jdeas

jdeas

Well Known Member
Wow, California is really on the ball! I have already received my first tax notice for my 'reserved' N-number and the threat of a penalty if I don't reply to the assessor.
Anybody else get something like this while you were still building?
 
Over the top

Wow, just got off the phone with the assessors office. Because I reserved an N number and rent a county hangar I must complete their tax paperwork each year with an enclosed letter stating the current status of the project.
Is it just me or is this a little over the top
 
What County?

Yes, this happened to me several years ago; it was Riverside County. The tax was calculated based on the assessed value of a completed aircraft which was $108K in my case. I had to go to the County Assessor's Office and personally confront the particular assessor who levied the tax. I took my FAA reserved N-number paperwork with me.

The assessor cancelled the tax principle, but charged me interest from the date of his assessment to the date that the assessment was rescinded. I think it was some sort of a face-saving measure. The interest payment was small, so I paid it just to be rid of the problem.

Sometimes, when the counties are desperate for funding, as they are now, they'll try anything to bring in revenue (rather than cut spending).

Bill Palmer :)
 
This happened to me

I also rent a county hangar at Compton Airport. To rent one, you give them your reserved N number.
Once that happens, you get a tax bill. I just call the office and tell them the number is reserved, I also write "No aircraft, I just have a N number reserved for future use", and return the form every year.
 
I just finished researching this in Arkansas. I'd say Arkansas isn't as automated as California, but essentially the rules are the same. I have "Empannage parts" on my personal property tax assessment.
 
jdeas said:
Wow, just got off the phone with the assessors office. Because I reserved an N number and rent a county hangar I must complete their tax paperwork each year with an enclosed letter stating the current status of the project.
Is it just me or is this a little over the top
Click to expand...


You live in Kalifornia, what did you expect? The states flat broke and they need all of your money they can get their hands on!
 
It's interesting how a state can tax you on an aircraft that does not exist. How can they put a value on that?
I can build an aircraft out of cardboard, register it, and get that "N" number assigned to it. Doesn't matter whether or not it will pass an airworthiness inspection.
It would serve no practical purpose, but it can be done.
 
Oklahoma

OK state sent me a notice also, after reserving N# for my RV4, which was still over a year from flying. I wrote them back stating the "airplane" was still incomplete. Never heard back again, and I later found out that OK frequently just drops the request. This was years ago, so maybe things are different now since the state has made such large cuts in budget. We'll see...
 
Bill Wightman said:
OK state sent me a notice also, after reserving N# for my RV4, which was still over a year from flying.
Click to expand...

BTW, when you reserve a number, you do not reserve it for any aircraft. You're just reserving the number in your name.
It has no reference to an aircraft.
 
I don't think you have an airplane until you have an airworthness certificate. It is just parts without one.
 
I took out a builder loan on my plane and part of the loan application paperwork was to fill out the registration form. Unbeknownst to me, the loan company submitted the form to the FAA. Several months later, I received my registration from the FAA followed by a tax letter from the state about a month after that.

I paid the tax on the amount of the investment at that time. I was a bit angry but, now realize that the state has taxed me and I've paid. I think that book has been closed.
 
Registration triggers tax, not airworthiness

wilddog said:
I don't think you have an airplane until you have an airworthness certificate. It is just parts without one.
Click to expand...

In Virginia, a homebuilt aircraft is considered a taxable asset when it is issued a registration certificate by the FAA, even though it may not have an airworthiness certificate.
 
Guys: You might want to think of an early property tax bill in another light. I know a guy who received a tax bill after reserving a N-number and all he had was the tail kit. He paid the few dollars they wanted and every year he gets the same tax bill for just the tail kit. Apparently, when he registered the airplane and the state accessed the FAA paperwork, the tax dude looked him up and saw he was already on tax rolls, no further action required. As far as I know he is still flying that airplane and his annual tax bill is just a few dollars per year based on his tail kit. Knowing the tax auditors are never wrong, he has forgone the opportunity to disabused them of their correctness. Dan
 
In California it's the county, not the state that levies property tax. I've had an N-number reserved for 4 years, and no tax bill from Kern County. They do however bill be for propery tax on the dirt I LEASE from the city on which my hangar sits.:confused:

At the rate I'm going, I'll be retired and saying bye-bye to California before that number gets assigned to an airplane.
 
