Tax Type
Aircraft Sales and Use Tax
Description
Aircraft lease agreement exempt under the provisions of Code § 58-685.31
Topic
Taxability of Persons and Transactions
Date Issued
03-13-1984
March 13, 1984
Dear *******************
This is in response to your letter of February 13, 1984 in which you request a ruling as to whether or not your lease transactions with ***** as set forth in a lease agreement enclosed with your letter, will qualify for exemption from Virginia aircraft sales and use tax.
Facts
***** (Lessor) is the owner of three helicopters purchased on January 18, 1984 for a total price of ***** or ***** and ***** for the aircraft, respectively. Lessor has leased or intends to lease each of the aircraft to ***** (Lessee). We are advised that Lessee will utilize the aircraft in providing shuttle service from ***** and to ***** flying daily flights, approximately two flights per hour.
Under the terms of the submitted lease agreement copy, each aircraft is leased or will be leased to Lessee for a period of seventy-two months, each requiring six monthly lease payments of ***** and sixty-six additional monthly lease payments of ***** or, at the option of Lessor from time to time during the period of sixty-six monthly payments, ***** per month plus an amount based on the announced prime interest rate of Chase Manhattan Bank N.A. plus ***** percent per annum.
Determination
§ 58-685.28 of the Code of Virginia defines a sale to mean any transfer of ownership or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of an aircraft, including transactions whereby possession is transferred but title is retained by the seller as security.
Under established departmental policy, as stated in Proposed Virginia Aircraft Sales and Use Tax Regulations currently subject to review under the Administrative Process Act for adoption December 1, 1984, the term "lease or rental" is restricted so a lease or rental for a period of time equaling at least 80 percent of the remaining life of the aircraft determined at the beginning of the lease term or a lease or rental in which the payments during the term of lease will equal at least 80 percent of the value of the aircraft.
On basis of lease data furnished us, as summarized herein, lease payments for the aircraft at issue will exceed 80 percent of the value of the leased aircraft. Accordingly, the lease transactions will constitute sales of aircraft for purposes of Virginia aircraft sales and use tax and the leased aircraft will be considered to have been acquired by the Lessor for purposes of resale. Since the tax is imposed on the "retail sales" of aircraft, which excludes aircraft acquired for resale, the acquisition of aircraft by Lessor will be exempt from Virginia aircraft sales and use tax.
On the basis also of data furnished us, as summarized herein, Lessee will qualify as an "airline operating in intrastate, interstate or foreign commerce as a common carrier providing scheduled air service on a continuing basis to one or more Virginia airports" and the leased aircraft will be used in providing such service. Lessee will therefore be exempt under the provisions of Code § 58-685.31 from Virginia aircraft sales and use tax on the three aircraft described herein.
This ruling is limited to the specific transactions herein considered and under the facts as you have presented them, and absent any changes in State law or in the use of the aircraft involved, you may rely upon this ruling as representing the position of the Department of Taxation.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner