Tax exempt- aircraft parts

[Tlrguy]

Hello all.

It has come to my attention that the state of Wisconsin is tax exempt when it comes to aircraft parts. I have a second address in Wisconsin and would like to start sending parts orders from Vans (not kits or engines) to said address.

Upon contacting Vans to confirm that I will not be getting charged sales tax, their accounting department tells me that they do collect sales tax for Wisconsin orders because their web store currently does not have the ability to differentiate. Is it just me or does that not sound like an acceptable answer and I question where the tax money collected goes?

This adds up to thousands of dollars over the course of an RV10 build. Has anyone else in a tax exempt state ever run into this issue? And how did you resolve it?

 

[upperdeck]

Where registered?

I think it really comes down to where you will register the airplane. If the parts are delivered and later registered in Wisconsin, no sales or use tax is due. Registration for an experimental here is under $100 and is a one time fee.

But even if the parts are delivered tax free to Wisconsin, but then registered in another state, you'll owe tax in that state.

 

[Tlrguy]

I think it really comes down to where you will register the airplane. If the parts are delivered and later registered in Wisconsin, no sales or use tax is due. Registration for an experimental here is under $100 and is a one time fee.

But even if the parts are delivered tax free to Wisconsin, but then registered in another state, you'll owe tax in that state.

My point exactly. Parts shipped to a tax exempt state requires no sales tax collected. You then take that same plane and register it in a tax exempt state and no sales or use tax is collected on the completed and registered aircraft.

Why in the world is Vans collecting sales tax on a tax exempt part? Because their computer system cannot discriminate is not an acceptable answer.

 

[MacCool]

Hello all.

It has come to my attention that the state of Wisconsin is tax exempt when it comes to aircraft parts. I have a second address in Wisconsin and would like to start sending parts orders from Vans (not kits or engines) to said address.

Upon contacting Vans to confirm that I will not be getting charged sales tax, their accounting department tells me that they do collect sales tax for Wisconsin orders because their web store currently does not have the ability to differentiate. Is it just me or does that not sound like an acceptable answer and I question where the tax money collected goes?

This adds up to thousands of dollars over the course of an RV10 build. Has anyone else in a tax exempt state ever run into this issue? And how did you resolve it?

I got exactly the same response from Aircraft Spruce when I recently asked them the same question. Like Van's, they weren't at all apologetic either. I am told that you can claim the sales tax you paid as an itemized deduction, but you don't get it all...there are tables that vary by state. https://www.irs.gov/pub/irs-pdf/i1040sca.pdf

I bought some avionics from Steinair. They don't even charge sales tax if your state is airplane-parts exempt. That's a better deal.

 

[Tlrguy]

I got exactly the same response from Aircraft Spruce when I recently asked them the same question. Like Van's, they weren't at all apologetic either. I am told that you can claim the sales tax you paid as an itemized deduction, but you don't get it all...there are tables that vary by state. https://www.irs.gov/pub/irs-pdf/i1040sca.pdf

I bought some avionics from Steinair. They don't even charge sales tax if your state is airplane-parts exempt. That's a better deal.

Aircraft Spruce may have just changed then. When I ship parts from Spruce to Wisconsin, every single item is noted as tax exempt. Call me crazy but collecting taxes in a tax exempt state is a very poor business practice. This is a simple computer software solution.

 

[Paul Thomas]

Vans' wasn't going to collect taxes if I elected to pick up at their factory vs. having it shipped to FL and had no issues doing different invoices. It sounds odd to collect in a tax exempt state... where is the tax money being sent?

Are you sure you all understood each other?

 

[BobTurner]

Reading between the lines, it sounds like your build is actually taking place in IL, which, I gather, has a sales tax. Most states that have a sales tax also have a ‘use tax’ (it is illegal to collect sales tax on interstate commerce, so it’s re-named ‘use tax’). If you import stuff, even your own stuff, from Wisc, you will owe IL ‘use tax’. The state will likely impose penalties and fees if they find out about this subterfuge.

 

[Tlrguy]

Reading between the lines, it sounds like your build is actually taking place in IL, which, I gather, has a sales tax. Most states that have a sales tax also have a ‘use tax’ (it is illegal to collect sales tax on interstate commerce, so it’s re-named ‘use tax’). If you import stuff, even your own stuff, from Wisc, you will owe IL ‘use tax’. The state will likely impose penalties and fees if they find out about this subterfuge.

