Navigating Aircraft Sales Tax, Use Tax, and Multi-State Exemptions: A Guide for Aircraft Owners and Buyers.

One of the greatest advantages of owning an aircraft is the freedom and mobility it provides, whether for personal travel or business operations. However, this mobility can lead to complex tax regulations, especially when purchasing an aircraft or determining its home base. Aircraft owners who operate across state lines must understand their sales tax and use tax obligations to avoid unexpected financial burdens.

Sales Tax vs. Use Tax on Aircraft Purchases

When purchasing an aircraft, the transaction is typically subject to either sales tax or use tax, just like any other high-value asset. Here’s how they differ:

Sales Tax – This tax is collected by the seller and remitted to the state where the purchase occurs. In most cases, the seller passes this cost to the buyer at the time of sale.

Use Tax – If an aircraft is moved to a different state after purchase, the new state may impose a use tax based on its tax rate—even if sales tax was already paid elsewhere.

How Differing State Tax Rates Impact Aircraft Owners

Tax complications arise when an aircraft is purchased in one state and relocated to another with a higher tax rate. While you won’t be taxed twice, you may have to pay the difference in tax rates.

For example, if you purchase an aircraft in Nevada (6% sales tax) and move it to California (7.5% sales tax), you could owe an additional 1.5% in use tax. However, the reverse does not apply—if you pay 7.5% in California and later move to Nevada, you won’t receive a refund for the difference. This makes strategic tax planning crucial for eliminating unnecessary tax liabilities.

Fly-Away Exemptions and Other Aviation Tax Exemptions

Aircraft buyers can legally avoid sales tax on airplane purchases through state-specific tax exemptions, including:

Fly-Away Exemptions – Many states waive sales tax if the aircraft is removed from the state within a specified time frame after purchase.

Casual Sale Exemptions – Some private sales may qualify for tax exemptions.

Charter & Commercial Use Exemptions – Aircraft used for charter services or commercial operations may be tax-exempt.

Manufacturer & Dealer Exemptions – Certain exemptions apply to aircraft dealers and manufacturers.

Since aviation tax exemptions vary widely by state, consulting an aircraft sales tax specialist ensures you maximize potential tax savings.

Understanding Aircraft Residency and Use Tax

A use tax on aircraft is only imposed when residency is established in a state. However, residency for aircraft tax purposes is determined not by where you live, but by where the aircraft is hangared or frequently used. Some states have broad definitions—simply landing within their borders can trigger tax liability.

Aircraft owners operating near state borders must be particularly cautious. For example, if you live in Oregon (a no sales/use tax state) but store your aircraft at a California airport, you may owe California use tax. Businesses must also ensure their company-owned aircraft’s tax jurisdiction aligns with its operational base to prevent unexpected liabilities.

Multi-State Aircraft Tax Complications

Navigating aircraft tax laws becomes even more challenging when an aircraft is purchased or used across multiple states. Common scenarios include:

Green Aircraft Transactions – Aircraft purchased as flyable airframes but later outfitted elsewhere can create complex jurisdictional tax issues.

Aircraft Relocation Years Later – Moving an aircraft from a no-tax state (e.g., New Hampshire, Delaware) to a taxable state (e.g., New Jersey) can trigger use tax—even years after the initial purchase.

These are just a few examples—aviation tax law is filled with unique situations requiring expert guidance to avoid costly mistakes.

Why You Must Report Your Aircraft Move

Aircraft owners often ask if they need to report relocating their plane. Since the initial purchase is documented, why not simply move the aircraft without notifying the new state?

This is a risky mistake for several reasons:

States actively track aircraft movements using flight records, airport logs, and registration databases.

Unlike small taxable purchases, aircraft transactions involve millions of dollars, making tax enforcement highly profitable.

Failing to report an aircraft relocation can lead to back taxes, interest, and severe penalties.

For example, if you relocate a $10 million aircraft and owe a 2% use tax difference, the state could pursue $200,000 in taxes—a substantial sum that tax officials are highly motivated to collect.

The Best Defense Against Aircraft Tax Liability

The smartest way to eliminate aircraft sales and use tax liability is proactive tax planning. Consulting an aviation tax professional before purchasing an aircraft ensures compliance with state tax laws while optimizing potential exemptions.

Even a 1% tax savings on an aircraft purchase can translate to hundreds of thousands of dollars in reduced costs. A strategic tax plan helps aircraft owners legally eliminate tax liability, ensuring they enjoy the benefits of aircraft ownership without unnecessary financial burdens.