Tax Type
Aircraft Sales and Use Tax
Retail Sales and Use Tax
Description
Jet engine purchase
Topic
Taxability of Persons and Transactions
Date Issued
06-29-1984
June 29, 1984
Re: §58-1118 Application: Sales and Use Tax
Dear ****
This will reply to your letter of November 30, 1983 in which you seek relief of sales and use tax and penalty assessed against your client, ***** ("Taxpayer"), as the result of a recent audit.
Facts
Taxpayer, a manufacturer, underwent a sales and use tax audit (third generation) for the period July 1, 1980 through March 31, 1983, for which an assessment was issued in the aggregate amount of $***** which, including $**** of penalty, was paid at the time the audit was submitted) for capital assets and purchases on which tax was not paid. Use tax compliance on capital assets was 10% and on purchases was 70%.
Taxpayer contests the audit on the grounds that (1) the purchase of jet engines for ***** should be subject to the 2% aircraft sales and use tax and not the 4% retail sales and use tax and (2) the remaining penalty should be abated because a change in Taxpayer's personnel resulted in invoices being overlooked which should have been picked up by the clerical staff as taxable.
Determination
§ 58-685.29 of the Code of Virginia imposes a tax on the retail sale of aircraft in Virginia. Va. Code § 58-685.28 defines "aircraft" as "any contrivance used or designed for untethered navigation of or flight in the air carrying one or more persons at an altitude" of more than 24 inches above the ground. A jet engine, although necessary for a jet aircraft to fly, is neither used nor designed for untethered navigation or flight in the air. Therefore, because an engine is not an aircraft subject to the aircraft sales and use tax and because Va. Code § 58-441.6(x) exempts from retail sales and use tax only aircraft subject to the aircraft sales and use tax, the 4% tax of Va. Code § 58-441.5 applies to the purchase of the jet engines.
Taxpayer's use tax compliance on this third audit was 70% for purchases and 10% for capital assets. Changes in a taxpayer's personnel when viewed in conjunction with the overall compliance is not a legitimate reason for abating penalty. However, because the purchase of the jet engines was an item not included in the previous two audits, we will waive the penalty imposed on such items.
The audit papers will be adjusted in accordance with this determination and the balance of the assessment is immediately due and payable.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner