Operators of Bombardier jets are dismayed because they now have to pay state sales taxes on parts purchased through Bombardier’s Smart Parts program. Several operators who spoke to AIN on condition of anonymity said one of the primary reasons they participate in Smart Parts is to control and budget annual operating costs. “This adds a new dimension to overhead we didn’t budget for 2010,” one said.
Although some operators expressed concern because Bombardier has begun charging sales tax for parts covered under its Smart Parts program, this is a fairly normal requirement, according to tax expert Nel Stubbs, vice president of Conklin & de Decker. “If an aircraft is based in a state that has a sales/use tax,” she explained, “and the part is brought into that state and installed on an aircraft, that state’s tax rules apply.
A recent announcement by Bombardier Aerospace is causing a stir among Smart Parts customers. The company is going to begin charging state sales tax on all parts ordered through the hourly program; the tax is not included in the hourly program cost. The change will apply only to sales in those states that require vendors to charge tax. The exact number of states involved was not readily available but is believed to be fewer than 10.
At press time, NBAA and other aviation alphabet groups continued to fight a proposed bill in the Washington state legislature that would impose a 0.5-percent excise tax on aircraft in the state. House Bill 3176 and accompanying Senate Bill 6873 would base this annual tax on the most recent sales price, depreciated via a state-mandated schedule.
The Ohio General Assembly has included an amendment to a recently enacted sales and use tax exemption for aircraft maintenance and repair transactions done at an FAA Part 145 repair station.
Conklin & de Decker last month released the 2008 State Tax Guide for General Aviation. The guide contains the latest taxes and fees for all 50 states, as well as sales and use tax applicable to aircraft sales, ownership, lease, parts and labor.
As of July 1, the state of Indiana can no longer impose a use tax on the value of aircraft temporarily located in the state for refurbishment, maintenance and overhauls.
California has amended its aircraft sales and use tax law, essentially closing a loophole that allowed buyers of aircraft and other big-ticket items to escape paying sales taxes.
The New York State Assembly didn’t follow the Senate’s lead and pass legislation that would exempt Part 91 aircraft from sales and use taxes. The bill’s sponsors said they intend to reintroduce the measure early this year. “This bill would make New York competitive with other [nearby] states that already exempt sales taxes related to aviation activities,” Sen. Bill Larkin (R-39th District) said.
New York’s state Senate last week passed legislation (S.3655) sponsored by Sen. Bill Larkin (R-39th District) to provide a sales and use tax exemption on general aviation airplanes to be operated under Part 91 and purchased in the state. The exemption, if passed by the state Assembly and signed by the governor, would take effect on December 1.
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