goatflieg

goatflieg

Well Known Member
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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.
 
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.
 
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
 
Carl Froehlich said:
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.
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When did the FAA get the authority or responsibility to collect or verify state sales tax?
 
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.
 
I have never heard of the faa getting involved with state or local taxes, neither normal or EAB aircraft. My DAR didn't ask.
 
plehrke said:
When did the FAA get the authority or responsibility to collect or verify state sales tax?
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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.
 
9GT said:
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.
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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.
 
goatflieg said:
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.
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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.
 
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plehrke said:
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.
Click to expand...

We pay the 6% sales tax due to the State of Michigan here in Michigan. The state does not have any grace built into the formula like Missouri has with its $2000 spent before any out of state purchases taxes are due. Here in Michigan it is no different than buying a car. The State is going to get its 6%. The State of Michigan monitors FAA registration records. If you live in the State, buy a used plane and register it with the FAA, they send you a little packet to fill out and you return it with the 6% sales tax. If you build a plane and register it, they send you a very large packet to complete along with clear instructions on computing you taxes due. They require photo copies of recipients of your purchases to verify in state material purchases where taxes have already been paid, and out of state purchases where taxes are still due. The State may or may not add a penalty to your tax bill if you did not pay them the year you made those purchases. They did not add a penalty to my taxes and were apparently satisfied with the big check they got from me. Their reviewers are very familiar with EXP home built aircraft and what the approximate costs are to build the various models, so the old saying "claim what you have to and deduct what you can" could get you in trouble here. In the State Of Michigan, when we fill out our tax forms, there are clear instructions for reporting out of state purchases and paying the taxes due for the tax year you are filing. Failure to comply or being 100% honest could get someone in a legal mess. If I were starting a new build today with a 5 year build plan, and planned to move to a low tax state in 4 years, I would pay the out of state purchases to the current state of residence every year. This spreads the tax burden over the years of the build and softens the blow of taxes due when your ready to get your airworthiness certificate. Technology is way too advanced to try and cheat the Government out of their due taxes and if you have never been through an audit, consider yourself lucky.
 
6% WOW, 15% here and where as we purchase most of our parts from the US we pay at the border before we receive the goods. The tax man still visits when we register and he has quite an attitude. Last time he said (when I called him after receiving a packet from him) " I know I know you already paid the taxes" . What an attitude he had knowing I had already paid my dues. He must be getting a commission on what he collects, he should get fired instead.
 
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