Tax Type
Aircraft Sales and Use Tax
Description
Aircraft acquisition in exchange for stock
Topic
Taxability of Persons and Transactions
Date Issued
12-19-1990
December 19, 1990
Dear ****
This will reply to your letter of February 2, 1990, in which you request a ruling on the application of the aircraft sales and use tax to the transfer of an aircraft for stock of * * * ("the Taxpayer").
FACTS
In exchange for an aircraft owned by two individuals, the Taxpayer issued to each individual one-third of the outstanding stock of the corporation. The transaction qualified as a tax free exchange under Internal Revenue Code § 351.
The Taxpayer requests a ruling whether its acquisition of the aircraft from the other shareholders makes the Taxpayer liable for any aircraft sales and use tax.
RULING
The Virginia Aircraft Sales and Use Tax Act imposes a tax equal to "[t]wo percent of the sale price of each aircraft sold in the Commonwealth." Va. Code § 58.1-1501 defines "sale" to mean "any transfer of ownership or possession of any aircraft by exchange or barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever . . ."
The Virginia Aircraft Sales and Use Tax Regulations set forth certain circumstances under which the transfer of an aircraft is not considered to be a sale. Virginia Regulation (VR) 630-11-1501(6)(d)(v), states that the term "sale" does not include "[a]ny transfer of ownership or possession from an individual or partnership if the transfer is incidental to the formation, organization, reorganization, or dissolution of a corporation in which the individual or partnership holds a controlling interest." The term "controlling interest" is defined to mean "the ownership of at least eighty percent of all outstanding shares of voting stock."
Based on the regulation cited above, as the two shareholders did not hold a controlling interest (80% or more of the outstanding shares of voting stock) in the corporation, I find no basis for concluding that the transfer of the aircraft to the corporation would qualify for exemption from the aircraft sales and use tax. I would also note that unlike the retail sales and use tax, there is no "occasional sale" exemption per se from the aircraft sales and use tax.
Therefore, based upon the information you have provided, the Taxpayer is liable for the payment of the aircraft sales and use tax on the above described transaction. Enclosed are prior rulings issued by the Department, P.D. 88-103 (5/12/88) and P.D. 88-170 (6/29/88), dealing with analogous situations.
I hope that the foregoing has responded to your questions, but please contact the Department if you have any further questions.
Sincerely
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner