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Old 12-05-2018, 09:17 AM
Langt Langt is offline
Join Date: Apr 2018
Location: Lambertville, MI
Posts: 9
Default Michigan Use Tax after 38 years??

In order to fly while working on my EAB project, I belong to a small flying club organized as a non-profit corp in Ohio, for which I recently started serving as treasurer. Our 1972 citabria 7ECA was purchased by the club 38 years ago in 1980 and as far as we know, has always been based in Michigan at KDUH, just outside Toledo Ohio. It has also been registered in Michigan for all or most of that 38 years. I just got a letter from the Michigan Department of Taxation saying they discovered the airplane is stored in Michigan and asking me to prove that we paid Michigan use tax. We have absolutely no records and the club founders that purchased the airplane are long ago buried....

I have not yet replied to the inquiry, and I am no CPA, but what I think I have learned so far is that Michigan law includes a statute of limitations of 4 years, but the Michigan taxation department (somehow) claims the limitation does not apply unless you file form 518 to register that the transaction took place (an act that is not legally required) and of course you wouldn't file this extra form if you didn't know you needed to pay the tax. So, as I understand it, if you fraudulently underpay, AND know to register the transaction, the limit is 4 years. If you don't know you owe the tax, or pay it and don't keep proof (and don't file the form 518 that nothing tells you to file), the time bomb ticks forever. Plus interest and penalties.

I am also guessing that if an owner of an airplane in Ohio purchased his airplane in Ohio as a "casual sale" (thus not paying any ohio tax) and then later moves his airplane to Michigan, he would owe the Michigan tax. If he doesn't know any better, it could be a big surprize later on.

To make matters worse, we had a prop strike this Fall. I am wondering if this is the end of the club.
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Old 12-05-2018, 12:19 PM
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DanBaier DanBaier is offline
Join Date: Mar 2009
Location: Rochester NY
Posts: 656

FWIW - get really good help with this one - someone who really knows the rules relative to the statute of limitations and works with clients on audits.

You're looking not only at the use tax but at interest and penalties as well (which for that period of time could mount up).

RV7A (N7101) - Flying 10/2008
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Old 12-05-2018, 01:01 PM
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az_gila az_gila is offline
Join Date: Jan 2005
Location: 57AZ - NW Tucson area
Posts: 9,926

Get a copy of the FAA records for the plane. It should include all of the Bills of Sale.
Gil Alexander
EAA Technical Counselor, Airframe Mechanic
Half completed RV-10 QB purchased
RV-6A N61GX - finally flying
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La Cholla Airpark (57AZ) Tucson AZ
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Old 12-05-2018, 01:43 PM
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N941WR N941WR is offline
Join Date: Jan 2005
Location: SC
Posts: 12,405

If you disband the club, who is liable for the back taxes?
Bill R.
RV-9 (Yes, it's a dragon tail)
O-360 w/ dual P-mags
Build the plane you want, not the plane others want you to build!
SC86 - Easley, SC

Last edited by N941WR : 12-05-2018 at 02:33 PM.
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Old 12-05-2018, 04:37 PM
Langt Langt is offline
Join Date: Apr 2018
Location: Lambertville, MI
Posts: 9

The club is organized as a non-profit corporation in Ohio. Members are share holders. So I think besides the airplane, they would have to come after us in Ohio. I don't think anything is at risk besides the club assets. It would be worse if it was a personal airplane outside of a corporation or LLC. Bad enough as is. I sent for FAA records today. However, the FAA bill of sale is stated as "not acceptable evidence" by Michigan.
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Old 12-05-2018, 08:05 PM
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jmk jmk is offline
Join Date: Jul 2006
Location: Midland, MI
Posts: 13

Just saw this.
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Old 12-06-2018, 04:14 PM
Langt Langt is offline
Join Date: Apr 2018
Location: Lambertville, MI
Posts: 9

Ah-- a ray of hope -- thanks (but it fizzled). I checked and the forms they sent are legitimate Michigan Forms and the addresses are correct per Michigan Dept of Taxation web site. So it is not a scam. Or at least not from a third party.


Last edited by Langt : 12-06-2018 at 04:59 PM. Reason: editorial
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Old 12-06-2018, 05:24 PM
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DanH DanH is online now
Join Date: Oct 2005
Location: 08A
Posts: 8,892

Sometimes there is little difference between a scam and a law.
Dan Horton
Barrett IO-390
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Old 12-06-2018, 07:04 PM
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AlexPeterson AlexPeterson is online now
Join Date: Sep 2005
Location: Maple Grove, MN
Posts: 2,199

Originally Posted by DanH View Post
Sometimes there is little difference between a scam and a law.
Sadly true!

This sounds a lot like the scam that Florida had going where they nailed people moving into the state a “sales” tax on their car, regardless of whether it had been previously registered elsewhere. IIRC, the courts finally shut that scam down.

Might try calling their bluff and just ignoring it. No one is required to keep tax records for 38 years.
Alex Peterson
RV6A N66AP 1600+ hours
Maple Grove, MN
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Old 12-07-2018, 08:15 AM
Marc Bourget Marc Bourget is offline
Join Date: Apr 2009
Location: Stockton, California
Posts: 225

My understanding is that if you are negligent or make a non-intentional mistake in preparing/paying your tax return. . .

the statute of limitations runs from the time you file/pay your taxes.

If no audit within the applicable statute period, then you're home free.

Not filing leaves the S.O.L open.

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