Aircraft and Watercraft
A tax is imposed on the retail sale of every aircraft sold in Virginia or upon the use of any aircraft in Virginia.
Purchasing of Aircraft
The purchaser of the aircraft must file Form AST-3, Aircraft Sales and Use Tax Return, with the Department of Taxation and pay the tax prior to applying for a license with the Department of Aviation. Upon receipt of payment, the Department of Taxation will certify payment to the Department of Aviation. Checks should be made payable to the Virginia Department of Taxation. The purchaser of the aircraft must apply for a license with the Department of Aviation.
Aircraft purchased in Virginia and subsequently moved out of Virginia in 60 days or less are not required to be licensed in Virginia and therefore are not liable for the tax.
Commercial dealers have two options for paying the Aircraft Sales and Use Tax:
- Any person holding a commercial dealer's license issued by the Department of Aviation may elect to be subject to 2 percent of the monthly gross receipts from the lease, charter or other use of any aircraft licensed for commercial use. A dealer who desires to be subject to the tax imposed by subdivision 3 of § 58.1-1502 shall notify the Department in writing of such election prior to registering. To register, complete Business Registration Application, Form R-1, or register online at iReg.
Dealers whose applications are approved will be required to pay the tax rate of 2 percent on gross receipts from the lease, charter, or other use of aircraft. Once a dealer makes the election, he or she must file Form AST-2, Dealer's Aircraft Sales and Use Tax Return, and pay the tax monthly on the gross receipts from all taxable transactions during the preceding month. Monthly returns and payments are due or before the 20th of each month for the preceding month.
- Dealers who do not elect to be taxed at the 2 percent rate on gross receipts for lease, charter or other use must pay the Aircraft Sales and Use Tax at the time an aircraft is purchased
For a current list of qualifying exemptions to the Virginia Aircraft Sales and Use Tax, please refer to Code of Virginia § 58.1-1505.
The tax rate is 2 percent of the sales price. If the aircraft is licensed in this state six months or more after its acquisition from outside this state, the tax is 2 percent of the aircraft's current market value or purchase price, whichever is lower.
For more information refer to Code of Virginia §§ 58.1-1500 through 1510.
Dealer Exclusion and Monthly Returns
A tax is imposed on the purchase of any watercraft sold in Virginia and upon the user of any watercraft not sold in Virginia, if such watercraft is required to be titled with the Virginia Department of Game and Inland Fisheries for use in Virginia.
In general, for purposes of this tax, a "watercraft" means any vessel propelled by machinery whether or not the machinery is the principal source of propulsion, or any sail-powered boat over 18 feet long measured along the centerline. A watercraft, however, would not include a seaplane on the water or a watercraft that has a valid marine titling document issued by the United States Coast Guard. Any motor purchased separately to be used to power a watercraft is subject to the Watercraft Sales Tax.
All transactions subject to the Watercraft Sales and Use Tax are exempt from the Virginia Retail Sales and Use Tax; however, all watercraft not subject to the Virginia Watercraft Sales and Use Tax are subject to the Virginia Retail Sales and Use Tax. Dealers are exempt from tax on purchases of watercraft for resale and also on purchases of watercraft for lease, charter or other use for compensation, but they are subject to tax on the gross receipts from lease, charter or other use.
For an updated list of exemptions to the Virginia Watercraft Sales and Use Tax, please refer to Code of Virginia § 58.1-1404.
In order to be exempt from tax on purchases for resale, dealers must file a Business Registration Application, Form R-1, or register online at iReg. By agreement with the Department of Taxation, dealers may collect and remit watercraft tax on behalf of their customers.
Individual purchasers must pay the Watercraft Sales and Use Tax before the watercraft is titled with the Department of Game and Inland Fisheries. All watercraft are required to be titled prior to their operation in Virginia. The tax may be paid to either the Department of Taxation or the Department of Game and Inland Fisheries. If the watercraft is purchased from a dealer authorized by agreement to collect the tax, it may be paid to the dealer. Individual purchasers must complete and submit Form WCT-3A, Individual Watercraft Tax Worksheet, with their payment of the tax.
On or before the 20th of each month, dealers are required to file Form WCT-2, Dealer's Monthly Return of Watercraft Sales and Use Tax, showing gross receipts from lease, charter and other compensatory use. The return may also include gross receipts from sales if authorized by agreement with the Department of Taxation to collect and remit watercraft tax on behalf of customers.
The tax rate is 2 percent of the purchase price or of the current market value if purchased six months or more before it is required to be titled for use in Virginia. The maximum watercraft tax for any transaction is $2,000.
For additional information please refer to Code of Virginia §§58.1-1400 through 58.1-1410