Wisconsin Rejects Tax Exemption on Maintenance and Mods

 - August 4, 2013, 12:15 AM

Wisconsin MROs have once again been foiled in their attempt to get the state legislature to exempt private aircraft maintenance and modification from the 5.5-percent state sales tax. While the tax does not apply to aircraft operated under Part 121 or 135 certificates, it does apply to those operating under Part 91.

Nearby states such as Illinois, Indiana, Michigan, Minnesota, Missouri and Ohio already exempt Part 91 aircraft service from this tax, as do California, Georgia, Florida and Massachusetts, among others. Pennsylvania recently joined that list. Wisconsin MROs, including Gulfstream in Appleton and the Cessna Citation Service Center in Milwaukee, are arguing that application of the tax is discriminatory and damages their Wisconsin-based businesses.

The Wisconsin Legislative Fiscal Bureau estimates that the sales tax on Part 91 maintenance currently produces a statistically insignificant $2 million to $3 million annually in tax revenue. Last year Wisconsin collected state sales tax revenues of $4.288 billion.

The cost on Wisconsin-based MROs, in the form of lost business, is thought to be significant but difficult to calculate. Because of the application of the tax, some aircraft owners do not consider Wisconsin-based businesses for maintenance.

“It’s clear to us from our customer base that the availability of the exemption is a significant factor when operators are deciding where to send their business,” a Gulfstream spokeswoman told AIN. “Since this is a tax paid for by the customer, it is shown directly on the customer’s invoice, so it has become a high-profile issue.”

She said Gulfstream operations benefit from the state sales tax exemptions in Brunswick and Savannah, Ga.; Long Beach, Calif.; West Palm Beach, Fla.; and Westfield, Mass., while facilities in Appleton, Dallas and Las Vegas must charge customers the tax.

The Wisconsin Legislature’s Joint Finance Committee has proposed a $2 million general aviation grant program as a means to offset the sales tax bite, but this is widely viewed within the industry as symbolic and insufficient, particularly as an incentive to get Gulfstream and other MROs to locate in or expand within the state. Gulfstream Appleton currently employs more than 800 people and there is plenty of room on the airport for expansion.

“This is an important issue in Wisconsin, and we continue to work with others in the industry and state government officials to establish a sales-tax exemption to improve Wisconsin’s competitiveness with regard to general aviation maintenance,” the Gulfstream spokeswoman said.


Bureaucrats have never met a tax they didn't like (especially one that impacts us millionaire playboy pilots)

I am embarrassed, as a pilot, that so many in the flying community seem to feel entitled to exemptions from sales taxes - a tax that everyone else in any given state has to pay, even those who do not have access to enough money to buy, rent, or repair an airplane. We cheer at government subsidies for repair and enhancement to the airports and facilities we use, but grumble and, worse, whine like overprivileged children when asked to pay the same tax rate on our planes and propellers and annual Inspections that our less wealthy neighbors have to pay for their children's shoes and school supplies and - in some states - food and medicine. Shame on us, we're spoiled brats, the very model of the "takers" we blame for the ills of our society. We should pay our taxes like everyone else, and it wouldn't hurt to do a bit of growing up while we're at it.

Of course the WI MROs are losing business to neighboring states. Any undergraduate student of economics knows why and would have easily predicted it. It's called the Tiebout hypothesis and was first described in the peer reviewed literature in 1956 (http://en.wikipedia.org/wiki/Tiebout_model).

everyone else is looking for tax breaks , so why not ask ,it is almost your political duty as a business owner . I know what you mean , this is a real issue in that every one is trying to get over on taxes. But is hard not to try.


You sound like you were taught by nuns (like I was) to feel guilty about everything.

An exemption is just motivation. More tax will be collected due to the earnings from the good paying jobs that stay in Wisconsin.

Did you think that the tax itself might be wrong?

I live in Taxachusetts where the sales tax is 6.25%... 0% on airplanes.

Okay, so there are no taxes on Part 135 and Part 121 operations, but there is a tax on Part 91? How is this a fair?

Why would anyone buy an aircraft in Wisconsin and have it serviced? I heard Gulfstream sends their aircraft out-of-state before the customer takes possession due to these taxes.

It is for exactly this reason, that I do not purchase or operate an aircraft in Wisconsin. The business environment in this state is appalling and it prevents me from investing in new business ventures.

Go figure, Wisconsin has the world's largest airshow.

People can vote out the legislators who have such a narrowminded attitude. They vote with their feet as they walk out the door.

Sorry for the mechanics trying to make a living in Wisconsin who have roots and family there, but like everyone else, they have a choice to move elsewhere.

Be aware that there is an act in Congress that has already passed the Senate. It is awaiting action in the House. If passed, the "marketplace fairness tax" would put a tax increase on everybody.

That’s an inaccurate description of the Marketplace Fairness Act. It would not increase tax rates, but rather allow the uniform enforcement of largely ignored state laws regarding sales taxes for purchases from out-of-state retailers (online and brick and mortar). These sales taxes are not collected at the time of sale; instead, buyers are supposed to voluntarily report these purchases to their state tax agencies and pay the tax, which rarely happens. To allow the collection of these taxes at the time of purchase, the hodge podge of tax exemptions at the differing states needs to be simplified, hence the need for the Marketplace Fairness Act (click on this link for more info).

Professional services, which is the time a mechanic spends fixing something (shop labor), ought not be taxed. Other than the fact that what was broken (or destined to break) is working again--there is no value add. Parts and supplies, on which you would pay sales tax if you bought them yourself, should be taxed. Everyone (part 91, 135, and 121) should pay that tax.

Your article is misleading- I bought a Part 91 airplane last fall and had to pay 6.25% sales tax in Illinois. Can you get me a refund? Thanks!

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