Tax Type
Aircraft Sales and Use Tax
Description
Retention of records; Taxpayer maintains that the tax was paid on one of the aircraft and the other aircraft is not airworthy.
Topic
Property Subject to Tax
Date Issued
11-30-1998
November 30, 1998
Re: § 58.1-1821 Application: Aircraft Sales and Use Tax
Dear ***
This is in reply to your letter in which you seek correction of an aircraft sales and use tax assessment issued to *** (the Taxpayer) for the period February 1992 through January 1998. I apologize for the delay in responding to your appeal.
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. Based on the airport survey, the Taxpayer was assessed aircraft sales and use tax, penalty, and interest on nine aircraft located in Virginia.
The Taxpayer responded to the audit assessment and provided additional information regarding the aircraft in question. Based on the information provided, the audit was adjusted to remove aircraft *** and *** from the audit. It is the Taxpayer's contention that five of the aircraft assessed were sold or based outside Virginia and not subject to Virginia aircraft sales and use tax. Of the remaining two aircraft held taxable, the Taxpayer maintains that the tax was paid on one of the aircraft and the other aircraft is not airworthy.
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 60 days over a 12 month period is required to license such aircraft with the Commonwealth prior to operating it within the Commonwealth.
Keeping the above in mind, I will address the application of the Virginia sales and use tax in the present case.
Aircraft**** According to records reviewed, the Taxpayer purchased the aircraft on December 30, 1994. Information shows that the seller deposited the payment for the aircraft in a Virginia branch bank. While the Taxpayer claims that the aircraft was purchased in Delaware, the evidence would indicate that the transaction occurred in Virginia and was subject to Virginia aircraft sales and use tax.
Aircraft ****The Taxpayer purchased the aircraft on December 20, 1994. The Taxpayer maintains that the aircraft was purchased in Kansas and flown to Delaware and later sold to an Ohio resident. The auditor requested documentation verifying the sale, however, as of this date the Taxpayer has not provided any documentation. Without additional documentation, I find that the assessment is correct as issued.
Aircraft****The Taxpayer indicates that this aircraft was purchased in 1992 and sold directly to a Maryland resident. According to a copy of the July 8, 1994 New Kent County Survey, the aircraft was owned by the Taxpayer and located in Virginia. Based on this information, the aircraft is subject to Virginia aircraft sales and use tax.
Aircraft ****According to a copy of the Taxpayer's December 10, 1997 letter to the Virginia Department of Aviation, the Taxpayer moved the aircraft from a Virginia airport to Delaware in 1997. Based on this information, the aircraft was located in Virginia during the audit period and subject to Virginia aircraft tax.
Aircraft**** The Taxpayer maintains that the aircraft was based at a Virginia airport until 1994 at which time the aircraft was moved to Delaware. The Taxpayer further indicates that taxes were paid on such aircraft.
The auditor requested that the Taxpayer provide documentation verifying that taxes were paid on the aircraft. The Taxpayer has provided no record of Virginia aircraft tax being paid on this particular aircraft. For this reason, I find that the assessment is correct.
Aircraft**** In the Taxpayer's December 17, 1996 letter, it informed the auditor that the aircraft in question was a collection of salvageable parts purchased outside Virginia and sent directly to Delaware. The Taxpayer indicates that to the best of its knowledge these parts were never assembled into an aircraft nor were they ever based in Virginia.
The auditor indicates that the aircraft has been viewed on numerous occasions at a Virginia airport. Further, based on information obtained from the Federal Aviation Administration (FM), the aircraft was registered to the Taxpayer on December 2, 1992 in Dover, Delaware and was issued an experimental airworthiness certificate. I would also note that while the registration of the aircraft is listed with a Dover, Delaware corporation, it is my understanding that this address is the Taxpayer's registered agent's address. The Taxpayer's physical address is listed with Delaware Secretary of State as being in Virginia. Based on this information and the fact that the Taxpayer has provided no evidence to support its claim, l find that the auditor was correct in its assessment of the aircraft.
Aircraft****The Taxpayer indicates that this aircraft was disassembled and trucked to Delaware in 1993. According to the Taxpayer, the aircraft has not been repaired or reassembled. Due to the condition of the aircraft, the Taxpayer indicates that it will seek a "no registration" for the aircraft from FM.
