Document Number
08-149
Tax Type
Aircraft Sales and Use Tax
Retail Sales and Use Tax
Description
Taxpayer's purchase of inoperable aircraft are subject to the 2% aircraft sales and use tax/Occasional sale exemption.
Topic
Assessment
Computation of Tax
Exemptions
Date Issued
07-30-2008


July 30, 2008



Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *****:

This is in response to your letter in which you seek correction of the retail sales and use tax assessment issued to ***** (the "Taxpayer") for the period May 2003 through January 2006. I apologize for the delay in responding to your letter.

FACTS


The Taxpayer is an aviation technical school that trains students to be aviation maintenance technicians under Federal Air Regulation Part 147. The Taxpayer purchases inoperable aircraft that the students restore to airworthy condition. The auditor assessed the retail sales and use tax on the Taxpayer's purchase of inoperable aircraft. The Taxpayer contests the retail sales and use tax assessment and claims that the inoperable aircraft are subject to the 2% aircraft sales and use tax at such time the aircraft become airworthy and required to be licensed.

In addition, the Taxpayer takes exception to the tax assessed on the purchase of aircraft paintings listed in the Taxpayer's depreciation schedule. The Taxpayer claims that the transactions qualify for the occasional sale exemption.

DETERMINATION


Inoperable Aircraft

In 1984, the Virginia General Assembly enacted legislation that removed the prohibition to the levy of aircraft sales and use tax upon planes not required to be licensed in Virginia. As a result of this amendment to Va. Code §§ 58-685.29 and 58-685.32 (recodified as Va. Code §§ 58.1-1502 and 58.1-1506), inoperable aircraft and aircraft kits are subject to the aircraft sales and use tax and are no longer subject to retail sales and use tax.

Based on the above, the Taxpayer's purchase of inoperable aircraft are subject to the 2% aircraft sales and use tax at such time the aircraft become airworthy and subject to licensing. Accordingly, the audit will be adjusted to remove the retail sales and use tax assessed on the inoperable aircraft.

Aircraft Paintings

The auditor assessed the tax on four separate purchases for paintings listed in the Taxpayer's depreciation schedule. The Taxpayer claims that the purchases constitute one transaction paid in four installment payments. However, the Taxpayer has provided no documentation to support its claim.

Virginia Code § 58.1-205 provides that any assessment of tax by the Department is deemed prima facie correct. The burden is on the taxpayer to prove the assessment is erroneous. Lacking the documentation to support its claim, the Taxpayer has not met the burden of proof in this case. Accordingly, I find that the auditor was correct in holding these transactions taxable in the audit.

CONCLUSION


Based on this determination, the audit will be returned to the audit staff to make the necessary adjustments to the audit and the assessment. A revised bill, with interest accrued to date, will be mailed to the Taxpayer once the adjustments have been made. No additional interest will accrue provided the outstanding assessment is paid within 30 days of the date of the bill.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
                • Sincerely,


                • Janie E. Bowen
                  Tax Commissioner



AR/1-1752468684.T


Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46