Tax Type
Aircraft Sales and Use Tax
Description
HB 193 effectively subjected aircraft kits to aircraft sales and use tax
Topic
Taxable Transactions
Date Issued
05-13-1996
May 13, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear*****************
This is in reply to your letter of March 13, 1996, in which you request a ruling on the application of the retail sales and use and aircraft sales and use taxes to sales of aircraft kits by ******************** (the"Taxpayer").
FACTS
The taxpayer sells amateur-built helicopter kits to individuals in Virginia. The kits require that the builder perform 51% of the assembly, resulting in the construction of either an Ultralight or Experimental helicopter.
The Taxpayer requests a ruling on whether the sale of these aircraft kits is subject to the retail sales tax or the aircraft sales tax in light of the department's updated retail sales and use tax regulation regarding aircraft sales.
RULING
Code of Virginia § 58.1-609.1(5) provides an exemption from the retail sales and use tax for aircraft subject to the aircraft sales and use tax (§ 58.1-1500 et seq.). Code of Virginia § 58.1-1502 imposes the aircraft sales and use tax upon the retail sale of every aircraft sold in Virginia, and upon the use of any aircraft required to be licensed by the Department of Aviation. Code of Virginia § 58.1-1501 defines an aircraft to mean any contrivance used or designed for untethered navigation or flight in the air by one or more persons at an altitude greater than twenty-four inches above the ground. Such term does not include parachutes.
The aircraft sales and use tax, when enacted in 1974, did not apply to aircraft which were not required to be licensed by the Department of Aviation. As such, inoperable aircraft and aircraft kits, which did not require licensure, were subject to the retail sales and use tax.
In 1984, the General Assembly passed legislation (HB 193) which imposed aviation licensing requirements upon aircraft previously unlicensed in Virginia. This action effectively subjected aircraft kits to the imposition of the aircraft sales and use tax. As such, the Taxpayer's sales of helicopter kits are subject to the aircraft sales and use tax at a rate of 2% of the sales price and not the retail sales and use tax of 4.5%. Tax Bulletin 84-13 (P.D. 84-95), issued June 25, 1984, addressed the change in tax application to aircraft kits.
The department revised Virginia Regulation (VR) 630-10-6, regarding retail sales of aircraft, effective July 1,1994. The revised regulation did not change the application of tax to sales of aircraft kits. Instead, the regulation clarified that the retail sales and use tax is not applicable to sales, leases, or rentals of aircraft provided such aircraft fall within the scope of the definition in Code of Virginia § 58.1-1501.
The department addressed the application of the retail sales and use and the aircraft sales and use taxes to aircraft sales in more detail in the 1995-1999 Virginia Sales and Use Tax Expenditure Study, Volume 2, No.1, copy of excerpt enclosed. Also enclosed are copies of the cited statutes and Tax Bulletin 84-13, for your review.
If you need further assistance, please do not hesitate to contact the department.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11044J
Rulings of the Tax Commissioner