FLYING AWAY TAX FREE
When an individual comes to Florida to purchase an aircraft, most likely the last thing on his or her mind is sales tax. Sales tax is a very real aspect of an aircraft transaction in Florida. Failing to take into consideration the tax that might be due on a transaction could make for an unwelcomed surprise down the line. This article will establish that aircraft are subject to tax, but the article will also provide for some ways to not have to pay tax on the aircraft purchase.
Anyone engaging in the business of selling tangible personal property in Florida is exercising a taxable privilege. See s. 212.05, Florida Statutes (“F.S.”). In order to sell tangible personal property in Florida, a State tax rate of six percent (6%) is charged on the transaction. See s. 212.05(1)(a)1.a., F.S. The tax due on the transaction can include what is called a discretionary sales surtax, which tax is in addition to the State tax rate. See ss. 212.054 and 212.055, F.S. A discretionary sales surtax is imposed on a county-by-county basis, which tax can be zero percent (0%) and up to an additional one and one half percent (1.5%). This discretionary sales surtax, however, is limited to the first $5,000 of the purchase price of the tangible personal property. See Rule 12A-15.004(2)(a), Florida Administrative Code (“F.A.C.”). “Tangible personal property” is defined as anything that “may be seen, weighed, measured, or touched or is in any manner perceptible to the senses, including … aircraft ….” See s. 212.02(19), F.S. Therefore, the purchase of an aircraft in Florida is subject to a State tax rate of 6%, plus any county discretionary sales surtax.
Now that it has been established that aircraft are subject to tax, let’s go through a couple of examples to illustrate.
Example 1: An individual goes to a Florida aircraft dealer’s business and purchases an aircraft for $3,500.00. The dealer and individual both are located in Leon County, Florida, which has a county discretionary sales surtax rate of 1.5%. The State tax due on the transaction is $210.00 ($3,500.00 * 6%), and the county discretionary sales surtax due on the transaction is $52.50 ($3,500.00 * 1.5%). Thus, the total amount of tax due is $262.50 ($210.00 + $52.50).
Example 2: An individual goes to a Florida aircraft dealer’s business and purchases an aircraft for $10,000.00. The dealer and individual both are located in Leon County, Florida, which has a county discretionary sales surtax rate of 1.5%. The State tax due on the transaction is $600.00 ($10,000.00 * 6%), and the county discretionary sales surtax due on the transaction is $75.00 ($5,000.00 * 1.5%). Thus, the total amount of tax due is $675.00 ($600.00 + $75.00).
Though the purchase of an aircraft in Florida is subject, there are certain instances where one does not have to pay tax on a transaction. In Florida, these exceptions are called exemptions. See generally s. 212.08, F.S. Under Florida law, the person claiming the exemption has the burden of proving the exemption. See, e.g., State ex rel. Szabo Food Services, Inc. of N.C. v. Dickinson, 286 So. 2d 529, 531 (Fla. 1973) (stating exemptions are construed against the taxpayer).
One exemption from tax is a “flyaway” exemption. In order to qualify for this exemption, the following criteria must be met:
(1) the seller is registered with the Department of Revenue (“Department”) for sales and use tax purposes;
(2) at the time of delivery, the purchaser is not a resident of Florida and does not make his or her permanent place of abode in Florida;
(3) the purchaser is not engaged in Florida in any employment, trade, business, or profession in which the aircraft will be used;
(4) if the purchaser is an entity (e.g., a corporation or limited liability company), the purchaser cannot have, as a Florida resident, an officer, director, or person vested with authority to participate in the management, direction, or control of the entity;
(5) the purchaser must remove the aircraft from Florida within 10 days of the date of purchase or, if the aircraft is immediately placed in a repair facility, within 20 days following completion of the repairs or alterations;
(6) the purchaser, within 30 days of the aircraft’s departure from Florida, must provide the Department proof (e.g., fuel receipts, tie-down/hanger charges, or other similar evidence) of the aircraft’s timely removal from Florida;
(7) the purchaser, within 90 days of purchase, must provide the Department written proof the aircraft was licensed, registered, or documented outside of Florida;
(8) the seller must obtain an affidavit, requiring the purchaser to attest to various items;
(9) the seller, within 30 days of purchase, must provide the Department a copy of the sales invoice, bill of sale, and/or closing statement, along with the affidavit in (8); and
(10) the seller must maintain the sales invoice, bill of sale, and/or closing statement, along with the affidavit in (8), as part of his or her records for at least 5 years or until the tax that is imposed by Chapter 212, F.S., can no longer be assessed.
If the nonresident purchaser meets these criteria, then he or she may come to Florida, purchase an aircraft, and take the purchased aircraft from Florida without having to pay tax to Florida on the purchase. Yet, the purchaser should be careful about return trips to Florida. On one of these return trips, the purchaser may find himself or herself with a tax bill for “use” in Florida. A sample of the required affidavit, as mentioned in requirement (8), is found at the end of this article.
After a while of having the above exemption, it became apparent there was a gap in the provision. Some nonresident purchasers would come from a foreign country and want to take advantage of the above provision. Yet, these potential purchasers found themselves in a predicament. In their home country, it might take months for their civil airworthiness authority to register the aircraft. Until the aircraft was registered with the foreign purchaser’s civil airworthiness authority, the aircraft would have to sit in Florida for various legal reasons. Consequently, this nonresident purchaser would be stuck with the aircraft in Florida for potentially months, and would lose out on the tax benefits previously mentioned.
The Florida Legislature recognized this gap and came up with a fix. If the aircraft was to be registered in a foreign jurisdiction (meaning outside of the United States or its territories), then the following criteria would need to be met by the nonresident purchaser:
- the previously mentioned flyaway requirements; (Though Rule 12A-1.007, F.A.C., does not currently reflect as much, it would seem logical for various aspects of the Rule to change to demonstrate the change in law, such as amending “date/days of purchase” in the above-mentioned requirements to “date of registration.”)
- application for the aircraft’s registration is properly filed with the foreign jurisdiction’s civil airworthiness authority within 10 days of purchase;
- the purchaser removes the aircraft from Florida to a foreign jurisdiction within 10 days of the date the aircraft is registered by the applicable foreign airworthiness authority; and
- the aircraft is operated in Florida solely to remove the aircraft from Florida to a foreign jurisdiction.
Thus, if a foreign purchaser meets these requirements, he or she may purchase an aircraft and not have to pay sales tax on the transaction.
The above provisions only cover instances in which a nonresident individual or entity will actually be registering (i.e., using) the aircraft somewhere outside of Florida. What if a nonresident seller (i.e., “dealer”) wants to come to Florida to purchase an aircraft for resale outside of Florida?
If the sale of an aircraft is made to a nonresident aircraft dealer that is not registered with the Department for sales and use tax purposes, the purchaser may buy the aircraft tax free. The purchaser must provide the seller (a Florida registered dealer) a notarized statement that the aircraft will be transported outside of Florida by the dealer for resale purposes only. See Rule 12A-1.007(6)(a), F.A.C. A copy of this affidavit is included below as well.
In summary, Florida law allows nonresident purchasers to come to Florida, purchase an aircraft, and not pay tax on the purchase of the aircraft. The only caveat is various criteria must be met in order to qualify for the exemption. A nonresident dealer may also come to Florida to purchase an aircraft tax free. For either type of transaction, an affidavit is required. Below, are sample affidavits taken from Rule 12A-1.007, F.A.C. If these requirements are not met, then tax may be due on the purchase of the aircraft.
About the author: David Brennan is an associate attorney with Moffa, Sutton, & Donnini,
P.A. His primary practice area is Florida tax controversy. David received
a B.S. in Accounting and Finance, with a minor in Computer Science, from
Florida State University. He worked as an accountant for a CPA firm before
attending law school at Regent University. He received his Juris Doctorate
in 2013 and was licensed to practice law in Florida in the same year.
In 2015, David earned his Masters of Laws in Taxation from Boston University.
You may contact David via email at DavidBrennan@FloridaSalesTax.com or
850-250-3830. You can read his
BIO HERE.
ADDITIONAL RESOURCES
ADDITIONAL ARTICLES TO READ
AIRCRAFT AIRPLANE vs FLORIDA SALES TAX, published September 13, 2015, by Jerry Donnini, Esq.
FLORIDA USE TAX AUDIT LETTER?, published June 14, 2015, by James Sutton, CPA, Esq. and Jerry Donnini, Esq.
GO TO JAIL FOR NOT PAYING FLORIDA SALES TAX?, published November 3, 2103, by James Sutton, CPA, Esq.