Thanks for the reply Bob. You are correct in calling it a use tax, which thankfully is a lower percentage in Illinois as compared to sales tax. The fact of the matter is, if parts are sent to a state that is exempt from this use tax, why would one collect taxes on said parts that fall in line with the rule of the law? Anyone interested in this stuff should consider reading the tax laws in New Mexico and many other states for that matter before registering their next aircraft.

 

[BobTurner]

Thanks for the reply Bob. You are correct in calling it a use tax, which thankfully is a lower percentage in Illinois as compared to sales tax. The fact of the matter is, if parts are sent to a state that is exempt from this use tax, why would one collect taxes on said parts that fall in line with the rule of the law? Anyone interested in this stuff should consider reading the tax laws in New Mexico and many other states for that matter before registering their next aircraft.

It doesn’t matter where you send the parts, if Vans thinks you live in IL then their accountant has advised them to withold IL use tax. If your build is actually taking place in Wisc., then I think you’re correct. But no idea how to straighten this out. Maybe pay now, ask for a refund directly from the state later?

 

[John Tierney]

WI Build and TN Move

I built my RV-7 in Wisconsin in the early 2000s, and at the time Van's and others didn't collect taxes, but the tax man hit me up after the plane was registered for a bunch of $$, as a vehicle tax, not parts tax. I moved to Tennessee within a year of registration, and guess what, TN said that WI didn't collect enough to satisfy them, and I got tagged again.

If you can prove that vendors are collecting tax during the build, by keeping good receipts and records, I would think that the tax-man would reduce the registration tax, but not eliminate it completely. You may want to contact the department of revenue of the state you intend to use as your residence when the plane is registered.

 

[Tlrguy]

I built my RV-7 in Wisconsin in the early 2000s, and at the time Van's and others didn't collect taxes, but the tax man hit me up after the plane was registered for a bunch of $$, as a vehicle tax, not parts tax. I moved to Tennessee within a year of registration, and guess what, TN said that WI didn't collect enough to satisfy them, and I got tagged again.

Hate to say it but you screwed up just like I did on my first two airplanes.

 

[birddog486]

Everyone will have their opinion on how this should work but I've built two airplanes in Wisconsin and both times I've had to pay tax on them.

When your building, the parts your purchasing are not parts for an airplane. There parts for your hobby, Recreation/education as the 51% rule states. Once your registered the additional parts become tax exempt as parts for your airplane.

I just made an order from spruce and noticed there finally selling only certain parts as tax exempt.

 

[upperdeck]

Fyi, the Wisconsin aircraft parts sales tax exemption went into effect July 1, 2014.

Effective July 1, 2014, charges for the repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection, and maintenance of any aircraft or any aircraft parts are not subject to sales tax pursuant to sec. 77.52(2)(a)10, Wis. Stats., as amended by 2013 Act 185.

 

[upperdeck]

Everyone will have their opinion on how this should work but I've built two airplanes in Wisconsin and both times I've had to pay tax on them.

When your building, the parts your purchasing are not parts for an airplane. There parts for your hobby, Recreation/education as the 51% rule states. Once your registered the additional parts become tax exempt as parts for your airplane.

I just made an order from spruce and noticed there finally selling only certain parts as tax exempt.

This isn't correct in Wisconsin. Vans, Garmin, Titan, etc, charged me NO sales tax when ordering their aircraft parts delivered and assembled in Wisconsin. The only aircraft parts I ordered before the state law went into effect was my tail kit. I did owe and paid USE tax on those parts ONLY.

 

[Snowflake]

Fyi, the Wisconsin aircraft parts sales tax exemption went into effect July 1, 2014.

Effective July 1, 2014, charges for the repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection, and maintenance of any aircraft or any aircraft parts are not subject to sales tax pursuant to sec. 77.52(2)(a)10, Wis. Stats., as amended by 2013 Act 185.

No mention of construction or new builds, it's essentially just repair and maintenance.

 

[Don E]

“or any aircraft parts are not subject to sales tax”

It seems to me that the subject phrase includes aircraft parts without regard to whether maintenance, repair, or new build.

 

[dpansier]

No mention of construction or new builds, it's essentially just repair and maintenance.

My understanding is this change in the Wisconsin law came about because of the large Gulfstream facility in Appleton (ATW). Gulfstream could not be competitive with other shops after adding in the 5.5% sales tax.

 

[RV7A Flyer]

It seems to me that the subject phrase includes aircraft parts without regard to whether maintenance, repair, or new build.

If only the phrase had a comma in it between "any aircraft" and "any aircraft parts", it might be read that way. But there isn't. Cf. O'Connor v Oakhurst Dairy.

IANAL, of course, but I can guess how the JDs at the tax agency would interpret this.