Use Tax

Cub flyer · Post by **Cub flyer** » Fri Nov 23, 2007 8:39 pm

Something to think about.

In PA there is a 6% PA sales tax on all airplanes.

If I purchase a new LSA for resale and it gets used by the company flight school. The state of PA wants their 6% as a use tax even though the airplane is registered for resale. If anything is purchased for the airplane from out of state (oil fliters from Aircraft spruce) etc. They want the 6% paid on those items. They are internally used in the company and not resold.

If the airplane is purchased for resale and then used for demo rides until resold then the use tax does not apply on the airplane but does on any parts purchased for it that are normal use and not upgrades.

If I purchase a new LSA for my business from a dealer in a state with less than 6% sales tax PA wants the remainder paid to them to equal 6%.

Example. I purchase an airplane in a state with 4% sales tax. I bring the airplane home and then pay 2% to the state of PA to use the airplane. $100,000 airplane, + $4,000 tax to state of purchase and $2000 tax to state of PA.

Check your local laws and be aware. It may make more sense to buy from a local dealer and pay the local sales tax. (less shipping)

This applies to computers, avionics, pens, paper, cars, parts etc.

rfane · Post by **rfane** » Mon Nov 26, 2007 10:38 am

Try 8.25% use tax where I am located. I paid approx. $9,600 in Use Tax for my CT.

CharlieTango · Post by **CharlieTango** » Mon Nov 26, 2007 11:24 am

there are ways to get around it and i inititated an attempt.

in the end the work around was about $7,000 worth of effort and the tax was $7,000 so i paid it.

Cub flyer · Post by **Cub flyer** » Mon Nov 26, 2007 1:09 pm

Where the trap lies is a flight school buys a new LSA and registers it for resale under a branch sales company name. They don't pay any sales tax at the time of purchase and the person who buys it pays the sales tax.

Now they might get caught in a use tax for the full amount because the airplane was used for profit during the time it was waiting to be resold.

Same goes for any parts purchased through mail order or out of state during the time of use.

Most LSA schools also sell new LSA airplane so depending on how their company is structured they might get tangled up.

I guess the question is will the airplane generate enough through rental to pay for the tax if resold in a few months.

PA wants use tax paid monthly on all items.

A good accountant probably has a way around this.