Aircraft State Taxes: What Every Aircraft Owner Needs to Know

So you took delivery of an aircraft in a fly-away state. You’re in the clear, right? Not necessarily. Aircraft are mobile property and can be taxed in multiple jurisdictions. States are becoming more savvy and are starting to enforce compliance.

With increased reporting and information sharing between agencies, we’re seeing a huge influx in state and local audits looking for non-compliance and lost revenue related to aircraft. 

There are two main state and local taxes that need to be considered. First, we have sales and use tax which is imposed on the purchase of the aircraft, usually enforced by the state. Second is property tax, which is an annual tax imposed on the value of the aircraft, usually enforced by individual counties.  

State Sales Tax Considerations

Sales tax is imposed when a transaction takes place in a state and use tax applies when an aircraft is brought into the state after the transaction. Many deliveries take place in a tax-friendly state to help manage the initial sales tax obligation. But use tax usually applies once the aircraft arrives at its home airport. 

Many states have options to defer the tax, or even full exemptions, but there are procedures that must be followed and requirements to be met. Therefore, the plan needs to be in place before the aircraft arrives in the state.

State Property Taxes 

Property tax is assessed annually for many states and each jurisdiction has its own set of rules for filing. It’s important to know if you have a property tax obligation and how to file. Keep in mind, it’s the taxpayer’s responsibility to comply. So you’re not off the hook if the state doesn’t contact you.  

Some states, such as Missouri and Texas, will only allow discounted rates and apportionment for timely filed returns. That means late filed returns can be very costly.  

Final Thoughts

As it relates to state taxes, the situation becomes even more complicated for aircraft owners who spend significant time in multiple states. There are many opportunities to manage state and local tax obligations. That is, if you plan early and ask the right questions. Understanding potential liabilities in advance can prevent unexpected tax bills down the road.

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