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Texas Aircraft Fly Toward Resale Exemption

  • Dec 8, 2015 | Gail Cole

 My plane, or yours?

Businesses that buy goods for resale typically don’t pay sales or use tax on those products at the time of purchase. Instead, they furnish a resale certificate that exempts them from paying the tax, and then charge their customers sales tax when the products are sold. For example, rental car agencies purchase automobiles for rent or lease, then tax the rental or lease fees. The state gets the sales tax revenue eventually, and the product is only taxed once.

Legislation recently enacted in Texas amends this policy with respect to aircraft, creating more flexibility in how purchasers may use their planes.

Prior to the enactment of SB 1396 (effective September 1, 2015), Texas policy “prevented the application of the resale exemption for aircraft purchases when the purchaser reserved certain rights and the ability to terminate an agreement at-will, because such arrangements failed to qualify as a true lease.” Owners who planned to maintain priority to use the aircraft at-will could not defer payment of sales tax by using a resale certificate at the time of purchase.

SB 1396 entitles the purchaser to the resale exemption so long as “for a period of one year beginning on the date the purchaser purchases the aircraft, more than 50 percent of the aircraft’s departures are made under the operational control of one or more lessees pursuant to one or more written agreements….”

The purchaser may use the aircraft for the remaining departures. In addition, the legislation enables the buyer to create “an entity that will purchase the aircraft with the sole intent of leasing it out to others (such as the entity’s owner).”

The Texas Comptroller is in the process of updating tax publication 94-168 to reflect the changes created by SB 1396. Additional information to follow.

Manage exemption and resale certificates in the cloud — it’s easy!

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.