We Assist Businesses and Individuals with All Texas Aircraft Tax Issues
In Texas, aircraft-related tax issues require a careful and comprehensive approach to compliance. Businesses and individuals can face substantial aircraft-related tax liability, and failure to pay Texas aircraft taxes can expose buyers, sellers, and other parties to additional liability for interest and penalties.
Our lawyers assist businesses and individuals with all aircraft-related tax issues in Texas. We also assist manufacturers, owners, and other clients with federal aircraft-related tax issues. With a tax practice focused on representing corporate entities and high-net-worth individuals, we have significant experience in this area and rely on it to protect our clients’ interests and help them move forward with confidence.
Aircraft-Related Tax Considerations and Concerns in Texas
Within our Texas state tax practice, we assist corporate and individual clients with all aircraft-related tax matters. This includes (but is not limited to) matters such as:
Manufacturing and Original Sale of Aircraft
Our lawyers are available to assist aircraft manufacturers of all sizes and in all segments of the aviation industry with Texas state tax compliance. This includes compliance with respect to manufacturing (e.g., Texas sales tax on components purchased from suppliers) and new aircraft sales. As a general rule, aircraft are subject to the same sales tax rules as other products in Texas. However, various exceptions apply, and, given the value of new aircraft, enforcement in this area is a top priority for the Texas Comptroller.
Sales of Used Aircraft
We assist clients with Texas sales tax compliance for transactions involving used aircraft. Here too, strict compliance is essential for mitigating the risk of facing scrutiny from the Texas Comptroller (and ensuring that buyers and sellers are prepared to withstand scrutiny if necessary). As a general rule, sellers are required to collect and remit sales tax under Texas law. If a seller does not collect and remit sales tax, the buyer must pay the tax due to the Texas Comptroller.
Aircraft Maintenance Services
While aircraft maintenance services generally do not qualify as “taxable services” under Texas law, materials and replacement parts used during maintenance generally are subject to Texas sales tax. If a service provider charges a lump-sum maintenance fee, the service provider must pay sales tax when purchasing materials or replacement parts. If a service provider separately lists the charges for materials or replacement parts on a customer’s invoice, the customer must pay sales tax on these items.
Aircraft Leasing and Rentals
Aircraft leases and rentals are also generally taxable under Texas law. This applies to aircraft stored both in and outside Texas if a lease or rental is for aircraft use in the state. If a leased or rented aircraft is brought into Texas during the lease or rental period, the transaction is “presumed” to be for use in Texas and is subject to Texas sales tax unless otherwise demonstrated (or unless an exception applies). Exceptions exist for leases to “related parties” and certain other specified transactions.
Texas Sales Tax Audits Involving Aircraft
Due to the complexity of Texas aircraft taxes and the substantial amounts that are typically owed on aircraft-related transactions, Texas sales tax audits in this area are common. The Texas Comptroller regularly audits manufacturers, owners, maintenance providers, and other parties. When facing these audits, targeted entities and individuals must be prepared to affirmatively demonstrate compliance to avoid liability, which requires representation by tax counsel with specific experience in this uniquely complicated, high-stakes area.
FAQs: Texas Aircraft Taxes
What qualifies as an “aircraft” for purposes of Texas sales tax compliance?
For purposes of Texas sales tax compliance, an “aircraft” is defined as, “[a] fixed-wing, heavier-than-air craft that is operated by a pilot from within the craft, is driven by propeller or jet and is supported by the dynamic reaction of the air against its wings; a helicopter; or an airplane flight simulation training device approved by the FAA.” Gliders, balloons, and other flying devices that do not meet this definition are excluded.
What is the standard sales tax rate for aircraft in Texas?
The standard state sales tax rate for aircraft in Texas is 6.25 percent of the sales price—the same rate that applies to other non-exempt products and services. Local tax rates can be up to two percent of the sales price.
I bought my plane in another state. Why is Texas sending me a tax bill?
Texas charges sales and use tax on airplanes purchased in other states when they are used predominantly in the state. While a plan bought outside of Texas, “is not subject to Texas sales and use tax if it is predominantly used outside of [the] state for at least one year,” detailed recordkeeping requirements and other rules apply.
Do I have to pay annual property tax on my aircraft?
As a general rule, Texas only imposes property tax on aircraft used for commercial purposes. While this can make it advantageous for high-net-worth individuals to keep their planes in Texas, individual buyers must also take the state’s sales tax laws into consideration.
Are there any exemptions for Texas aircraft taxes?
Yes, there are several exceptions to Texas’s sales tax requirements for aircraft. These include exceptions for agricultural use, certified and licensed carriers, fractional ownership, flight schools, and occasional sales, among others. If you are interested in finding out whether your sale or purchase qualifies (or may be able to qualify) for an exemption, we invite you to get in touch.
Speak with a Texas Tax Lawyer at Brown PC in Confidence
To speak with a Texas tax lawyer at Brown PC about aircraft tax compliance, defending against a Texas sales tax audit, or any other aircraft-related tax issue, contact us to request an appointment today. Call us at 888-870-0025 or contact us confidentially online, and a member of our firm will be in touch with you shortly.