Sales Tax on Renting

azpilot

azpilot

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azpilot
For those of you that rent, does your FBO charge sales tax?

The FBO where I got my private charged sales tax on the airplane rental, but not the instruction. That is normal for here in Arizona. You typically pay sales tax on goods, but not on services. In the city where the FBO is located, sales tax is 7.8%.

This FBO has closed, and I went to a different FBO at the same airport. I was very surprised to see that the second FBO did not charge sales tax on the rental rates. They just included the tax in the quoted price.

So, for those of you that rent in an area where sales tax is charged. Do you pay sales tax on the rental of the airplane?
 
When I rented, sales tax was charged if there was not an instructor in the plane.
 
I was, and am charged the quoted price on their website. I guess they pay the applicable taxes out of that amount, and their advertised prices include all taxes. :)
 
I pay tax when renting not when getting instruction.
 
It highly depends what the STATE law is. The FBO is not supposed to apply it with discretion. Some states charge a sales tax on services and rentals. Some (like California) only apply it to the sale of "tangible" property. Furhter, some have specific exemptions for aviation (we used to pay tax on rentals here, but not on instaruction, but about six years ago we got a blanket exemption).
 
What is taxable or not varies tremendously from state to state. How much tax is charged varies from municipality to rural, and between them.

Some places have sales tax already figured into their prices, it makes it fast and easy to check out. Some add everything up,and tax the taxables on top. It's all up to the owner, who has to report sales and give the appropriate taxes to the city, county and/or state as required, and when required.
 
Sales Tax if not being used for instruction around here (Houston, TX area)
 
I had to check an invoice to be sure, but it doesn't look like I'm being charged sales tax on my flights (whether it was a personal rental or flight with an instructor).
 
Iowa has tax on both plane rental and flight instruction. As I recall, instructional services are generally not taxable but flight instruction is specifically listed as an exception that is taxable.

Hank S said:
Some places have sales tax already figured into their prices, it makes it fast and easy to check out. Some add everything up,and tax the taxables on top. It's all up to the owner, who has to report sales and give the appropriate taxes to the city, county and/or state as required, and when required.
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I've been considering doing this because I think it will make my life easier and because I've always thought it was dumb to advertise a price that isn't the actual price.
Are there any places that have laws restricting that practice?
 
Just checked my receipt in Nebraska. No sales tax on rental or CFI.

I would say it's highly variable depending on state laws. I own a technology company and we have to charge sales tax if we go on site for support, but if we do it remotely we technically don't have to. It's really weird and if you go to three different tech companies they'll all three tax it differently. :mad2:
 
In Texas, the comptroller has interpreted the law such that no instruction or airplane rental in furtherance of a rating, or even rentals to maintain currency, should be subject to sales tax.
 
aggie06 said:
In Texas, the comptroller has interpreted the law such that no instruction or airplane rental in furtherance of a rating, or even rentals to maintain currency, should be subject to sales tax.
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On that note, to the OP you may want to call the department of revenue in your state and simply ask them for an opinion. The fact that two different schools are charging you differently tells me that it's confusing.

If they come back and state that it's not taxable, then you can take that information to the school so they can change how they charge you.
You likely won't get credit back because they've already sent that money to the state, but going forward it could help.

Good luck
 
Our aircraft rental taxes goes to paying for Joe Arpaio jail pink underwear supply.

Those aint cheap you know.
 

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I rent at this place that AZ Pilot is talking about. So if we were charged tax and we shouldn't have I'm going to Lawyer UP. Not really, I liked the owner and he is a good guy. As the OP mentioned this place is now closed as of 2/7
 
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flyingron said:
It highly depends what the STATE law is. The FBO is not supposed to apply it with discretion. Some states charge a sales tax on services and rentals. Some (like California) only apply it to the sale of "tangible" property. Furhter, some have specific exemptions for aviation (we used to pay tax on rentals here, but not on instaruction, but about six years ago we got a blanket exemption).
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I completely agree. That is why I have been rather confused why two FBO's at the SAME AIRPORT, would handle this differently.
 
evapilotaz said:
I rent at this place that AZ Pilot is talking about. So if we were charged tax and we shouldn't have I'm going to Lawyer UP. Not really, I liked the owner and he is a good guy. As the OP mentioned this place is now closed as of 2/7
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Based on my (admittedly limited) understanding of Arizona tax law, I am fairly confident that the FBO has to pay the sales tax on the rental, and not the instruction. I think the first FBO was right to charge the sales tax, and I am now very happy that the second FBO does not.
 
tuwood said:
On that note, to the OP you may want to call the department of revenue in your state and simply ask them for an opinion. The fact that two different schools are charging you differently tells me that it's confusing.

