Tax Type
Aircraft Sales and Use Tax
Description
Lease agreement
Topic
Taxability of Persons and Transactions
Date Issued
05-03-1984
May 3, 1984
Re: § 58-1118 Application
Aircraft Sales and Use Tax
Dear ******************
This is in reply to your application for correction under § 58-1118, Code of Virginia.
FACTS
As I understand your situation, you purchased an aircraft in October 1980 and in January 1981 leased the aircraft to a Virginia registered aircraft dealer. You contend that you were informed by the Department of Taxation that no tax was due on your 1980 purchase since you were leasing the aircraft to a registered dealer and that the lessee would remit tax to the department on the gross receipts from the operation of such aircraft under the dealer exclusion provisions. In January 1983 you registered the aircraft with the Division of Aviation and in September 1983 the Department of Taxation assessed the aircraft sales tax, penalty, and interest.
You contend that you are willing to pay a just tax on the aircraft and feel that a refund is due since tax was paid on the gross receipts from the operation of the aircraft.
DETERMINATION
The Virginia aircraft sales tax is imposed upon the retail sale of an aircraft and the purchaser is responsible for payment of the tax. For purposes of the aircraft sales tax, the term sale includes a lease or rental if such lease or rental substantially equals the remaining life of the aircraft as determined at the beginning of the term of lease.
"Substantially equals" means equal to or exceeds eighty percent of the value of the aircraft at the beginning of the lease term. These positions have been the long established positions of the Department of Taxation.
Your correspondence includes a copy of the lease agreement. The agreement provides for a maximum term of one year and an hourly actual usage rate of *****. No substantiating evidence has been presented which discloses that the value of the lease exceeded eighty percent of the value of the aircraft. I must deny that the lease agreement between you and the lessee qualified as a sale. Therefore, you are the purchaser of the aircraft and remain subject to tax.
Any tax which may have been erroneously paid by the lessee to the Department of Taxation on the basis of gross receipts from the operation of the aircraft is a matter separate and distinct from your aircraft purchase and tax liability. Any determination on such matter must be made between the lessee and the department and no refund would be due to You since the tax was paid by another taxpayer.
The department's assessment reflected a value of ***** on your aircraft. No purchase invoice or other substantiating information supports a different value at the time of purchase for your aircraft. Your correspondence and supporting information discloses a value of for the aircraft on July 11, 1983. However, the aircraft sales tax is imposed on the retail sale of the aircraft which occurred in October 1980.
In the extenuating circumstances as related by you, the penalty will be relieved but the assessment for aircraft sales tax and interest is due and payable.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner