Tax Type
Aircraft Sales and Use Tax
Description
Contestment of Aircraft Tax assessment
Topic
Basis of Tax
Statute of Limitations
Date Issued
12-12-2001
December 12, 2001
Re: § 58.1-1821 Application: Aircraft Sales and Use Tax
Dear *****
This will reply to your letter in which you seek correction of the aircraft sales and use tax assessment issued to your client, the ***** ("Taxpayer"). I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer purchased an aircraft in 1994. The Taxpayer has operated the aircraft in various locations since it acquired the aircraft. The Taxpayer licensed the aircraft with the Virginia Department of Aviation in 1996. Based on information the auditor received from the ***** Assessor's Office and aircraft trade publications, the auditor assessed the 2% aircraft sales and use tax based on a value of $**** million. The assessment was issued on March 9, 2000.
The Taxpayer is taking exception to the aircraft sales and use tax audit assessment for the following reasons:
1. The Taxpayer purchased the aircraft from a commercial dealer whose responsibility it was to collect the tax. If another state's tax was collected, the Taxpayer is entitled to a credit of taxes paid.
2. Upon the licensing of the aircraft, the statute of limitations for assessing tax began to run. The Taxpayer believes the statute of limitations expired prior to the date the assessment was made.
3. The original purchase price of the aircraft was *****. If the assessment is determined to be valid, the tax measure should be reduced from $***** million to $********.
4. The assessment of aircraft tax is based on the requirement that the aircraft be licensed. There are no records available showing that the aircraft was in Virginia for 60 days during any calendar year.
Based on the above, the Taxpayer is requesting that the aircraft tax assessment be abated in its entirety.
DETERMINATION
Imposition of tax
Code of Virginia § 58.1-1502 levies a 2% aircraft sales and use tax "upon the use in the Commonwealth of any aircraft required to be licensed by the Department of Aviation pursuant to § 5.1-5." Code of Virginia § 5.1-5 provides for the licensing of aircraft as follows:
-
- Every resident of this Commonwealth owning a civil aircraft, every nonresident owning a civil aircraft based in this Commonwealth over sixty days during any twelve-month period... shall, before the same is operated in this Commonwealth, obtain from the Department an aircraft license for such aircraft.
As explained in Title 23 of the Virginia Administrative Code (VAC) 10-220-50, the aircraft sales and use tax is to be paid by the purchaser or user of the aircraft and is to be collected by the Commissioner prior to the time the owner applies to the Department of Aviation for, and obtains an aircraft license. Therefore, the fact that a commercial dealer fails to collect the tax does not relieve the purchaser from the responsibility to pay the tax.
In the present case, the Taxpayer purchased the aircraft in 1994 from an out-of-state dealer and based the aircraft at locations outside Virginia. The Taxpayer elected to register the aircraft with the Virginia Department of Aviation in 1996, thus subjecting the aircraft to the 2% Virginia aircraft sales and use tax, provided a similar tax had not been paid to the dealer or another state. It should be noted that the licensing of an aircraft triggers the taxing event. At the time of licensing, the Taxpayer was required to pay the tax and file a return.
Statute of limitations
Code of Virginia § 58.1-104 establishes the period of limitations for assessing taxes. This Code section provides that, with exceptions not relevant here, taxes shall be assessed within three years from the last day prescribed by law for the timely filing of a return. This statute goes on to state that in the event a taxpayer fails to file a required return, the department may assess taxes any time within six years from the last day prescribed by law for the filing of the return.
Code of Virginia § 58.1-1503 requires a buyer "to present [an] invoice to the Tax
Commissioner with his return and payment of the tax." The department developed
Form AST-3, Virginia Aircraft Sales and Use Tax Return, to satisfy this requirement.
Since the Taxpayer licensed the aircraft in 1996 and failed to file a return as required
under Code of Virginia § 58.1-1503, the department timely assessed the tax in
accordance with Code of Virginia § 58.1-104.
Basis of tax
With regard to the value of the aircraft for basis of the tax due, the auditor relied on the only information available at the time, i.e., from the local assessor's office and trade publications. If the Taxpayer can provide documentation to confirm the purchase price of the aircraft, including all modifications to the aircraft prior to taking possession, the audit assessment will be adjusted accordingly. Also, upon proof of aircraft sales and use tax paid to another state, credit will be allowed against the Virginia assessment in accordance with Code of Virginia § 58.1-1504.
Information relating to the value of the aircraft and taxes paid to another state should be sent to ***** District Office, *****. If the requested documentation is not received within 60 days from the date of this letter, the assessment as issued will become due and payable.
If you should have any questions regarding this determination, you may contact ***** in the Office of Policy and Administration, Policy Development, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
PD/28523K
Rulings of the Tax Commissioner