Helpful Amendments to Florida Sales and Use Tax Laws

Posted on July 29, 2010 by Harry Ekblom

Florida has recently made changes to its sales and use tax laws that will affect - in a positive way - owners and operators of aircraft. 

Florida assesses a 6% sales tax on tangible personal property sold in Florida or used in Florida. The sale of an aircraft in Florida will attract Florida sales tax in the absence of an exemption. Although Florida does provide a number of aviation-related exemptions, there have been proposals to either cap or reduce the tax rate for aircraft to make Florida more competitive with neighboring states. Although the recent Florida amendments don’t go as far as some would have liked – they don’t, for instance, contain the broad tax cap that was sought and obtained by the yachting industry - they are helpful nonetheless. The amendments affecting aircraft (described in a recent Florida Department of Revenue publication) include:

  • A cap of $300 on the tax that can be imposed on the sale or use of a fractional ownership interest in a fractional aircraft ownership program. Note that the fractional program must meet the requirements of FAR Part 91K, and also that the fractional program must have at least 25 aircraft in its fleet. In addition, the sale to or use by a fractional program manager operating a qualifying fractional program of any parts or labor used in the completion, maintenance, repair or overhaul of a fractional program aircraft also will be exempt from Florida tax (subject to registration and certification requirements).
  • A 20-day use tax exemption. This exemption allows a nonresident of Florida to avoid Florida use tax on his or her aircraft, so long as the aircraft enters and remains in Florida for no more than a total of 20 days during the 6-month period after the date of its purchase.   Florida already presumes that an aircraft used in another state or territory of the United States or in the District of Columbia for six months or longer before being brought into Florida is not subject to use tax in the state. Under the new exemption, the number of days the aircraft remains in Florida only for flight training, repairs, alteration, refitting or modifications does not count against the 20-day limit. The 20‑day exemption was intended to address concerns that the lack of clarity in the Florida use tax law was deterring aircraft owners and operators from using their aircraft to visit Florida.

The Florida amendments came into effect on July 1, 2010.

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Extension of 50% Depreciation Allowance for Business Aircraft

Posted on February 19, 2009 by Harry Ekblom

On February 17, 2009, President Obama signed into law The American Recovery and Reinvestment Act of 2009.  Of particular interest to the aviation community is the Act's one-year extension of the 50% bonus depreciation allowance.   To qualify, aircraft must be placed in service by December 31, 2009 (rather than December 31, 2008, as was previously the case).   For "certain aircraft" (that is aircraft with a cost exceeding $200,000 and an estimated production period exceeding four months), aircraft must be placed in service by December 31, 2010 (rather than December 31, 2009).

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Sales of Aircraft Fractional Interest - Tax Recapture

Posted on February 13, 2009 by Harry Ekblom

Given the economic climate, some business aircraft owners are thinking of disposing of their aircraft. A sign of the times, unfortunately. This post is first in a series that flags some issues that tend to pop up in the context of aircraft dispositions. The first few posts will focus on dispositions of interests in aircraft under fractional ownership programs.

• Budget for recapture of tax depreciation. Most owners are well aware of the tax benefits associated with the use of aircraft in their businesses - particularly the allowances for bonus depreciation and accelerated depreciation. Given that business aircraft operated under Part 91-K may qualify as 5-year MACRS property, some owners may have a zero basis. If you have a low tax basis you should keep in mind that the sale of your interest may trigger the recapture of the depreciation allowance, and that this will be treated as ordinary income – not capital gain – for federal income tax purposes. If you have purchased (or expect to purchase) another aircraft or interest you may be able to avoid recapture through the use of a like-kind exchange – but if you are simply looking to put your days of aircraft ownership in your rear view mirror, a like-kind exchange is not the answer.
 

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