Homebuilt Aircraft Tax Laws

[goatflieg]

A conversation with a local RV-10 builder brought up the issue of taxes as they apply to homebuilt aircraft. He was considering registering his aircraft in the state he would eventually move to, as he had learned that Michigan aircraft taxes are exorbitant. That got me thinking about educating myself on the tax burden I would eventually be facing. AOPA has some information, but I was wondering if anyone here has some suggestions for sources of tax information dealing specifically with homebuilt aircraft.

[rvbuilder2002]

It is different in every state, so you need to contact your state revenue dept, or talk with someone that is familiar with the specifics within your state.

[Carl Froehlich]

Be careful as many states, like Virginia, apply airplane personal property tax by county, not by state. For an RV I can go one county over and be paying ~$2K/year property tax instead of the $0 tax for my county.

The only straight forward state tax that is comparable is sales tax. That said, I suspect most FAA inspectors will want to see sales tax paid to the state the aircraft is registered in. If this is not the state where the airplane is when inspected you will need have a ready story.

Good luck,
Carl

[plehrke]

Originally Posted by Carl Froehlich

That said, I suspect most FAA inspectors will want to see sales tax paid to the state the aircraft is registered in. If this is not the state where the airplane is when inspected you will need have a ready story.

When did the FAA get the authority or responsibility to collect or verify state sales tax?

[9GT]

I find Michigan taxes very reasonable. I paid Michigan state sales tax on everything I purchased to build the plane in one lump sum after they became aware it was a real airplane when it was issued its airworthiness certificate. Then about $25 yearly IIRC for the Michigan registration decal. That includes a new MI sectional and MI airport directory.

[Carl Froehlich]

Originally Posted by plehrke

When did the FAA get the authority or responsibility to collect or verify state sales tax?

Good point - this might be a Virginia issue as all airworthy aircraft in the state are subject to a one time 2% sales tax: http://www.doav.virginia.gov/licensi...aft%20faqs.htm

[BobTurner]

I have never heard of the faa getting involved with state or local taxes, neither normal or EAB aircraft. My DAR didn't ask.

[RV7A Flyer]

Originally Posted by plehrke

When did the FAA get the authority or responsibility to collect or verify state sales tax?

Never. I'm sure a DAR will weigh in here, but I'm certain that state and local (or federal) taxes are none of their concern.

[goatflieg]

Originally Posted by 9GT

I find Michigan taxes very reasonable. I paid Michigan state sales tax on everything I purchased to build the plane in one lump sum after they became aware it was a real airplane when it was issued its airworthiness certificate. Then about $25 yearly IIRC for the Michigan registration decal. That includes a new MI sectional and MI airport directory.

David, since you're relatively nearby, I may send you a message, and maybe we could meet up sometime and discuss this. MI sales tax is 6%, and if I spend $80K building my airplane, that's still a $4800 bite, if I'm calculating correctly. For tax purposes, I'm assuming I would only have to pay the sales tax on the actual aircraft materials, and exclude tooling, training, etc. I don't want to have to dodge anything or be deceptive, and I'm definitely going to base the aircraft at PTK, so I just want to get an idea of what I'm in for.

[plehrke]

Originally Posted by goatflieg

David, since you're relatively nearby, I may send you a message, and maybe we could meet up sometime and discuss this. MI sales tax is 6%, and if I spend $80K building my airplane, that's still a $4800 bite, if I'm calculating correctly. For tax purposes, I'm assuming I would only have to pay the sales tax on the actual aircraft materials, and exclude tooling, training, etc. I don't want to have to dodge anything or be deceptive, and I'm definitely going to base the aircraft at PTK, so I just want to get an idea of what I'm in for.

Warning: I am not an authority on taxes!
Look into whether your state has a dollar value per year type of use tax. ("Use" tax is just "sales" tax on stuff you buy out of state since I think technically the fed does not allow a state to charge "sales" tax for purchase in other states so the charge a "use" tax for the use of the state infrastructure to support the stuff you bought out of state). MIssouri charges use tax on out of state purchases over $2000 per year. I paid use tax based on year purchased but did it after flying (that is another story). Many years during my build I purchased stuff but under the $2000 threshold. First year spent only $1700 for tail kit so no need to add that to use tax bill (Technically if that year I bought $600 worth of tools from out of state, or a TV from Amazon, I would then owe use tax on $2300 worth of stuff so yes, in MO you may need to include tools.) Also the stuff you buy from the local aviation aisle of Lowes you already have paid sales tax on. This was not huge except when it came to paint, I bought all supplies locally. Also remember sales tax is on what you paid, not what it's worth.
Your state may vary but these small little rules can actually save you taxes.