My mistake was assuming that they were assessing me for having a plane. He kept using terms like 'airplane' 'airworthy' etc. I made the argument that right now it isn't an airplane, its just a pile of aluminum sitting in my garage. I also pointed out that airworthiness was the sole domain of the FAA and the State didn't have the authority to call something a plane that even the FAA doesn't.

He called all over the state trying to figure out what to do. I took that as a sign that more Arkansans need to build experimental aircraft.

Eventually he came back with the excuse that they were taxing the parts, not the plane. His argument is that parts (new, spare, reconditioned...whatever) are taxable. I ran out of arguments and it's only $16 a year. But I fear that now that they know I'm here, I have to claim my wings and fuse, etc. And he made it a point that the engine HAS to be reported at the time of purchase (RATS!).
 
There are of course two tax issues WRT buying and building a plane. Some states have annual personal property tax assessments on capital goods (cars, planes, boats) - where this thread began. Other states (such as mine, Florida) don't annually assess tax on those kinds of assets. However, it's far more common (tho' still not universal) for states to have a sales or use tax assessment in place for such assets (which I think at least one or two of the above posters are referring to). As I learned when calling up the Tallahassee's Dept. of Revenue, Florida expects one to pay sales tax on the value of each kit as it's received. (They of course expect us to pay sales tax on virtually everything we buy...). Unlike most purchases, however, Florida gets help from the U.S. Coast Guard (when it comes to documented vessels) and the FAA (for planes), so that sooner or later one receives a (sales) tax assessment from the State, even if the kit purchases were 'invisible' to the State. And related to this, if one later transfers the aircraft to another state, that payment of sales tax may be considered as the basis for avoiding (or reducing) the use tax the second state may levy on the asset.

But here's a question I'd welcome comments on: Why invite this tax issue a year or three before it's necessary? Why file for an N number well ahead of when the kits are close to becoming an a/c, when one can avoid the assessment of sales tax (and for states like California, assuming one is home building, the annual personal property tax) that the N number generates? One might lose a chance for a given N number if waiting, but wo't there be 'new' N numbers available at a later date that aren't available earlier? Beyond the satisfaction of holding an N number, doesn't filing for one just make life more complicated and more expensive sooner? I realize it's a very popular thing to do...but perhaps out of ignorance, I just don't get it.

Jack
 
I did it because I went to a lot of trouble getting the number I wanted and wasn't about to give it up. I found the number I wanted and it was on a experimantel test plane that had since been scrapped. The fellow had also passed away several years ago. His wife was kind enough to go through all the hurdles of giving up the number so I could get it transferred to me. It took about a year before I actually got it done. Now I have N9JW and it's all mine. :D
 
Imaginary money

If they want to tax your plane that doesn't exist, can't you just pay it with imaginary money?
 
Mud tax

They do however bill be for propery tax on the dirt I LEASE from the city on which my hangar sits.:confused:

I had a sailboat in a slip in Alameda County (Ca.) and they taxed me for the dirt (silt) under the boat. :mad:
 
Lack of understanding...

I'm not sure I get the personal property tax thing. I'm in Canada, and trust me.. we are VERY acquainted with taxes. I lived in Virginia for a few years. Are you saying that I'd have to pay sales tax on all I bought for my plane (I think it was 4.5% there) and then pay a yearly tax just for owning it? I believe I had to do that with my vehicles.

I get property tax on homes. It is required to pay for services (water, sewer, garbage, etc.) I can even justify something for cars (to pay for road maintenance). What services is the State / County providing to you that requires a tax on your plane? Do they fund airports? If nothing, why don't they charge tax on large screen TVs? Furniture? Personal computers? Toothpaste?

I can tell you, I was better off, tax wise, living in the US... but I still don't understand this tax. Seems regressive to me.

Sorry for the editorial... :p
 
Indiana has been quite realistic on airplanes. I would guess you have to be up into light twins to be over $100/year. BUT, they make up for it on the car you drive to the airport! Excise tax (after you have paid the 7% sales tax) on a new car can be well over $500 per year. It used to be over $1000, but I haven't owned anything that nice for a while, so I don't really know. I know that I smile when I pay for the 9A. Best tax bargain out there!

