales Tax when it was purchased. So the state is going back years and adding penalties and interest. I have heard that one owner got a bill for over $12K on a J3 Cub he purchased 20 years ago.

I'm confused! Are you saying that Missouri has had a sales tax on aircraft for some period of time and those people that didn't pay it are now being identified and assessed? OR Was the sales tax ordinance recently passed and the state is trying to go back retoractively?

Gary

 

[Dean]

I'm confused! Are you saying that Missouri has had a sales tax on aircraft for some period of time and those people that didn't pay it are now being identified and assessed? OR Was the sales tax ordinance recently passed and the state is trying to go back retoractively?

Gary

The way I understand it, owners were to pay sales tax on aircraft all along, but the state never collected it and never pushed the issue because of how RSMO 144.043 and some other statues read. In August 2008 RSMO 144.043 was changed. So with the new verbage our new Director of Revenue started going after BACK taxes he thought was owed. So the answer to your questions would be YES to both.

 

[BillTIZ]

Missouri is hurting for money and the state had to use the Presidents Stimulus money to pay income tax returns. So looking for another source of income they have sent all aircraft owners in the state letters saying they must pay back sales tax, penalties and interest or a usage tax. Under RSMO 144.043, light aircraft are exempt from ales tax, so most light aircraft registered in Missouri never paid sales tax. The only tax we have been paying is our county personnel property tax.

So owners that purchased years ago are having to pay thousands, one owner was hit with 20 years worth of penalties and interest. The state has threatened to file liens against owners aircrafts if they don't pay up.

Define "light aircraft", it should be in the RSMO. And if the RSMO says light aircraft are exempt, then how can they legally send the bill and back fines?

 

[SCCutler]

Simple. Create a Delaware (or Nevada) Corporation and re-register your aircraft there.

Establish an extra layer of reporting requirement, and potentially expose yourself to taxation as a business. That's slick!

 

[wabower]

None of that works. It's where the plane is based, not where it is registered that creates the nexus and situs required for taxation. The state tax examiners have search and seizure rights in the hangars.

quote=Rotor&Wing;457303]Simple. Create a Delaware (or Nevada) Corporation and re-register your aircraft there. Also do not give your local airport manager your registration number if you keep the plane in an enclosed hangar.[/quote]

 

[Dave Siciliano]

We went through that a few years ago in Texas. At my airport, folks got bills from transfers years ago.
Here are the actual facts. There is an occasional sale waiver in Texas. Many folks never bothered with it; then, complained when they later go a bill. Typical stuff, they didn't do their homework, then, complained when they got caught.

Also, since the tax folks didn't know what happened, they went back several years and said show us your plane isn't subject to tax. They even allowed folks to go back and get a certificate from the seller from years ago if they could.

Recently, they sent me a bill for my airplane being a business use plane. We looked up the statute and sent a certified letter citing the exception. Issue resolved.

My point is, the tax folks don't know what's going on, so, someone in a leadership position says send everyone a bill and make them prove it's not subject to taxation. I don't like it, but how else would they figure it out what's going on? In most states the buyer is required to report the purchase; if he or she doesn't, it may catch up with him or her years later. All the states seem to be digging, but they can't retroactively change the rules.

When we purchased the Baron we looked into this in advance. We reported the purchase and sent a letter meeting the requirements of the statute citing the exception. Matter resolved.

Now, if the rules were there and no one was paying attention or complying with them, bend over.

Best,

Dave

 

[SCCutler]

None of that works. It's where the plane is based, not where it is registered that creates the nexus and situs required for taxation. The state tax examiners have search and seizure rights in the hangars.

quote=Rotor&Wing;457303]Simple. Create a Delaware (or Nevada) Corporation and re-register your aircraft there. Also do not give your local airport manager your registration number if you keep the plane in an enclosed hangar.

[/quote]

We went through that a few years ago in Texas. At my airport, folks got bills from transfers years ago.
Here are the actual facts. There is an occasional sale waiver in Texas. Many folks never bothered with it; then, complained when they later go a bill. Typical stuff, they didn't do their homework, then, complained when they got caught.

Also, since the tax folks didn't know what happened, they went back several years and said show us your plane isn't subject to tax. They even allowed folks to go back and get a certificate from the seller from years ago if they could.

Recently, they sent me a bill for my airplane being a business use plane. We looked up the statute and sent a certified letter citing the exception. Issue resolved.

My point is, the tax folks don't know what's going on, so, someone in a leadership position says send everyone a bill and make them prove it's not subject to taxation. I don't like it, but how else would they figure it out what's going on? In most states the buyer is required to report the purchase; if he or she doesn't, it may catch up with him or her years later. All the states seem to be digging, but they can't retroactively change the rules.

When we purchased the Baron we looked into this in advance. We reported the purchase and sent a letter meeting the requirements of the statute citing the exception. Matter resolved.

Now, if the rules were there and no one was paying attention or complying with them, bend over.

Best,

Dave

Wise wisdom from ... ummm... wise guys.

