Tax Type
Aircraft Sales and Use Tax
Description
Tax paid to another state
Topic
Taxability of Persons and Transactions
Date Issued
12-07-1988
December 7, 1988
Re: §58.1-1821 Application/ Aircraft Sales and Use Tax
Dear*****************
This will reply to your letter of October 12, 1987 seeking correction of aircraft sales and use tax assessed to *************** (taxpayer).
FACTS
In connection with its long term lease of an aircraft, the taxpayer was recently denied a credit claimed against the aircraft sales and use tax for retail sales tax paid to another state by its aircraft lessor for certain modifications made to the aircraft after the lease was entered into.
The taxpayer contests the department's denial of this credit claiming that since its lease payments were increased at least in part by the amount of sales tax paid to the other state on the aircraft modifications, that such sales tax paid should be allowed as a credit against the aircraft tax due on its total of lease payments.
DETERMINATION
Virginia Code §58.1-1504 allows a credit against the aircraft sales and use tax for a "person's use in this Commonwealth of an aircraft purchased by him in another state, ... equal to the tax paid by him to another state by reason of the imposition of a similar tax on his purchase or use of the property..." (Emphasis added)
The retail sales tax is a "similar tax", for purposes of the credit authorized in this code section, (See VR 630-11- 150) enclosed). However, since the sales tax for which the taxpayer is presently seeking a credit was paid by the aircraft lessor and not by the taxpayer, the taxpayer is not entitled to a credit for such tax.
This is true, despite the increase in the taxpayer's lease payments to reimburse the lessor for its costs of having the modifications performed. Had the modifications in this case been completed prior to the date on which the lease was entered into and the initial lease amount been adjusted to reflect the cost of such modifications, including sales tax, there would be no basis for the credit sought by the taxpayer at this time. Similarly, no credit is due under the present circumstances when the modifications occurred after the lease was entered into.
Accordingly, I find no basis in the aircraft sales and use tax law and regulations to allow the credit sought by the taxpayer in this case.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner