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Florida Leased Aircraft Sales Tax White Paper

November 22, 2010

Summary Analysis

The bill clarifies that the lease of any aircraft to a nonresident is exempt from the taxes under chapter 212, F.S., if the aircraft enters and remains in this state for less than a total of 21 days during the 6-month period after the date of the lease, or if the aircraft enters and remains in the state exclusively for the purpose of flight training, repairs, alterations, refitting, or modification. The bill also provides that an artificial business entity is a nonresident if its principal office is outside the state.

The bill’s provisions will have an insignificant fiscal impact on state and local government revenues.

Full Analysis

Present Situation

Aircraft Purchases: Section 212.05, F.S., imposes sales tax on the sale of an aircraft in this state. An exemption from the sales and use tax is provided on the purchase of an aircraft if the purchaser removes the aircraft from the state within 10 days after the date of purchase, or when the aircraft is repaired or altered, within 20 days after completion of the repairs or alterations.

Importation of Aircraft: Section 212.06, F.S., provides that a use tax shall apply and be due on tangible personal property imported or caused to be imported into this state for use, consumption, distribution, or storage to be used or consumed in this state; provided, however, that, it shall be presumed that tangible personal property used in another state, territory of the United States, or in the District of Columbia for 6 months or longer before being imported into this state was not purchased for use in this state.

Exports of Aircraft: Section 212.06(5)(a)1., F.S., provides that aircraft exported outside of the continental U.S. is tax exempt when the purchaser provides a validated U.S. customs declaration and the cancelled U.S. registry of the aircraft.

Aircraft Manufacturers: Section 212.08(11), F.S., provides that the sales tax imposed on an aircraft sold by a manufacturer is equal to the amount of sales tax that would be imposed by the state where the aircraft will be domiciled, up to the six percent imposed by Florida. This partial exemption applies only if the purchaser is a resident of another state who will not use the aircraft in Florida, a purchaser who is a resident of another state and uses the aircraft in interstate or foreign commerce, or if the purchaser is a resident of a foreign country.

Temporary Presence: Section 212.08(7)(ggg) F.S. was passed last year as part of ch. 2010-128 and 2010-147, Laws of Florida. It provides that aircraft owned by non-residents that enter and remain in the state for less than 21 days during the six-month period after the date of purchase are exempt from the use tax imposed under chapter 212. The use and removal of aircraft from the state may be proven with documentation such as invoices for fuel or hangars, repairs, or other similar documentation issued by Florida-based vendors or suppliers which clearly identify the aircraft owned by the non-resident.

The use tax exemption also applies to aircraft owned by non-residents that enter the state exclusively for the purpose of flight training, repairs, alterations, refitting, or modification. These exempt activities must be supported with written documentation issued by Florida-based vendors or suppliers which clearly identify the aircraft owned by the non-resident.

Miscellaneous Exemptions: A number of sales and use tax exemptions related to aviation exist in s. 212.08, F.S.: Aircraft repair and maintenance labor charges – For qualified aircraft, aircraft of more than 15,000 pounds maximum certified takeoff weight, and rotary wing aircraft of more than 10,000 pounds maximum certified takeoff weight;

Equipment used in aircraft repair and maintenance – For qualified aircraft, aircraft of more than 15,000 pounds maximum certified takeoff weight, and rotary wing aircraft of more than 10,300 pounds maximum certified takeoff weight; and

Aircraft sales and leases – For qualified aircraft and for aircraft of more than 15,000 pounds maximum certified takeoff weight used by a common carrier, as defined by federal regulations.

Fractional Aircraft Programs – A maximum tax of $300 is imposed upon an interest in an aircraft used in a fractional aircraft ownership program.

Effect of Proposed Changes

The Department of Revenue has informally ruled that s. 212.08(7)(ggg) does not apply to leases of aircraft because the language of the exemption applies only to use tax payable by the owner of the aircraft. In a lease, the owner lessor is only responsible for sales tax to be collected from the lessee. The lessee may be responsible for use tax, but is not the owner of the aircraft. DOR reasons that because the owner’s liability is for sales tax, not for use tax, the lessor owner is not exempt. DOR also reasons that since the lessee is not the owner, the exemption can not apply to the use tax owed by the lessee.

The bill clarifies that the temporary presence exemption contained in s. 212.08(7)(ggg) F.S. is also intended to apply to leases of aircraft leased to nonresidents.

The bill provides an effective date of July 1, 2011.

Section Directory

Section 1. Amends s. 212.08(7)(ggg), F.S., to clarify that a lease of an aircraft to a non-resident of Florida is exempt from the use tax imposed under chapter 212, F.S., if the aircraft enters and remains in Florida for less than a total of 21 days during the six-month period after the purchase date or if the aircraft enters the state exclusively for the purpose of training, repairs, alterations, refitting, or modification.

Section 2. Provides an effective date of July 1, 2011.

Fiscal Analysis & Economic Impact Statement

State Government

1. Revenues: Last year the Revenue Estimating Conference found that s. 212.08(7)(ggg) would have an insignificant fiscal impact on state government revenues. This bill is remedial in nature and only clarifies the exemption already determined to be insignificant by the Revenue Estimating Conference.

2. Expenditures: None.

Local Government

1. Revenues: The Revenue Estimating Conference should find that the bill’s provisions will have an insignificant fiscal impact on local government revenues.

2. Expenditures: None

Private Sector

This legislation has the potential to positively impact the private sector by reducing the potential use tax liability incurred by nonresidents on aircraft temporarily in the state. Anecdotal evidence indicates that some nonresident aircraft owners have avoided bringing their aircraft into the state because of potential use tax liabilities. By alleviating the concerns of those nonresidents, the provisions of this legislation may increase tourism and visitors due to private aircraft entering the state for conventions, sporting events, vacations, and other similar activities.

Constitutional Issues

Applicability of Municipality/County Mandates Provision: The mandates provision appears to apply because this bill reduces the authority that counties or municipalities have to raise revenues in the aggregate; however, an exemption applies because the Revenue Estimating Conference should estimate that this bill will have an insignificant fiscal impact on local governments.