The occasional sale exemption works great for the buyer who can locate a plane that meets the requirements.

However, many (or all) Texas dealers HATE this exemption as it puts them in a competitive disadvantage, even though the dealers pay taxes, hires employees and contribute to the Texas economy...

The only possible solution if this is the right aircraft for you is to evaluate if setting up a leasing arrangement makes sense to defer the sales / use tax.

Good luck!

Good Morning Bill,

Unfortunately it's not so simple. Even if you only sell one airplane a year, if you or your company (depending on whom is selling the plane) sells two or more taxable items or even if you merely hold a sales tax permit, you're going to get hit with the tax. That means if you have your plane in an LLC and lease it back to yourself (a scenario which requires the collection of sales tax on the lease payments) you are automatically locked into paying sales tax when you sell the plane, based on the fact that you hold a sales tax permit and have been collecting on taxable transactions.

Texas is not a great state to own aircraft in (at least from a tax standpoint). The state comptrollers office (and many of the municipal tax offices) monitor the FAA registry and you can bet that if you register an aircraft with an address inside their jurisdiction, you're going to be getting a letter from them.

John IV

Good Morning Bill,

Unfortunately it's not so simple. Even if you only sell one airplane a year, if you or your company (depending on whom is selling the plane) sells two or more taxable items or even if you merely hold a sales tax permit, you're going to get hit with the tax. That means if you have your plane in an LLC and lease it back to yourself (a scenario which requires the collection of sales tax on the lease payments) you are automatically locked into paying sales tax when you sell the plane, based on the fact that you hold a sales tax permit and have been collecting on taxable transactions.

Texas is not a great state to own aircraft in (at least from a tax standpoint). The state comptrollers office (and many of the municipal tax offices) monitor the FAA registry and you can bet that if you register with an address inside their jurisdiction, you're going to be getting a letter from them.

John IV

Daniel,

I must be typing slowly today, you got two replies in before I got my first one in - and it wasn't even a long reply!

You are of course 100% correct. Buyer, not seller. Sorry about that, I should have been more clear.

Good answers in both of your posts. Sounds like you've dealt with TX sales & use issues a time or two yourself.

Thanks,

John IV

Daniel,

I must be typing slowly today, you got two replies in before I got my first one in - and it wasn't even a long reply!

You are of course 100% correct. Buyer, not seller. Sorry about that, I should have been more clear.

Good answers in both of your posts. Sounds like you've dealt with TX sales & use issues a time or two yourself.

Thanks,

John IV

Texas is not a great state to own aircraft in (at least from a tax standpoint). The state comptrollers office (and many of the municipal tax offices) monitor the FAA registry and you can bet that if you register an aircraft with an address inside their jurisdiction, you're going to be getting a letter from them.

John IV

I was recently chatting bout this with a broker and he related a story to me in dealing with these folks. Said they went back and forth several times on a conference call, after some time an agent asked the buyer if he'd ever sold anything on EBay. Buyer said, a couple times. Agent pointer out first two could meet the exemption. Plane would be at least number three; therefore subject to the tax!
Don't know how credible. I've gotten the exemption on past planes, but had purchased each of them from an individual. Jets also seem to get more attention from the local property tax folks. So, I'm treading lightly. Just have to factor that into any prospective purchase. In my dealings with them; no sense of humor.

Not at all...sale of an aircraft by any companies who ever hold a sales tax permit in any states will disqualify the purchaser from claiming the occasional sale exemption.

Buying a plane from a company selling widgets or hamburgers do not qualify.

Texas comptroller's office is not exactly staffed with folks sympathetic to GA, unfortunately.

If you buy from an individual, yes, you can meet the requirements of the exemption.

If an LLC or corporation is the seller, you need to to be doing a lot of investigative work to see if the plane can meet the requirements.

I have seen an exemption denied, simply because the affidavit was not dated by the seller, no joke!

People seem to be confusing sellers and buyers in this TX tax discussion. From what was posted, buyer selling things on eBay does not determine tax status of what was bought. It is the what the seller has sold over the prior 12 months. Sounds like if the seller sold stuff on eBay or had a garage sale it can subject the buyer to sales tax. It is hard to know if your seller can withstand the scrutiny of the TX Revenue folks.

Sales tax creates a lot of friction in buying and selling bigger iron.

Yes, I was trying to get that out before leaving this afternoon. Of course, seller. We have found a bit more room here on the part of the seller than having ever had a sales tax cert. There are ways to insulate aircraft ownership. Had a fella here do the full ten rounds with the tax folks in a case like that. Seller kept separate books on the aircraft and took several other actions which insulated the plane from the business. A very large bill went to zero. But one really has to be on their toes; the more money involved, the more scrutiny. And one may get to spend a lot of time dealing with folks that treat you like you're trying to get over on Texas (g). When I purchased my KA, we had a fella call our FBO and demand to know who was flying the plane, how many passengers, and more info. FBO said they would have to call the owner. Caller threatened to subpoena those records. Of course, there aren't any at the FBO. Wonder who that might have been (sarc) They never called me.
We sent a letter from the seller to the state controller's office showing he was an occasional seller.

Yes, I was trying to get that out before leaving this afternoon. Of course, seller. We have found a bit more room here on the part of the seller than having ever had a sales tax cert. There are ways to insulate aircraft ownership. Had a fella here do the full ten rounds with the tax folks in a case like that. Seller kept separate books on the aircraft and took several other actions which insulated the plane from the business. A very large bill went to zero. But one really has to be on their toes; the more money involved, the more scrutiny. And one may get to spend a lot of time dealing with folks that treat you like you're trying to get over on Texas (g). When I purchased my KA, we had a fella call our FBO and demand to know who was flying the plane, how many passengers, and more info. FBO said they would have to call the owner. Caller threatened to subpoena those records. Of course, there aren't any at the FBO. Wonder who that might have been (sarc) They never called me.
We sent a letter from the seller to the state controller's office showing he was an occasional seller.

There shouldn't be and I haven't seen much friction...sales (use) tax is always the responsibility of the buyer and the seller can't really do much about the buyer's tax situation in his or her home state.

For the most part, seller is willing to accommodate the buyer by agreeing to close the transaction in a tax-friendly locale. Otherwise, there is not much to fight about.

Airplane taxes are very complex. The States all have different rules. You could end up closing the sale in one State, move to your home State and they both want to collect sales/use tax. In Ohio, we still have the casual sale exemption if the sale meets the requirements. Sales tax must have been paid to any State sometime since leaving the factory. Title cannot transfer through a dealer, even for one day. Another option is sale for resale or leasing between two LLC's. you pay a lease rate to your other company and pay the sales tax only on the lease payments.

Get a good aviation tax attorney and CPA.

Well...

I am not sure if this is totally accurate.
If you bought an MU-2 that was manufactured 30 years ago, it cannot be your responsibility to produce proof that owner #2 24 years ago had paid sales tax to another State.