Bob
 
Dave Cole said:
In Virginia, a homebuilt aircraft is considered a taxable asset when it is issued a registration certificate by the FAA, even though it may not have an airworthiness certificate.
Click to expand...

But a reserved N-number is not "attached" to an aircraft. The reminder postcards and the FAA AC is very specific about not painting it on any plane until you have FAA permission...

I'm not sure how the county/state could take a reserved N-number and assume you have a plane....:rolleyes:

Tell it's your dream and you are saving your pennies for a Citation or Gulfstream and you want your initials on it.
 
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The possible penalty is the problem

What got me was this, A simple FAA web search would have shown that number as reserved only. Instead of doing this they spent the time and money to send me a tax bill for something that does not even exist yet.
To add to the insult, because I did not reply in time it is now under review and I may have to pay a penalty!
I don't mind paying what's due but come on guys, prove you don't have a plane or pay a penalty?
 
jdeas said:
What got me was this, A simple FAA web search would have shown that number as reserved only. Instead of doing this they spent the time and money to send me a tax bill for something that does not even exist yet.
To add to the insult, because I did not reply in time it is now under review and I may have to pay a penalty!
I don't mind paying what's due but come on guys, prove you don't have a plane or pay a penalty?
Click to expand...

How did they know what model/type plane you are bulding to get the correct tax rate?

Print out the FAA web page for your reservation and send that in....:)
 
jdeas said:
What got me was this, A simple FAA web search would have shown that number as reserved only. Instead of doing this they spent the time and money to send me a tax bill for something that does not even exist yet.
To add to the insult, because I did not reply in time it is now under review and I may have to pay a penalty!
I don't mind paying what's due but come on guys, prove you don't have a plane or pay a penalty?
Click to expand...

If the penalty is a percent of the tax due, x percent of nuthin' is nuthin', eh? :)

Remind me not to associate my n-number with any hangar I rent until after it's an airplane...
 
Virginia taxes on aircraft

java said:
snip... Are you saying that I'd have to pay sales tax on all I bought for my plane (I think it was 4.5% there) and then pay a yearly tax just for owning it? I believe I had to do that with my vehicles.
Click to expand...

Since you mentioned Virginia, I can speak to that.

Virginia does not require sales tax to be paid on the parts you purchase for a homebuilt airplane (although the parts you buy in Virginia will be taxed by the merchant anyway). Instead of a sales tax, the state collects a use tax for aircraft, which is a one-time tax collected at the time of purchase, aka the date an FAA aircraft registration certificate is issued. As a homebuilder, the state requires that you supply copies of invoices to substantiate the cost, and you are taxed accordingly. Fortunately, the use tax is at a rate that is significantly less than the state and local sales tax.

Of course, it doesn't end there. The locality in which you hangar your aircraft will collect annual personal property taxes on it's value at a rate that varies quite a bit from one jurisdiction to another.
 
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To back up what Dave said on Virginia taxes, the state-wide one-time use tax is 2%. Having a reserved N-number does not open you up to a tax liability (I've had mine for 5 years now). Registering your plane or pile of parts with the FAA can lead to an early tax bill which is why most wait until they are within 6-months of getting their airworthiness inspection to do so (got to have it registered in order to recieve the airworthiness cert).

In Virginia, personal property taxes are a county assessment. Some counties tax aircraft, some do not.
 
Rental

Flying Scotsman said:
Remind me not to associate my n-number with any hangar I rent until after it's an airplane...
Click to expand...

Yet another catch, many airports require you to prove that you own an airworthy aircraft, by producing an airworthiness certificate and registration, before they will rent you a hangar. It has to do with people thinking that hangars are storage lockers, not a place to keep an airplane.

John Clark ATP, CFI
FAA FAAST Team Member
EAA Flight Advisor
RV8 N18U "Sunshine"
Airport Commissioner, KSBA
 
Renting the hangar did require an N number

Yes, the airport manager did use my reserved N-number. It is a required to rent a county hangar. In the end I doubt I will get a penalty but I have to wait for an assessor to review the case and call me back (after they receive my letter).
Just silly. I bet the county checks the FAA records to confirm what you sent in as matching up with the FAA registration. They need to review their work flow and do that first!
 
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