 

[Trapper John]

The way I understand it, owners were to pay sales tax on aircraft all along, but the state never collected it and never pushed the issue because of how RSMO 144.043 and some other statues read. In August 2008 RSMO 144.043 was changed. So with the new verbage our new Director of Revenue started going after BACK taxes he thought was owed. So the answer to your questions would be YES to both.

If the state of Missouri would put a little effort in collecting vehicle taxes and fees, they could leave aircraft owners the hell alone! When I lived there I had neighbors that drove a pickup for two years on temp tags and then they split one set of plates between 2 cars!


Trapper John

 

[zekeaero]

Only if the plane remains there for a certain amount of time. Right now the state doesn't have the resources to go to every airport and track each and every plane. What they are doing is asking airport managers to report aircraft that are "based" at that airport. The next trick is defining "based".

Thankfully many airport managers have better things to do with their time. What I have seen is the AM's asking the FBO's to supply registration numbers which even they are reluctant to do.

I would not be so sure of that. If you purchased your plane less than 6 months ago, I would NOT visit Florida.

I bought a used plane in February. It is registered in Oregon which does not have a sales tax. (Don't worry, my income taxes MORE than make up for that.) I have a trip planned which includes a stop in Florida for 3 DAYS. Concerned about the tax hit, I sent a letter to Florida's Dept. of Rev. asking for an official statement on the visit.

They replied saying that I could definitely be subject to the tax. I will be staying in Georgia.

Municipalities are hurting for cash right now. They'll go after any easy target they can. There are some "test cases" in court right now. (Maine does the same thing for aircraft less than 1 yr old) But the battle is lengthy and expensive.

My recommendation is to avoid aviation travel to these states regardless of how long you've owned your plane. Take your dollars elsewhere.

 

[Dean]

I got this email today from the MPA President.

Update



Today in the State MPA board meeting we recognized and discussed the need to address an issue that has become a concern to quite a number of our members. Some of our members have received letters from the Missouri Department of Revenue demanding use tax or sales taxes as well as penalties and interest on aircraft that they purchased dating back several years. Some have reported that they even approached the DOR prior to the purchase of their aircraft regarding sales tax and were given no definitive answers and now are being asked to pay with penalties. The most common circumstance seems to have been when there was a transaction between individuals. Under those circumstances there was a belief that neither sales taxes nor use taxes applied to aircraft. That belief seems to have been built up over many years (since 1955) and without correction by the DOR through either enforcement or education. They have now, for whatever reason, started implementing collection of back taxes, penalties and interest on such sales/purchases.

While we do not believe that any of our members have deliberately flouted the sales tax/use tax laws we believe the situation is of such importance that we need to address the issue and give some guidance to MPA members. We also believe that many other aircraft owners in the State of Missouri may also receive similar demands from the DOR.

Our first response:
We have appointed a special committee headed by Carolyn Morris to investigate and develop a plan of action. This plan may include obtaining further legal counsel, direct negotiations with the Missouri Director of Revenue, or such other plan as the committee may recommend. We invite other aviation organizations with members in Missouri to add their weight to any negotiations rather than fight this alone.

Thus far we have obtained an urgent preliminary report from legal counsel.

Our preliminary position is that such taxes by the State are probably due, but that the interest and penalties should be waived. We believe that the grounds for waiving of penalties and interest are justified under some of the many circumstances communicated to us by our members as well as the State’s own actions or lack thereof in educating the potential aircraft owner of their tax obligations. There also seem to be anomalies in the various laws regarding the matter. The result is that there is much confusion and misunderstanding amongst the aviation community. These anomalies need addressing and definitive guidelines need to be obtained and published.

What can you do if you have received one of these DOR letters of demand?
€ Write to your State Representative and Senator a letter explaining your position and reasons why you think penalties and interest are not appropriate. Follow up with a phone call.
€ Discuss the matter with a CPA as everyone’s circumstances are not the same.
€ It’s your call, but consider paying the tax while including a letter explaining that you are temporarily withholding penalties and interest until matters are clarified through legal opinion or you have yourself negotiated with the DOR the swift payment of only the principle amount in return for forgiveness of penalties and interest.

Please let us know should you receive a letter of demand and forward us a copy of your response (cpmorris61@yahoo.com).

This news update is to inform you of our plans and intentions to work for our members to resolve this issue to the mutual satisfaction of all concerned, if at all possible. The content is not to be taken as legal advice as we do not have answers yet. The committee, ably headed by Carolyn Morris will keep you informed by email.

Jonathan Rimington
President, Missouri Pilots Association

 

[jshawley]

What has gotten us Missouri pilots more than annoyed is the haphazard way we've been threatened. And as the letter from Jonathon Rimington, MPA president notes, many have been misled by the very departmental bureaucrats who now want our money.

As one local aviation icon, 95-year old Gene (his first issue ticket had been signed by Wilbur himself) noted, he had been buying/selling/trading planes for 78 years, and this was the first he had ever heard of this "use tax".

The reality is, Missouri is broke, and we pilots have been called up to perform our civic duty and bail it out --something about noblesse oblige and all that.

Sigh...

