| Often people ask my opinion of the
| |
| | specifications.
|
| various exemptions that can be used to
| |
| | 3. Aircraft Owner must obtain "operations
|
| exempt an aircraft from California sales
| |
| | specifications" that prescribe the
|
| and use tax. I have a canned response
| |
| | authorizations, limitations, and
|
| that runs them briefly through the
| |
| | procedures under which each kind of
|
| available methods. Many times they
| |
| | operation must be conducted.
|
| question why we dont propose using the
| |
| | A. Type of aircraft, registration numbers
|
| "Common Carrier" or "Part 135" exemption
| |
| | or markings and serial numbers of each
|
| as it is often referred to in the
| |
| | aircraft authorized for use must be
|
| industry.
| |
| | listed.
|
| Aero & Marine Tax Professionals ( are
| |
| | 1. Copy of the operators (Aircraft Owner)
|
| experts in helping people avoid paying
| |
| | Federal Aviation Administration (FAA)
|
| sales tax on their aircraft purchases.
| |
| | Part 135 air carrier certificate.
|
| If they insist I explain it to them, I
| |
| | 2. FAA registration documents identifying
|
| start by asking some simple questions:
| |
| | when the aircraft was added to Aircraft
|
| 1. Do you intend to place your aircraft
| |
| | Owner fleet.
|
| on charter because you want to generate
| |
| | 3. A list of the operators certified
|
| some revenue to off set your costs?
| |
| | pilots.
|
| 2. Do you think this exemption is a
| |
| | 4. Evidence of insurance coverage (a
|
| viable method of legally avoiding
| |
| | complete copy of the policy) for common
|
| California sales and use tax?
| |
| | carrier.
|
| If they answer yes to either question I
| |
| | 5. A complete copy of the aircraft flight
|
| attempt to clarify their interest even
| |
| | logs during the first twelve months of
|
| further.
| |
| | operational use. (Please note: copies of
|
| 3. Are you sure that you want someone
| |
| | actual flight logs are required. Computer
|
| else in control of your aircraft?
| |
| | print-outs are not acceptable.)
|
| 4. Are you sure that you want strangers
| |
| | 6. A summary which describes each flight
|
| in your "new" (to you) aircraft?
| |
| | during the first twelve months of
|
| Once they convince me that they intend to
| |
| | operation.
|
| use the common carrier exemption they get
| |
| | 7. Aircraft log books and receipts which
|
| "the speech".
| |
| | support all non common carriage use (i.e.
|
| California Sales and Use Tax Regulation
| |
| | personal use).
|
| 1593 is the regulation that details what
| |
| | 8. Aircraft log books, passenger briefing
|
| is required to support this type of claim
| |
| | cards, FAA flight plans, trip logs,
|
| for an exemption. This is the longest
| |
| | weight and moment sheets and other
|
| test period of all the possible
| |
| | related evidence which supports common
|
| exemptions. Where Regulation 1620 uses 90
| |
| | carrier flights and revenue.
|
| day and six month tests, 1593 requires
| |
| | 9. Copies of operators customer revenue
|
| twelve months.
| |
| | billings showing the amount charged on
|
| Unless the aircraft owner is also in
| |
| | all charter flights, Federal Excise tax
|
| possession of a common carrier
| |
| | returns and customer contracts. Each
|
| certificate which is covered under
| |
| | flight which is claimed to be charter
|
| California Sales and Use Tax Law Section
| |
| | during the first twelve months of
|
| 6366, he must enter into a lease with a
| |
| | operational use must be supported by a
|
| organization that has a certificate. This
| |
| | corresponding invoice.
|
| lease is covered under section 6366.1.
| |
| | 10. A complete copy of the aircraft or
|
| This is where the use of this exemption
| |
| | engine maintenance logs showing total
|
| gets very tricky.
| |
| | engine hours recorded since the date of
|
| The California Sales and Use Tax
| |
| | purchase.
|
| Regulation covering this area is
| |
| | 11. A complete copy of the sales contract
|
| explained below. Regulation 1593 exempts
| |
| | which verifies the purchase price, date
|
| from tax aircraft used in this state as a
| |
| | and location of the delivery of the
|
| common carrier. The pertinent parts of
| |
| | aircraft.
|
| the regulation are as follows:
| |
| | 12. A complete copy of the lease
|
| "(a) DEFINITIONS.
| |
| | agreement, if the aircraft was leased, to
|
| (2) COMMON CARRIER. As used herein, the
| |
| | the actual operator.
|
| term common carrier means any person who
| |
| | 13. A copy of all lease payment invoices
|
| engages in the business of transporting
| |
| | made to lessor (owner) by the lessee
|
| persons or property for hire or
| |
| | (operator).
|
| compensation and who offers his or her
| |
| | 14. Copy of evidence establishing the
|
| services indiscriminately to the public
| |
| | pilot was an employee of the common
|
| or to some portion of the public.
| |
| | carrier and listed as same in the
|
| (b) APPLICATION OF TAX.
| |
| | provisions of the operational
|
| (1) AIRCRAFT. Tax does not apply to the
| |
| | specifications .
