REFLECTOR: FLORIDA OFFICIALS GOING AFTER AIRCRAFT SALES, USE TAXES

[Scott Baker]

In this world nothing can be said to be certain, except death and taxes. Benjamin Franklin 

Just about every state with a sales tax applies the tax towards aircraft purchases.  Buyers of Velocity kits sometimes think that the act of receiving the aircraft in from another state obsolves them of paying sales tax in the state in which they reside.  Wrong.  It only means that the seller (i.e. Velocity, Inc.) need not collect the tax - you are still obligated to pay your local tax collector.

The FAA shares its aircraft registration database with state tax agencies.  Until Velocity builders actually register their aircraft (obtain an N-number) - the tax man probably does not know that your Velocity exists.  Soon after you apply for your N-number, expect a letter from the local tax agency offering their congratulations on your "new" purchase - and to please provide evidense that you have paid sales tax (either in your home state or in the state in which you purchased the aircraft).  Credit is given to sales tax paid in other states.

Smart owners will march down to the tax collectors office soon after they receive their kit - and with factory invoice in hand to document the $60,000 purchase price of their "aircraft" - pay the local sales tax and say "Have a nice day!"  Most local tax officials will think that $60K is the total price of the aircraft - and fail to realize that builders have upcoming expendatures in equipment (engine, propeller, avionics).  If you are lucky,, getting your name on the tax roll at the onset might keep the assessor's office from performing an audit after the aircraft is completed.  Ask me no questions, I will tell you no lies. 

A quick note about parts versus labor - and what is taxable.  Believe it or not, many states apply sale tax to "fabrication labor" (as opposed to labor for repairs, which is generally not taxable).  Let's say you ignored the sales tax issue until the aircraft becomes registered.  The local tax office calls to say that since they cannot find "Velocity" in their aircraft price guides - please make yourself available for an appraiser, who will take a close look at the aircraft and have you complete a questionairre regarding the aircraft's components (engine make, model, hours; radio equipment; etc).  The appraiser compares your aircraft to other Velocity models that are listed in Trade--a-Plane ... and calculates you have a $150,000 aircraft.  "Yes, that's true", you say - but I only have $80,000 worth of parts invested in the aircraft.  The reply from the tax people could be - "That's nice, but you still owe taxes on the $70,000 worth of work you put into the aircraft."  This is another reason, in my opinion, to pay the sales tax on the kit soon after it arrives - and hope the local tax office does not follow up with annual appraisals.

No one likes paying taxes.  Consult a tax specialist to learn what you might do to legally lower or eliminate taxes by registering the aircraft in another state - or in the course of a business with a resale license.  For some this is an option - and for others, not.

One last comment - you are not going to win an argument with the sales tax people.

Scott Baker




----- Original Message ----- 
  From: Jim Agnew 
  To: Velocity Reflector 
  Sent: Saturday, February 04, 2006 11:19 AM
  Subject: REFLECTOR: FLORIDA OFFICIALS GOING AFTER AIRCRAFT SALES, USE TAXES


  Take Note!


  ~~~ AOPA Close to Home ~~~
  FLORIDA OFFICIALS GOING AFTER AIRCRAFT SALES, USE TAXES
  Members are alerting AOPA to a recurring situation in Florida where 
  the state, in reviewing its information on recent FAA aircraft 
  registrations, is aggressively seeking sales or use taxes from new 
  aircraft owners who may not have already paid. Typically, for newly 
  constructed experimental aircraft, owners are only required to pay tax 
  on the parts, not the builder's labor. However, if you register the 
  aircraft before completion, you can be responsible for taxes as of the 
  registration date unless you prove otherwise. As always, check with 
  your financial advisor for details. AOPA's Pilot's Guide to Taxes 
  ( http://www.aopa.org/members/files/guides/tax_guide.html ) has a listing 
  of Web sites for revenue departments in all states and phone numbers 
  to aid you or your accounting professional.



   
  James F. Agnew Jim_Agnew_2 at Yahoo.Com Tampa, FL Velocity 173 Elite Aircraft Completed & Flying 


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