Tax Type
Aircraft Sales and Use Tax
Description
Aircraft based in-state
Topic
Taxability of Persons and Transactions
Date Issued
08-21-1995
August 21, 1995
Re: § 58.1-1821 Application: Aircraft Sales and Use Tax
Dear**********
This will reply to your letter of February 14, 1995 in which you are seeking correction of the aircraft sales and use tax audit of***********(the "Taxpayer") for the period of February, 1989 through December, 1993.
FACTS
The Taxpayer purchased an aircraft in the latter part of 1989. Delivery of the aircraft to the Taxpayer took place in Texas. Although not noted in your letter, it is understood that shortly after the initial purchase, the aircraft was leased to a Colorado corporation. As provided in the lease agreement with the Colorado corporation, the Taxpayer had the right to use the aircraft at any time on a "first come, first serve" basis. The lease provided that the aircraft was to be home based at Dulles International Airport, Virginia, and could not be outside Virginia for a period in excess of seven days without the Taxpayer's permission. Upon expiration of the lease with the Colorado corporation, the Taxpayer then leased the aircraft to a Tennessee corporation. The Tennessee corporation maintained and hangared the aircraft in Tennessee for approximately 18 months, the term of the lease. Upon termination of the lease, the aircraft was delivered to the Taxpayer in Texas to be sold at an aircraft show. When no sale was consummated in Texas, the aircraft was flown to Dulles International Airport, where the aircraft was eventually sold. The Taxpayer claims that based on the fact the aircraft was delivered to them outside Virginia, leased and hangared outside Virginia, and only brought into Virginia for purposes of selling it, the Virginia aircraft sales and use tax does not apply.
DETERMINATION
Code of Virginia § 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 § 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 12 month period, is required to license such aircraft with the Commonwealth prior to operating it within the Commonwealth.
Based on the information provided in your letter, the aircraft in question was based in Virginia during the lease with the Colorado corporation (term of lease was a minimum of 15 months), and the Taxpayer had the right to use the aircraft during the entire lease period. Based on Code of Virginia §§ 58.1-1502 and 5.1-5 cited above, the aircraft in question was required to be licensed in Virginia and therefore was subject to the 2% Virginia aircraft sales and use tax. While I sympathize with your situation, I am unable to waive the tax and interest associated with this audit. However, based on the circumstances, I will agree to waive penalty. Upon receipt of your check in the amount of********audit penalty will be waived in its entirety.
If you should have any questions, please contact********* Office of Tax Policy, at **********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9387K
Rulings of the Tax Commissioner