|
| sale of and the storage, use, or other
| |
| | 15. FAA airman competency/proficiency
|
| consumption of aircraft sold, leased, or
| |
| | check Federal Aviation Regulation 135
|
| sold to persons for the purpose of
| |
| | forms for all pilots flying this plane.
|
| leasing, to: (A) a person who operates
| |
| | 16. Copies of flight crew logs.
|
| the aircraft as a common carrier of
| |
| | 17. Copies of aircraft logs showing pilot
|
| persons or property, provided:
| |
| | training time, test flights, and
|
| 1. the person operates the aircraft under
| |
| | maintenance ferry flights.
|
| authority of the laws of this state, of
| |
| | 18. Each certificate holder shall prepare
|
| the United States, or of any foreign
| |
| | and keep current a manual setting forth
|
| government, and
| |
| | the certificate holders procedures and
|
| 2. the persons use of the aircraft as a
| |
| | policies concerning the operation of the
|
| common carrier is authorized or permitted
| |
| | aircraft which are acceptable to the FAA
|
| by the persons governmental authority to
| |
| | administrator. Please provide a copy of
|
| operate the aircraft;"
| |
| | said manual.
|
| (c) USE OF AIRCRAFT.
| |
| | 19. Provide a copy of the air worthiness
|
| (1) COMMON CARRIERS. In determining
| |
| | certificate for the Citation.
|
| whether a purchaser or lessee of an
| |
| | 20. The common carrier aircraft must be
|
| aircraft is using that aircraft as a
| |
| | operated by a U.S. certified airman
|
| common carrier of persons or property,
| |
| | employed be the certificate holder.
|
| only that use of the aircraft by the
| |
| | Please provide copies of employment
|
| carrier during the first 12 consecutive
| |
| | agreements or payroll records of the
|
| months commencing with the first
| |
| | certificate holder.
|
| operational use of the aircraft will be
| |
| | 21. Provide a load manifest for each
|
| considered. This test period does not
| |
| | common carrier flight which must contain
|
| include, and is extended by, the amount
| |
| | the following information:
|
| of time, prior to the first use of the
| |
| | A. Number of passengers
|
| aircraft as a common carrier, during
| |
| | B. Total weight of the loaded aircraft
|
| which the aircraft is in the physical
| |
| | C. The maximum allowable take off weight
|
| possession of a repair station certified
| |
| | for that flight
|
| by the FAA or a manufacturers maintenance
| |
| | D. The center of gravity limits
|
| facility undergoing modification, repair,
| |
| | E. The registration number of the
|
| or replacement. The period of this
| |
| | aircraft
|
| extension/exclusion shall not exceed 12
| |
| | F. The origin and destination of the
|
| months. If the purchaser does not own the
| |
| | aircraft
|
| aircraft for 12 consecutive months
| |
| | G. Identification of crew members and
|
| commencing with the first operational
| |
| | their crew position assignments
|
| use, as may be extended as provided
| |
| | H. The pilot in command and the second in
|
| herein, then only the period of time
| |
| | command pilot
|
| commencing with the first operational use
| |
| | The documentation must establish that the
|
| that the purchaser owns the aircraft will
| |
| | principal use of the aircraft was as a
|
| be considered.
| |
| | common carrier during the first twelve
|
| (A) "Operational use" means the actual
| |
| | months of operational use. Effective
|
| time during which the aircraft is
| |
| | January 1, 1997, Section 6366 provides a
|
| operated in powered navigation in the
| |
| | rebuttable presumption that a person is
|
| air. Operational use includes positioning
| |
| | not engaged in business as a common
|
| or repositioning aircraft by flying the
| |
| | carrier unless the yearly gross receipts
|
| aircraft from one point to another
| |
| | from such operations exceed twenty (20%)
|
| ("ferry flights") except when such
| |
| | percent of the purchase price of the
|
| flights are solely for purposes of having
| |
| | aircraft, or fifty thousand dollars
|
| the aircraft repaired. Ferry flights
| |
| | ($50,000), whichever is less. Prior to
|
| solely for the purpose of transporting
| |
| | January 1, 1997, a person was not
|
| the aircraft to a repair location, or
| |
| | considered engaged in business as a
|
| solely to return from a repair location,
| |
| | common carrier unless the yearly gross
|
| are not operational use, nor are test
| |
| | receipts exceeded ten (10%) percent of
|
| flights as described in subdivision
| |
| | the purchase price of the aircraft, or
|
| (d)(2) or personnel training as described
| |
| | twenty-five thousand dollars ($25,000),
|
| in subdivision (d)(4).
| |
| | whichever is less."
|
| (B) If the aircraft is used as a common
| |
| | In response to the onerous document
|
| carrier for more than one-half of the
| |
| | request from the Board, KAL contacts the
|
| operational use during the test period
| |
| | office of WCG and discovers the phone
|
| the carriers principal use of the
| |
| | number is disconnected. After a few weeks
|
| aircraft will be deemed to be that of a
| |
| | of panicked nervousness KAL discovers
|
| common carrier except as provided in
| |
| | that WCG went out of business and all of
|
| subdivisions (c)(1)(D) and (c)(1)(E).
