State Taxes

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Virginia Leaders Say: 'No Plane, No Gain'

April 11, 2011

At a time when many states, faced with severe budget shortfalls, are considering raising taxes on aviation, Virginia is leading the way by demonstrating that targeted tax incentives for aviation can attract business, create jobs and actually increase tax revenue. Governor Bob McDonnell (R-VA) has recently signed into a law a bill creating two new exemptions from the two-percent aircraft sales and use tax to attract aviation-related business to the state.

The first exemption is for businesses such as charter operators, FBOs, flight schools, aircraft brokers, parts manufacturers and aircraft management companies. If these businesses choose to locate their headquarters in Virginia, invest at least $4 million in a local public use airport and create at least 50 new high-paying jobs over the next four years, they can claim the exemption from the sales tax.

“Before this law was passed, Virginia’s aircraft sales tax was an obstacle for aviation companies to locate in the state,” said NBAA’s Scott O’Brien, project manager for the Association’s Operations Service Group. “These companies have the potential to create good, high-paying jobs, but the jobs follow the airplanes. Neighboring states like Maryland, and North and South Carolina all have interstate commerce exemptions or limits on aircraft sales tax, so companies were basing outside Virginia.”

The second provision is a fly-away exemption, which allows non-residents to purchase an aircraft in Virginia without being subject to Virginia sales tax if they relocate the aircraft away from the state within 60 days of closing.

“About 20 states have a fly-away exemption,” said O’Brien. “Virginia will likely not lose any tax revenue from it, because people were already going to other states to do aircraft deals. This will encourage them to conduct business in Virginia.”

O’Brien added that Virginia’s exemption has a peculiar requirement, which is to list Virginia as the location of the aircraft closing on the FAA bill of sale. However, there is no field for delivery location on the FAA form. As aircraft owners begin using the exemption, Virginia may issue further guidance on this requirement, which NBAA will provide to Members.

Because of the potential for increased investment in the state’s airports, the legislation was supported by the Virginia Department of Aviation. Some aircraft management and charter companies have already said they will take advantage of the new exemption and locate in Virginia.

“With this new law, Virginia legislators have demonstrated that they understand the value business aviation brings to the state,” said O’Brien. “Virginia has become a model for other states looking to stimulate recovery and create jobs.”

For additional information, contact NBAA’s Operations Service Group at (202) 783-9250 or info@nbaa.org.