Tax Type
Aircraft Sales and Use Tax
Description
Aircraft are subject to the 2 percent Virginia aircraft sales and use tax
Topic
Property Subject to Tax
Rate of Tax
Date Issued
09-17-2004
September 17, 2004
Re: § 58.1-1821 Application: Aircraft Sales and Use Tax
Dear *********:
This is in reply to your correspondence in which you seek correction of the aircraft sales and use tax audit assessments issued to your client, ***** (the "Taxpayer"), for the periods October 2001 and December 2002. I apologize for the delay in the Department's response.
FACTS
The Taxpayer is a ***** limited liability company. As a result of the Department's audit, the Taxpayer was assessed Virginia aircraft sales and use tax on two aircraft. The Taxpayer has raised several arguments in support of its claim that the aircraft in question are not subject to Virginia aircraft sales and use tax. The Taxpayer's arguments are based primarily upon its assertion that the aircraft are not based in Virginia and, therefore, are not subject to taxation.
DETERMINATION
Virginia Code § 58.1-1502 imposes the aircraft sales and use tax on the "retail sale of every aircraft sold in the Commonwealth and upon the use in the Commonwealth of any aircraft required to be licensed by the Department of Aviation pursuant to Va. Code § 5.1-5." Virginia Code § 5.1-5 provides that every resident or nonresident owning a civil aircraft based in Virginia for sixty days over a twelve month period is required to license such aircraft with the Commonwealth prior to operating it within the Commonwealth.
Keeping the above in mind, I will separately address the issues raised by the Taxpayer.
Aircraft *****
You state that the Department's aircraft sales and use tax report shows the aircraft as being purchased on January 1, 2003. Thus, the sixty-day period for purposes of determining the taxation of the aircraft could not begin prior to January 2003. You claim that the assessment was not validly made pursuant to the statute and must be abated. Further, while you indicate that the aircraft was actually purchased in 2002, you maintain that it was never hangered, stored or parked overnight in Virginia during the calendar year 2002. As such, the aircraft is not subject to taxation.
The January 2003 date listed on the aircraft sales and use tax audit report is the date the Department issued the assessment and is not a reference to the purchase date of the aircraft. Further, based on the audit period, the auditor was within the provisions of the statute for purposes of determining licensing requirements and taxation based on the sixty-day rule. Based on the foregoing, I find that you have not proven that the Department's assessment is invalid.
Further, the Department addressed the term "based" for purposes of applying the licensing requirements and taxation of aircraft in Virginia in the prior audit. In its July 24, 1998 response to the Taxpayer (Public Document 98-120), the Department determined that an aircraft is required to be licensed in Virginia and subject to taxation if the operator/owner operates the aircraft in Virginia on sixty or more occasions during a twelve-month period, and also leases space for sixty days or more at a Virginia airport.
According to the documentation provided, the aircraft frequently entered Virginia during June and December of 2002 and again in January 2003. Based on this information, the aircraft appears to be subject to licensing requirements and taxation. Lacking evidence to prove otherwise, I find there is no basis to abate the assessment.
In subsequent correspondence, you provided a copy of the seller's correspondence to the Taxpayer regarding where the purchase of the aircraft took place. The seller indicates the Taxpayer took title to the aircraft in Connecticut on June 28, 2002. The seller claims this is consistent with the terms of the sales agreement and also evidenced by the Federal Aviation Administration (FAA) and Warranty Bill of Sale.
A review of the information provided (FAA and Warranty Bill of Sale) provides no evidence that the Taxpayer took title to the aircraft in Connecticut. I would also note that the Taxpayer did not provide a copy of the sales agreement. The Taxpayer has not provided sufficient documentation to support its claim that the Taxpayer took title to the aircraft in another state. The Taxpayer will need to provide the aircraft's sales agreement or other documentation to establish the location where the Taxpayer took possession of the aircraft.
Aircraft *****
It is the Taxpayer's contention that the aircraft is based in another state and, therefore, is not subject to the Virginia aircraft sales and use tax. In addition, the Taxpayer provides the registration application and documentation of ramp rental fees for the aircraft in the state where the Taxpayer contends the aircraft is based. While the Taxpayer agrees that the aircraft has been physically present within the Commonwealth for sixty days, the Taxpayer contends that mere physical presence in the Commonwealth does not equate to a home base for the aircraft. Absent a required license, the Taxpayer maintains that the Department lacks the authority to assess sales and use tax on the aircraft.
As noted above, the Department previously addressed the issue of "based" for purposes of determining aircraft licensing requirements and taxation. Therefore, the Taxpayer had prior knowledge of the law regarding Virginia licensing requirements and taxation for aircraft. The fact that the Taxpayer established that it paid ramp rental fees on the aircraft in another state is not evidence that the aircraft is not subject to licensing and taxation in Virginia. Rather, the fact that the Taxpayer agrees that the aircraft was present within Virginia for sixty days supports the Department's assessment of the aircraft tax. Further, the fact that the aircraft is not registered in Virginia is not evidence that it is exempt from licensing requirements and taxation in Virginia. Based on the foregoing, I find no basis for adjustment of the assessment.
Payments
In subsequent correspondence, you indicate that the Taxpayer paid in full all sales and use taxes for the audit period April 1997 though March 2003. Accordingly, you contend that the aircraft sales and use tax assessments have been settled.
The aircraft sales and use tax and the retail sales and use tax are distinct and separate taxes. For this reason, the Department issued separate assessments for the aircraft tax liability and for the retail sales and use tax liability. The Department's records indicate that the Taxpayer has paid the retail sales and use tax assessment issued under bill ***** for the audit period April 1997 through March 2003. There is no evidence that the Taxpayer paid the contested aircraft tax assessments. Accordingly, I find that the aircraft sales and use tax assessments remain due and payable.
Conclusion
Based on the information obtained by the Department, it appears that the Taxpayer's aircraft are subject to the 2 percent Virginia aircraft sales and use tax. I recognize, however, that there has not been a complete review of the documentation that could substantiate the Taxpayer's position.
In order to determine whether or not the aircraft are actually subject to tax, it will be necessary for the Taxpayer to furnish to the auditor flight logs, pilot records, or airport hangar and tie-down receipts for each aircraft for the 2002 and 2003 calendar years. In addition, the Taxpayer will need to provide the aircraft sales agreement or other documentation for each aircraft in order to establish the location that possession took place. Once the auditor reviews this information, it will be determined whether the aircraft in question are subject to licensing requirements and taxation as set forth above. If the Taxpayer fails to provide the required documentation within 60 days from the date of this letter, the Department has no alternative but to assume the aircraft are subject to the Virginia aircraft sales and use tax, and collection action will resume.
The Code of Virginia sections and public document cited, along with other reference documents, are available on-line in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us. If you have any questions about this determination, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****. Questions concerning the documentation for review should be directed to *****, Audit Supervisor, at *****.
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- Sincerely,
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Tax Commissioner -
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AR/44982T
Rulings of the Tax Commissioner