Tax Type
Aircraft Sales and Use Tax
Description
Aircraft based in state/aircraft licensing requirements
Topic
Taxability of Persons and Transactions
Date Issued
02-03-1998
February 3, 1998
Dear **********************:
This will reply to your letter in which you seek correction of an aircraft sales and use tax assessment issued to your client, ***** (the Taxpayer) for the period July 1996 through December 1996.
FACTS
The Virginia Department of Aviation requires airport managers to complete an Airport Survey annually to list all aircraft that are, in the manager's opinion, located at the airport often enough to require licensing in accordance with Code of Virginia ***** § 5.1-5. According to the January 1997 Airport Survey, the aircraft, a 1993 Socata, Model number ***** owned by the Taxpayer was based at ***** Airport for sixty or more days over a twelve-month period. The department assessed the Taxpayer the aircraft tax, penalty, and interest on the aircraft based on the foregoing information.
The Taxpayer contends that the aircraft in question does not meet the aircraft licensing requirements set forth in Code of Virginia § 5.1-5, and is therefore not subject to the Virginia aircraft sales and use tax. The Taxpayer is requesting that the assessed aircraft tax, penalty and interest on the aircraft be abated.
DETERMINATION
Aircraft Sales and Use Tax: 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 Code of Virginia § 5.1-5.' Code of Virginia § 5.1-5 provides that every resident or nonresident owning a civil aircraft based in Virginia for sixty days over a twelve-month period is required to license such aircraft with the Commonwealth prior to operating it within the Commonwealth.
The Taxpayer believes that the word "days' as used in Code of Virginia § 5.1-5, consists of twenty-four hours or at least an overnight period in order to be counted as one day. Based on this assumption, the Taxpayer maintains that the aircraft was not based in Virginia for sixty or more days over a twelve-month period.
The word "days' as used in Code of Virginia § 5.1-5, refers to a day as a unit of time and not as an aggregation of a certain number of hours, minutes, or seconds. The last moment of any day is one day before the first moment of the next day. Any other method of computation would require an accurate account to be kept of the exact hour, minute, and second of the occurrence to be timed and would prove to be impracticable.
I would also note that the critical factor in determining if an aircraft is subject to licensing in Virginia under Code of Virginia § 5.1-5 is whether the aircraft is based in Virginia. If an aircraft operator/owner in the course of business or in the course of routine flying, leases, rents or owns a hanger, or tie down space at an airport in Virginia, it would indicate that they intended to "base' or operate in Virginia on more than an occasional basis. Thus, if a operator/owner operates an aircraft in Virginia on more than sixty occasions or days in a twelve month period, and, in addition leases space for more than sixty days at an airport in Virginia, the aircraft is required to be licensed in Virginia.
Based on the foregoing, the Taxpayer's aircraft would be subject to Virginia licensing requirements, thus rendering the aircraft subject to the 2% Virginia aircraft sales and use tax. Accordingly, I find that the auditor was correct in the assessment of aircraft sales and use tax to the aircraft in this instance.
Interest: With regard to interest, Code of Virginia § 58.1-1812 mandates the imposition of interest on all deficiencies of tax. Absent the abatement of associated tax, interest cannot be waived. Due to the validity of the tax assessed on the aircraft, there is no basis for waiver of any portion of the interest.
Penalty: Code of Virginia § 58.1-105 authorizes the Tax Commissioner to accept an offer in compromise for cases in which a penalty is imposed upon the taxpayer for failure to comply with the requirements of the tax laws. Generally, absent indications of fraud, penalty will be waived on first time audits. Based upon the circumstances outlined in your letter and since this is the first audit of the Taxpayer pertaining to this issue, I will agree to waive all penalty associated with this assessment.
Summary: Upon receipt of your payment for the tax and interest of the department will abate the penalty. The payment should be sent to Office of Tax Policy, P.O. Box 1880, Richmond, Virginia 23218-1880, within 30 days from the date of this letter.
If you have any questions concerning this letter, you may **************contact at *****.
Rulings of the Tax Commissioner