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  • Writer's pictureThomas A. Alston

Unveiling the Truth Behind California Aircraft Sales Tax Myths with Aero & Marine Tax Professionals.

Pilots in personal aircraft

Dispelling Myths and Confronting Realities

The most common misconception revolves around the notion that merely registering an aircraft under an LLC shields owners and potential buyers from sales and use tax liabilities. However, this facade of protection swiftly crumbles when you choose willingly to not submit tax returns, plunging individuals into a precarious position with California taxing authorities, and potentially causing them to be guilty of committing fraud.

If your aircraft is under an LLC where you regularly conduct business and are actively submitting tax returns, then your avoidance of sales and use tax is legitimate, not fraudulent.

The stark reality is that while some people may get away with using this illegitimate practice, they remain susceptible to California's inevitable shifts in tax regulations. At any juncture, the state can pivot its stance, demanding retroactive tax payments without regard of prior assurances.

Seeking Sound Counsel

Prior to navigating the complex landscape of aircraft sales and use tax, seeking counsel from seasoned professionals like Aero and Marine Tax Professionals is paramount. Investing in expert guidance, albeit a fraction of your potential tax liabilities, not only ensures legal compliance but also fortifies one's long-term protection against falling for the multitude of tax myths that seem like appealing on the surface but are deceptive tax schemes.

Debunking Misconceptions

Numerous fallacies perpetuate among aircraft owners, each carrying the potential to exact steep legal and financial tolls. Tom Alston, of Aero and Marine Tax Professionals, has compiled some of these pitfalls into a list to safeguard individuals from repeating costly errors:

  1. “I will just register my plane outside of the state!”: Merely registering an aircraft outside California without due exemption procedures constitutes fraudulent evasion, inviting scrutiny from tax authorities.

  2. “If I fly into California, I’ll just hide my aircraft in a rural hangar or private airport.”: Attempting to hide your aircraft in remote hangars or private airstrips will offer you no sanctuary from California's vigilant tax enforcers, ultimately costing you more than the original tax due.

  3. “If I don’t use any kind of flight tracking software, the state will never catch me!”: Relying solely on flight logs as supporting proof that the crat did not enter California proves to be futile, as verifiable documentation, such as fuel receipts with timestamped details, are the more acceptable pieces of proof.

  4. “I wrote $1 in ‘Other Valuable Consideration’ on my FAA Bill of Sale.”: Disguising substantial transactions with nominal values on the FAA Bills of Sale will never deceive auditors, inviting scrutiny of your transaction.

  5. “I registered my plane in a Delaware corporation.”: Regardless of registration location, California presumes taxable status unless you can prove otherwise.

  6. “I registered my plane in Oregon, and I have an address there too!”: Establishing residency elsewhere does not provide protection, as California scrutinizes every detail to assert tax liabilities.

  7. “I am a broker! I buy all my aircraft with a resale license.”: Purchasing aircraft under resale licenses for personal use breaches California law, exposing violators to imminent tax liabilities.

  8. “I’ll negotiate the tax down with the state.”: California tax authorities neither negotiate nor compromise; compliance or exemption remains the sole recourse.

  9. “I’ll take them to court!” Challenging California's tax assessments requires jumping through the hoops of exhaustive administrative procedures, entailing exorbitant costs with no guarantee of success.

Armed with factual insights and expert guidance, individuals can navigate California's aircraft use tax landscape with confidence, steering clear of pitfalls that ensnare the unwary and safeguarding their financial integrity.

By reading this, you have already taken the first step towards financial freedom. Let Aero & Marine guide you the rest of the way and help you to legally avoid CA sales and use tax on your aircraft, vessel, or vehicle purchase.


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