 

[RotorAndWing]

I would not be so sure of that. If you purchased your plane less than 6 months ago, I would NOT visit Florida.

I bought a used plane in February. It is registered in Oregon which does not have a sales tax. (Don't worry, my income taxes MORE than make up for that.) I have a trip planned which includes a stop in Florida for 3 DAYS. Concerned about the tax hit, I sent a letter to Florida's Dept. of Rev. asking for an official statement on the visit.

They replied saying that I could definitely be subject to the tax. I will be staying in Georgia.

Municipalities are hurting for cash right now. They'll go after any easy target they can. There are some "test cases" in court right now. (Maine does the same thing for aircraft less than 1 yr old) But the battle is lengthy and expensive.

My recommendation is to avoid aviation travel to these states regardless of how long you've owned your plane. Take your dollars elsewhere.

No problem here. The less "visitors" we have tangling up our airspace the better.

 

[RotorAndWing]

Establish an extra layer of reporting requirement, and potentially expose yourself to taxation as a business. That's slick!

None of that works. It's where the plane is based, not where it is registered that creates the nexus and situs required for taxation. The state tax examiners have search and seizure rights in the hangars.

Yea, what was I thinking. NO one registers airplanes or yachts in corporations in tax friendly states. And gee, the paperwork would be sooooo overwhelming.

I'll just wait for the D of R people to come kick my hangar door down and seize my plane.

 

[Dr. O]

This very discussion has been beaten into the ground on the various boat groups I monitor... Exact same issues, proof of having paid sales and use taxes, but brought to a head by the fact that boats often spend more time in the southern states, especially Florida, in the cold months of the year...

Most states have a grace period that exempts transient planes/boats... Theoretically, if your plane/boat was kept in 4 different states for 3 months at a time, per year, you might have to pay use tax to all four states annually... In addition if your state of registration has a sales tax that is lower than the state you are currently subject to their use tax, you owe them the difference between what you paid and what that states tax rate is - I had to pay Florida the 1% difference... And some states don't even have a grace period... If your boat or plane simply crosses their boundary you owe the use tax...

denny-o

 

[Diana]

Dean, Jim, what is the latest on this? If someone were moving to MO in the next few months, where would they find the latest info?

 

[timwinters]

Diana,

If they paid sales tax in their current state and can prove it then they have nothing to worry about.

I was audited shortly after moving back to Missouri. The auditor said straight out that it was because my corporation owned an airplane and they love finding no sales tax paid on planes.

I had my cancelled check from Arkansas, case closed, no issues.

I have lived in MO all my life except for a 4 year stint in Arkansas and don't understand how anyone could have honestly thought that they could buy a plane in Missouri and not pay sales tax on that purchase. If they thought that then they were looking for an answer that they WANTED to hear...and not the real answer. And now they get caught and they're whining. I'm finding it difficult to drum up any sympathy.

 

[alaskaflyer]

So, if you live in state x which has no sales or use tax and buy a plane in that state and own it for a few years, and then relocate to Missouri with your plane ...?

 

[timwinters]

So, if you live in state x which has no sales or use tax and buy a plane in that state and own it for a few years, and then relocate to Missouri with your plane ...?

You know, I'm not sure. I don't think they necessarily knew that I just moved myself and my company back to the state a few years earlier. What I do know is that they cross referenced the airplanes based at KSGF with their tax records and saw that I hadn't paid any sales tax in MO. This was in 2007 by the way.

 

[Ghery]

So, if you live in state x which has no sales or use tax and buy a plane in that state and own it for a few years, and then relocate to Missouri with your plane ...?

Don't know about Missouri, but come to Washington. The airplane will be considered "non-essential transportation" (shows what they know ) and you will be billed for the sales tax on the "sticker price" of the plane. Bring a car that you've owned for more than 6 months, no problem. Boats and RVs get taxed, too. Thank goodness I could prove I'd paid California sales tax on those two things when I moved here from Oregon (no sales tax) in 1996.

 

[Mxfarm]

Diana,
I have lived in MO all my life except for a 4 year stint in Arkansas and don't understand how anyone could have honestly thought that they could buy a plane in Missouri and not pay sales tax on that purchase. If they thought that then they were looking for an answer that they WANTED to hear...and not the real answer. And now they get caught and they're whining. I'm finding it difficult to drum up any sympathy.

Not to disagree with you Tim, but part of the problem was with the Dept of Rev. folks telling owners they didn't owe any tax. You get tired of arguing with the bureaucrats. Had to do this a few year back getting license on my wife's rig. "How many cylinders does it have?" I reply "10". "Yea right, now really, how many cylinders does it have?" this when on for a bit and I finally asked "how many do you want it to have?" She says "8", I say "8 it is, it has 8 cylinders".

If they say you don't own any tax and won't take your money, I'd probably let the dog sleep too. That's one reason the DOR has been so willing to drop the penalties and interest.

Here's a link to the current (Oct) MPA newsletter, I believe it has the most current info.

http://www.orgsites.com/mo/mpanews/oct2009.pdf

see ya,

marc