New York Flight Schools Face Tax Fight

[N918KT]

http://www.avweb.com/avwebbiz/news/New_York_Flight_School_Tax_208835-1.html

Flight schools all over New York State are facing a tax fight. According to Bob Miller, a New York State flight school owner, he will have to close his flight school because the new tax ruling is costing him thousands of dollars. He predicts that other flight schools in New York State will be forced to close and aircraft owners with leaseback arrangements with flight schools will also be hit hard because of a change in tax ruling of New York State.

 

[ClimbnSink]

Awesome. Everyone's happy little exceptions have to end eventually.

 

[TriGear28]

Awesome. Everyone's happy little exceptions have to end eventually.

elaborate if you can. no offense meant.

 

[david0tey]

Greedy 1 percenters! Always complaining about their taxes! /sarcasm/

 

[Captain]

I'll say this, if it's an 'inturpretation' of a law that's changing then there's no way it should be retroactive!

 

[taters]

Too bad Whitey Bulger is in a court room when you need him.
I own a training operation,..this would be devastating to anyone.

 

[bflynn]

No more leasbacks in New York...roger.

 

[steingar]

As far as I know everyone in my state has to pay sales tax on aircraft. I had to pay it on mine. I don't see the big whip, other than 8.75% being a bit steep.

 

[EdFred]

As far as I know everyone in my state has to pay sales tax on aircraft. I had to pay it on mine. I don't see the big whip, other than 8.75% being a bit steep.

Most (if not all) states have an exemption on sales tax on items used for business purposes. I don't have to charge or collect sales tax on any of the materials and equipment I buy or sell unless it goes to an individual just using it for a hobby. Same goes for aircraft here. Probably the same in Ohio as well.

 

[wabower]

Is that a sale for resale (inventory) exemption? If a company buys a delivery truck, is that sale also exempt?

Most (if not all) states have an exemption on sales tax on items used for business purposes. I don't have to charge or collect sales tax on any of the materials and equipment I buy or sell unless it goes to an individual just using it for a hobby. Same goes for aircraft here. Probably the same in Ohio as well.

 

[EdFred]

Is that a sale for resale (inventory) exemption? If a company buys a delivery truck, is that sale also exempt?

For me - I'm not paying any sales tax for the purchase because it's a resale. For my customers, they aren't paying any sales tax because the materials are equipment are used in the manufacture of another product - usually as a component of a larger item - which also doesn't get taxed. At least not until it finally goes to an end user. A delivery truck would not be exempt.

At one time Michigan's tax code was easily searchable, and when I bought my first airplane, there was about 7 or 8 exemptions to paying the tax on it. Unfortunately they have "upgraded" their website, and now all I get is crap for results. I'm 99+% sure if the plane was used as a rental it was exempt - though that may have changed in the past 4 years.

Edit: Found it

Rentals and Leases - A registered lessor in Michigan has the option of paying six percent Michigan Tax on the acquisition of tangible personal property that is to be leased in Michigan or to collect and remit six percent use tax on the total rental receipts. Total rental receipts include all charges, even though separately itemized by the lessor to the lessee, for the leased property. The method chosen may not be changed for the entire life item.

 

[wabower]

In some cases the taxing authority doesn't consider it as an interpretation issue but instead views it as a failure on the state's part to enforce an existing law.

Such was the case when TX formed the special BART unit to follow airplane transactions and collect sales tax.

I'll say this, if it's an 'inturpretation' of a law that's changing then there's no way it should be retroactive!

 

[DJTorrente]

There is support in administrative law that an agency can 'shift' between two permissible 'interpretations' of the law without it constituting a change in law per se.

However, this is not a subtle shift. I've recently read the state opinion letters that specifically endorse an aircraft bought for leasing purposes as exempt from Sales & Use tax. Unfortunately those opinion letters are only binding on those who asked for them (Hello! Anyone ever hear of the Equal Protection Clause?).

I see this as a shakedown, pure and simple. Small FBO's or private leaseback operators with thin margins probably can't afford to fight, nor are they willing to risk the con$equence$ of lo$$$ing. NY apparently has not learned that you can't slaughter the cow AND drink the milk.

 

[tonycondon]

wow, haven't heard about bob miller for a while. notice his over the airwaves rant hasn't been updated for a few years now and his school website is down.

 

[poadeleted20]

The big problem here is the retroactivity. Folks operated their businesses based on the original interpretation, and charged their customers accordingly. Now they are being hit for taxes for which they would have charged their customers higher rates at the time of the transactions. For the state to change its mind and now demand payment for taxes from which the operators were told they were exempt at the time they did the business is, IMO, just plain wrong -- changing the rules after the game was played.