If they come back and state that it's not taxable, then you can take that information to the school so they can change how they charge you.
You likely won't get credit back because they've already sent that money to the state, but going forward it could help.

Good luck
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I can say....

In the construction industry I see that (loophole) abused quite often and the homeowners have no clue about what is taxable and what is not...

For instance,,, there are several contractors who will build a 3 million dollar house here and bill the homeowner 6%, altho only some materials are taxable and labor is not....

Makes for a nice windfall for the contractor at the end of the job..

example..

3 million dollar house,,, 1.5 is materials and taxable, and 1.5 is labor and NOT taxable...

6% of 1.5 million is = 90,000 dollars


It is a good scam if you can pull it off and keep a straight face..:rolleyes:
 
AZPilot do you have anything on your receipt from CAS showing a line Item for taxes either for Rental or Instruction? I would think if they are charging taxes and its embedded into their rental advertised rate taxes would need to have a separate line item on the receipt.
 
evapilotaz said:
AZPilot do you have anything on your receipt from CAS showing a line Item for taxes either for Rental or Instruction? I would think if they are charging taxes and its embedded into their rental advertised rate taxes would need to have a separate line item on the receipt.
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Yes, I have looked at the invoices, and there are no lines for taxes anywhere. I was confused when I saw it, so I double checked all the math and reread the invoice two times. There is just no line item for taxes anywhere on the form.
 
azpilot said:
Yes, I have looked at the invoices, and there are no lines for taxes anywhere. I was confused when I saw it, so I double checked all the math and reread the invoice two times. There is just no line item for taxes anywhere on the form.
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Have you asked CAS if taxes are included in rental or instruction?
I would think to make the feds happy taxes needs to show in every transaction. But what Do I know.
 
Do they charge sales tax on car and truck rentals in your state?
 
N801BH said:
I can say....

In the construction industry I see that (loophole) abused quite often and the homeowners have no clue about what is taxable and what is not...

For instance,,, there are several contractors who will build a 3 million dollar house here and bill the homeowner 6%, altho only some materials are taxable and labor is not....

Makes for a nice windfall for the contractor at the end of the job..

example..

3 million dollar house,,, 1.5 is materials and taxable, and 1.5 is labor and NOT taxable...

6% of 1.5 million is = 90,000 dollars


It is a good scam if you can pull it off and keep a straight face..:rolleyes:
Click to expand...

I'd say the good scam is when you don't do the above and the government gets 90k for doing absolutely nothing.
 
at the FBO I rent at (in WA), we pay sales tax ont he planes. I haven't looked to see if i'm paying sales tax on the CFI or not.

However, in an equity club, you don't pay sales tax, as you're an "owner" and you're reimbursing the club $X/hr for wear and tear/fuel, etc.
 
evapilotaz said:
Have you asked CAS if taxes are included in rental or instruction?
I would think to make the feds happy taxes needs to show in every transaction. But what Do I know.
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I'm not bringing it up. I don't want to give them any ideas...
 
James331 said:
I'd say the good scam is when you don't do the above and the government gets 90k for doing absolutely nothing.
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Pretty much all taxation the government gets for doing nothing. I'm not sure what your point is.
 
evapilotaz said:
AZPilot do you have anything on your receipt from CAS showing a line Item for taxes either for Rental or Instruction? I would think if they are charging taxes and its embedded into their rental advertised rate taxes would need to have a separate line item on the receipt.
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Again, depends on state law. In California, you're allowed to embed the tax in the rate... But then you pay tax at a higher effective rate, so most folks don't.

Paul
 
evapilotaz said:
Have you asked CAS if taxes are included in rental or instruction?
I would think to make the feds happy taxes needs to show in every transaction. But what Do I know.
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Not aware of any such federal requirement. As noted, California doesn't require it, but encourages it... But completely legal, though more expensive, to not call out the tax separately.

Paul
 
Just to follow up on this, I took a closer look at the statements I have received from my FBO and the "sales tax" line. When I flew with an instructor, I was not charged any sales tax. When I fly solo, they do charge me sales tax. I think this has to do with the fact that the dual flight is a service. In Arizona, services do not get charged sales tax. For example, if you hire someone to clean your carpets (I used to do this for a living), you don't pay sales tax. On the other hand, when you rent an airplane, you are purchasing the use of a product, so you do pay the sales tax.

Anyway, I just thought I'd share that with everyone.

Dual - no sales tax
Renting - sales tax

Next time I am in the FBO, I think I'll ask them to clarify this.
 
I just looked at my receipt from a flight school in NJ. It says right on the receipt that 7% sales tax is charged on rentals and other "taxable" items. However, rental and instruction is tax exempt. So anytime there is an instructor instructing, no sales tax period.
 
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