Tax Issues

Bookmark and Share

Improved NBAA State Aviation Tax Report Now Available

August 20, 2012

NBAA Flight Plan interview with NBAA NBAA Senior Manager of Finance and Tax Policy Scott O'Brien

What you pay in aviation-related taxes varies widely from state to state. Now, the NBAA State Aviation Tax Report has been revamped to make it easier for Members to compare tax rates and policies between all 50 states.

“For each of the states every year, our accountants and lawyers on the Tax Committee research the taxability of aircraft ownership in that state,” said NBAA Senior Manager of Finance and Tax Policy Scott O’Brien. “In the newly revised NBAA State Aviation Tax Report, we created a standard list of exemptions and evaluated them in each state. We also provide a link to the statute for exemptions in each state. When you’re planning to buy or restructure ownership, this is an invaluable resource.”

The revised report also is presented in an easier-to-read format that better facilitates comparison between states, O’Brien said. It reflects the effort NBAA puts forth in not only monitoring tax policies around the country, but in advocating for common-sense tax policies for business aviation that ultimately benefit the economy.

“We compare, side-by-side, the things most aircraft owners and operators look at,” O’Brien said. “It’s tough to find something like this anywhere else.”

The NBAA State Aviation Tax Report is free to Members.

“With states across the country facing budget shortfalls in recent years, legislators have become pressed to look for new sources of revenue, and their focus often lands on business aviation,” O’Brien said. “Lawmakers often see taxing business aviation as a way to increase revenue, so every time a legislature is in session, we have to monitor efforts to institute new taxes on business aviation, raise existing taxes or eliminate exemptions.”

O’Brien has plenty of examples of where NBAA advocacy has averted detrimental changes in state tax policy.

In Maryland, the state legislature wanted to impose a "luxury" tax on some aircraft, which would have made its aviation-related taxes higher than those in neighboring states. Ultimately, that would have decreased the value of general aviation to the Maryland economy, because owners would have moved their aircraft to those surrounding jurisdictions with more accommodating tax policies. Thanks in part to NBAA’s efforts, the Maryland measure failed in committee.

In Idaho, NBAA advocacy helped enable an exemption from sales and use taxes for aircraft parts and components installed on out-of-state aircraft. “This exemption helps make Idaho repair facilities more competitive with businesses in other states,” O’Brien pointed out. “It will bring jobs to Idaho.”

Some Illinois lawmakers had hoped to introduce a bill that would modify the exemption for aircraft used for commercial purposes, making that exemption harder to use. For example, operators would have been required to document 50-percent commercial use on a continuous basis. “For an aircraft operated under both FAR Part 91 and 135, documenting compliance with the 50-percent test on a continuous basis would have been administratively burdensome,” said O’Brien. “We suggested Illinois consider a 12-month test to determine if an aircraft qualifies for the exemption.”

Thanks to NBAA’s concerns with the proposed legislation, the bill did not move forward.

Lawmakers in Massachusetts have also repeatedly tried to end the sales tax exemption on aircraft and parts.

 “We go in and explain to legislators that this will ultimately hurt the state’s economy because the people involved in aviation will see it as a cue to leave Massachusetts. So far, we’ve been successful,” O’Brien said. “But every time the legislature is in session, we have to be watchful for new tax proposals for the industry.”