| |
| | its records are unavailable. In this
|
| Each flight of the aircraft is examined
| |
| | case, even though KAL met the substance
|
| separately for purposes of determining
| |
| | of the transaction by operating the
|
| common carrier use. For these purposes, a
| |
| | aircraft more than fifty percent of the
|
| flight is the powered navigation of the
| |
| | time as a charter, the aircraft will be
|
| aircraft from one location on the ground
| |
| | assessed tax of approximately $160,000.00
|
| or water to the first point on the ground
| |
| | (assuming a flat rate of eight percent.)
|
| or water at which the aircraft lands.
| |
| | KALs failure to maintain control over the
|
| (C) A flight qualifies as a common
| |
| | documents (the form of the transaction)
|
| carrier use of the aircraft for purposes
| |
| | has created the situation where the King
|
| of the exemption only if the flight is
| |
| | Air purchase is taxable.
|
| authorized or permitted by the
| |
| | My advice to all aircraft purchasers who
|
| governmental authority under which the
| |
| | intend to claim this type of exemption,
|
| aircraft is operated and involves the
| |
| | is: Do your homework.
|
| transportation of persons or property.
| |
| | 1. Work with reputable charter companies.
|
| Where the aircraft does not itself
| |
| | Make sure the charter company has been
|
| transport the person or property to a
| |
| | around for a long time, has good
|
| location on the ground (or water), the
| |
| | references, and has solid financial
|
| flight does not qualify as a common
| |
| | backing. In addition, even if you are
|
| carrier flight for purposes of the
| |
| | secure with your choice of a charter
|
| exemption.
| |
| | operator. Require them to provide you
|
| For example, John Q. Taxpayer purchases a
| |
| | with the required documentation on a
|
| used King Air in the state of Texas for
| |
| | monthly basis.
|
| $2,000,000.00 and owns the aircraft in a
| |
| | 2. The most difficult part of your
|
| Delaware corporation known as King
| |
| | documentation request is section 12 of
|
| Aircraft Leasing (KAL). Cal contracts
| |
| | the list. The charter company must
|
| with Western Charter Group (WCG), an
| |
| | provide copies of every invoice they
|
| organization at Van Nuys Airport with a
| |
| | issued to their customers for every
|
| legitimate Part 135 Carrier certificate
| |
| | claimed charter flight. Often, the
|
| to have operational control over KALs new
| |
| | charter companies are reluctant to make
|
| aircraft.
| |
| | this information public. Make the charter
|
| As of this moment, the insurance for the
| |
| | company sign an agreement that guarantees
|
| aircraft and the FAA maintenance
| |
| | you will receive the documents, other
|
| requirements just accelerated the cost of
| |
| | wise your transaction will be taxed.
|
| operating the aircraft. Unless KAL did an
| |
| | 3. Do a complete economic analysis before
|
| economic analysis of this type of use, it
| |
| | you decide. Consider the additional costs
|
| may discover that the additional
| |
| | of operation, and the effect of federal
|
| operating costs may outweigh the tax
| |
| | depreciation before you decide to claim
|
| savings.
| |
| | this type of exemption.
|
| KAL operates within its understanding of
| |
| | If all the above requirements start to
|
| Regulation 1593 and the scope of the
| |
| | give you a headache, or begin to convince
|
| lease agreement with WCG for one year
| |
| | you that youd rather buy a Volkswagen bus
|
| (the test period), then KAL decides to
| |
| | and then take a sip of cool ice tea and
|
| remove the aircraft from Part 135 use and
| |
| | smile. Recently the Board has adopted
|
| merely use the aircraft for its personal
| |
| | Regulation 1620 (b0(4) which will allow
|
| business use. In year three KAL is
| |
| | you to use a test period know as
|
| contacted by the Board of Equalization
| |
| | commercial interstate flight hours to
|
| (Board) and a review of KALs exempt
| |
| | exempt aircraft. It does not require the
|
| status is scheduled.
| |
| | extra expense of operating as a common
|
| The Board sends a list to KAL and
| |
| | carrier, the test period is on flight
|
| requests the following documents:
| |
| | hours only, and it is only six months
|
| "COMMON CARRIER EXEMPTION CLAIM
| |
| | long. Even if you want to use a Part 135
|
| DOCUMENTATION REQUIRED FOR REVIEW
| |
| | Carrier, you can exempt your aircraft in
|
| 1. In order to qualify as a common
| |
| | only six months by using this new
|
| carrier the air carrier certificate must
| |
| | regulation.
|
| be in the name of the common carrier.
| |
| | Yes you can have the best of both worlds.
|
| 2. A certificate holder under this part
| |
| | You can have a reputable charter company
|
| may not operate an aircraft under part
| |
| | operate your aircraft and you dont have
|
| 121 and part 135 of this chapter using a
| |
| | to meet the onerous requirements of the
|
| name different than the business name
| |
| | twelve month test.
|
| appearing in the certificate holders
| |
| | I will cover this new regulation in a
|
| provisions of its operations
| |
| | future article.
|