According to FM records, the aircraft was registered to the Taxpayer on October 12, 1983, in Dover, Delaware. I again point out that while the aircraft registration indicates Dover, Delaware, the Taxpayer's physical address is in Virginia. Further, in a March 17, 1998 letter to the Taxpayer, FM shows that the aircraft still has a valid airworthiness certificate. Based on this information and the fact that the Taxpayer has provided no evidence that this particular aircraft was disassembled in 1993, it appears that the aircraft is taxable.
Overcollection of sales tax: The auditor reviewed records for the period January 1994 through December 1995. The records revealed that the Taxpayer failed to pay two percent of the monthly gross receipts from the rental of its aircraft as provided in Code of Virginia § 58.1-1502(3), (copy enclosed). Rather, the Taxpayer erroneously collected and remitted to the department four and a half percent retail sales and use tax on such rentals.
Code of Virginia § 58.1-625 states, in part, "any dealer collecting the sales or use tax on transactions exempt or not taxable under this chapter shall transmit to the Tax Commissioner such erroneously or illegally collected tax unless or until he can affirmatively show that the tax has since been refunded to the purchaser or credited to his account."
While the Taxpayer indicates that the auditor corrected the erroneously collected sales tax for a period of ten years, l would note that the audit only covered a six-year period. The auditor advised the Taxpayer that credit would be given in the audit if the Taxpayer refunded the erroneously collected sales tax to its customers. The auditor made no corrections to the sales tax collected in error as the Taxpayer properly remitted the erroneously collected sales tax to the department. It is my understanding that the auditor informed the Taxpayer the correct application of the tax for future aircraft rentals. I find that the auditor properly handled the issue of erroneously sales tax in this case.
Summary: Absent additional information, the department has no alternative but to assume the outstanding aircraft tax assessment is valid. Nevertheless, since this is the first audit of the Taxpayer, l will agree to waive all penalty associated with this assessment. The Taxpayer should remit its payment of tax and interest totaling $*** within 30 days. If you have any questions regarding this letter, please contact *** at the department's Office of Tax Policy at ***.
Sincerely,
Danny M. Payne
Tax Commissioner
Re: § 58.1-1821 Application: Aircraft Sales and Use Tax
Dear ***
This is in reply to your letter in which you seek correction of an aircraft sales and use tax assessment issued to *** (the Taxpayer) for the period February 1992 through January 1998. I apologize for the delay in responding to your appeal.
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. Based on the airport survey, the Taxpayer was assessed aircraft sales and use tax, penalty, and interest on nine aircraft located in Virginia.
The Taxpayer responded to the audit assessment and provided additional information regarding the aircraft in question. Based on the information provided, the audit was adjusted to remove aircraft *** and *** from the audit. It is the Taxpayer's contention that five of the aircraft assessed were sold or based outside Virginia and not subject to Virginia aircraft sales and use tax. Of the remaining two aircraft held taxable, the Taxpayer maintains that the tax was paid on one of the aircraft and the other aircraft is not airworthy.
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 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 60 days over a 12 month period is required to license such aircraft with the Commonwealth prior to operating it within the Commonwealth.
Keeping the above in mind, I will address the application of the Virginia sales and use tax in the present case.
Aircraft**** According to records reviewed, the Taxpayer purchased the aircraft on December 30, 1994. Information shows that the seller deposited the payment for the aircraft in a Virginia branch bank. While the Taxpayer claims that the aircraft was purchased in Delaware, the evidence would indicate that the transaction occurred in Virginia and was subject to Virginia aircraft sales and use tax.
Aircraft ****The Taxpayer purchased the aircraft on December 20, 1994. The Taxpayer maintains that the aircraft was purchased in Kansas and flown to Delaware and later sold to an Ohio resident. The auditor requested documentation verifying the sale, however, as of this date the Taxpayer has not provided any documentation. Without additional documentation, I find that the assessment is correct as issued.
Aircraft****The Taxpayer indicates that this aircraft was purchased in 1992 and sold directly to a Maryland resident. According to a copy of the July 8, 1994 New Kent County Survey, the aircraft was owned by the Taxpayer and located in Virginia. Based on this information, the aircraft is subject to Virginia aircraft sales and use tax.
