Tax Type
Aircraft Sales and Use Tax
Description
Applicability of Aircraft Tax
Topic
Basis of Tax
Taxability of Persons and Transactions
Date Issued
08-17-2001
August 17, 2001
Request for Ruling: Aircraft Sales and Use Tax
Dear *****
This is in reply to your letter of May 17, 2001, in which you seek a ruling on the application of the Virginia aircraft sales and use tax to the lease of an aircraft by ***** (the "Taxpayer").
FACTS
The Taxpayer, a Virginia corporation, entered into an agreement to lease an aircraft for a five-year term. Under the terms of the lease, the Taxpayer will make lease payments totaling 3.5 million dollars. The aircraft is valued at 10.5 million dollars. Upon expiration of the lease, the Taxpayer may elect to purchase the aircraft or secure another third-party buyer for the aircraft.
The aircraft is hangered outside Virginia, and the Taxpayer is currently remitting tax on the lease payments to the state in which the aircraft is based. The Taxpayer indicates that the aircraft has made in excess of 60 round trips to a Virginia airport within a twelve-month period. The Taxpayer asks whether the aircraft is subject to the Virginia aircraft sales and use tax.
RULING
Code of Virginia § 58.1-1502 levies a tax upon the retail sale of every aircraft sold in Virginia and upon the use in Virginia of any aircraft "required to be licensed" by the Department of Aviation pursuant to Code of Virginia § 5.1-5. Code of Virginia § 5.1-5 provides that every resident or nonresident owning a civil aircraft based in Virginia for 60 days over a twelve-month period is required to license such aircraft with the Commonwealth prior to operating it within the Commonwealth.
For purposes of the aircraft sales tax, the term "sale" includes a lease or rental if such lease or rental substantially equals the remaining life of the aircraft as determined at the beginning of the term of lease. Under Title 23 of The Virginia Administrative Code (VAC) 10-220-5, the term "substantially equal" shall mean "equal to or exceeds eighty percent."
According to the information provided, the Taxpayer is leasing an aircraft that is based outside Virginia and the value of the lease does not exceed eighty percent of the value of the aircraft. Based on Code of Virginia §§ 58.1-1502 and 5.1-5 cited above, it appears that the aircraft in question is not required to be licensed in Virginia and is not subject to the Virginia aircraft sales and use tax. I would note that the department has not been provided a copy of the lease agreement; therefore, any changes in the facts as outlined above may result in a different application of the tax.
I would also note that the aircraft, if sold to the Taxpayer at the end of the lease, will be subject to the two percent aircraft sales tax if the sale occurs in Virginia. If the aircraft is not sold in Virginia, but is required to be licensed in Virginia more than six months after its acquisition, a tax equal to two percent of the current market value of the aircraft, including the cost of any modifications, improvements or additions thereto, subsequent to its initial acquisition, will be imposed. See Title 23 VAC 10-220-10.2
I trust the information provided has addressed your concerns. If you have any questions, please contact ***** in the department's Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/34599T
Rulings of the Tax Commissioner