Aircraft ****According to a copy of the Taxpayer's December 10, 1997 letter to the Virginia Department of Aviation, the Taxpayer moved the aircraft from a Virginia airport to Delaware in 1997. Based on this information, the aircraft was located in Virginia during the audit period and subject to Virginia aircraft tax.
Aircraft**** The Taxpayer maintains that the aircraft was based at a Virginia airport until 1994 at which time the aircraft was moved to Delaware. The Taxpayer further indicates that taxes were paid on such aircraft.
The auditor requested that the Taxpayer provide documentation verifying that taxes were paid on the aircraft. The Taxpayer has provided no record of Virginia aircraft tax being paid on this particular aircraft. For this reason, I find that the assessment is correct.
Aircraft**** In the Taxpayer's December 17, 1996 letter, it informed the auditor that the aircraft in question was a collection of salvageable parts purchased outside Virginia and sent directly to Delaware. The Taxpayer indicates that to the best of its knowledge these parts were never assembled into an aircraft nor were they ever based in Virginia.
The auditor indicates that the aircraft has been viewed on numerous occasions at a Virginia airport. Further, based on information obtained from the Federal Aviation Administration (FM), the aircraft was registered to the Taxpayer on December 2, 1992 in Dover, Delaware and was issued an experimental airworthiness certificate. I would also note that while the registration of the aircraft is listed with a Dover, Delaware corporation, it is my understanding that this address is the Taxpayer's registered agent's address. The Taxpayer's physical address is listed with Delaware Secretary of State as being in Virginia. Based on this information and the fact that the Taxpayer has provided no evidence to support its claim, l find that the auditor was correct in its assessment of the aircraft.
Aircraft****The Taxpayer indicates that this aircraft was disassembled and trucked to Delaware in 1993. According to the Taxpayer, the aircraft has not been repaired or reassembled. Due to the condition of the aircraft, the Taxpayer indicates that it will seek a "no registration" for the aircraft from FM.
According to FM records, the aircraft was registered to the Taxpayer on October 12, 1983, in Dover, Delaware. I again point out that while the aircraft registration indicates Dover, Delaware, the Taxpayer's physical address is in Virginia. Further, in a March 17, 1998 letter to the Taxpayer, FM shows that the aircraft still has a valid airworthiness certificate. Based on this information and the fact that the Taxpayer has provided no evidence that this particular aircraft was disassembled in 1993, it appears that the aircraft is taxable.
Overcollection of sales tax: The auditor reviewed records for the period January 1994 through December 1995. The records revealed that the Taxpayer failed to pay two percent of the monthly gross receipts from the rental of its aircraft as provided in Code of Virginia § 58.1-1502(3), (copy enclosed). Rather, the Taxpayer erroneously collected and remitted to the department four and a half percent retail sales and use tax on such rentals.
Code of Virginia § 58.1-625 states, in part, "any dealer collecting the sales or use tax on transactions exempt or not taxable under this chapter shall transmit to the Tax Commissioner such erroneously or illegally collected tax unless or until he can affirmatively show that the tax has since been refunded to the purchaser or credited to his account."
While the Taxpayer indicates that the auditor corrected the erroneously collected sales tax for a period of ten years, l would note that the audit only covered a six-year period. The auditor advised the Taxpayer that credit would be given in the audit if the Taxpayer refunded the erroneously collected sales tax to its customers. The auditor made no corrections to the sales tax collected in error as the Taxpayer properly remitted the erroneously collected sales tax to the department. It is my understanding that the auditor informed the Taxpayer the correct application of the tax for future aircraft rentals. I find that the auditor properly handled the issue of erroneously sales tax in this case.
Summary: Absent additional information, the department has no alternative but to assume the outstanding aircraft tax assessment is valid. Nevertheless, since this is the first audit of the Taxpayer, l will agree to waive all penalty associated with this assessment. The Taxpayer should remit its payment of tax and interest totaling $*** within 30 days. If you have any questions regarding this letter, please contact *** at the department's Office of Tax Policy at ***.
Sincerely,
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner