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RE: Lessons Learned and Honesty ... Sales Tax

F

fstringham7a

Well Known Member
RE: Lessons Learned and Honesty ... Sales Tax

From the very start of my RV7A project I determined (without much research)that I would creat an LLC in another tax friendly state to "legally" avoid paying the High Sales/Property Tax in my state...Utah......I have many law abiding friends with big expensive boats...recreational vehicals, luxuary cars, and airplanes that have done this. Fast forward 3 plus years: I learned that just like a whole bunch of building ideas/designs/custom parts this notion was full of holes and just plain unsafe!

During the past number of weeks there have been a number of project decisions and activities I have been contemplating with regards to the near completion of my project. Most have had pretty reasonable and easy solutions......and some (fabrication of a custom ram air induction plenum to attach to my ECi throttle body...you just got to love fiberglass) have not been with out some drama and trauma. As I happily and successfully checked off each of these final project decisions and work accomplished there was still an uneasy feeling.

Last night I finally put my finger on it with the help of one of my build partners. He mentioned that I should take a second look at the ramifications of my out of state LLC in regards to Utah State Law. It just so happened that I had spent sometime last week reviewing the thread on this forum that discussed this vary issue. I realized that his comments and my review of this thread created that uneasy feeling I was having.

So off to the computer for some late night study of that never boring material called "STATE TAX LAW"!!!!!!!!!!It became pretty apparent that, my state at least, will prosecute individuals using this method of out of state LLC to avoid Sales/Property Tax.......if one were to be caught. So what are the chances of getting caught? How would one get caught? Answer: is probably not likely.....even though in my county I have understood from other pilots that unannounced hanger inspections by the tax folks is taking place. I would imagine they just sort of wander around the hanger area asking questions and checking things out. I do know of one individual who bought his plane out of state/had it in an out of state LLC and was told by the Tax Collector if you are a resident of the state and your plane is hangered in this state, by law, you will pay this state sales/property tax or be prosecuted. HE PAID! So, if in my ever so humble opinion if the odds are low that you will be caught.......a great cover story can be made if approched.......why not take a chance!

The answer is simple. HONESTY.

Called Van's today and notified Cynthia I will need a new Bill Of Sale. Talked to my banker (Wife First Thrift) and said the plane's budget just went way in the red. I will start looking for a job (post haste) to accumulate the funds to finish the plane (paint job........is that it?...YES...not so fast there partner ....remember this whole boring discussion was about the TAXES. Sales tax will be 6% of the final cost of the aircraft and .4% of the final cost for property tax...........). Oh ya...I am a retired school teacher with only one skill set....I can build a plane!

I started building this plane on faith and so the saga continues. Two steps forword one step back. Hard lessons learned. Great skills developed. I just never figured that a character adjustment would be part of the bargine. Honesty is and always will be the best policy. Life in general as in flying ....cut corners.....push the limits....ignore the rules.....AT YOUR PERIL.

Anybody know of any job opening for an old retired Chemistry Teacher......with an MBA no less!!!!!!

I choose to start a new thread on Sales Tax that is infact a thread on honesty. I get it NOW!!!!!!!!!!!!!:D

Frank @ SGU RV7A........Not Done Yet...But Getting Close.....anybody see the tax man in the pattern please advise!!!!!!!!!!!!:eek:
 
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urgh. maybe they won't bill you until next January or Feb. ? which gives you awhile to put tax dollars aside.

thx for sharing.
 
Mark

Thanks for the idea...but..the rule says within ten days of getting bill of sale one must comply.

Frank @ SGU ...NDY...BGC

mark manda said:
urgh. maybe they won't bill you until next January or Feb. ? which gives you awhile to put tax dollars aside.

thx for sharing.
Click to expand...
 
Honesty? Do they teach that anymore. Great job Frank.

BTW-I recently stopped by Franks for a RV fix. And I understand why he is overbudget. His plane is outstanding. He should win most beautiful prop.
RV7238.jpg
 
California

I came to this realization before I completed buying my -6A that I would have to pay sales tax (8%) and property tax each year. I did talk to a tax consultant and it seems best to just pay it, or they will bill me. I think they talk to the FAA and see what A/C are registered in their state.

But as far as a job goes, you might check into teaching part time at either a local community college, or one online. I'm not sure of all of the requirements for that, but you might look at ones like the University of Phoenix.
 
Good Job!

I agonized over the same thing when I bought my -8. I finally paid the 6% sales tax and felt better (but poorer) immediately.

Keeping your integrity intact is worth the $!
You have my respect, admiration and thanks!
 
Sales tax

I recieved a note in the mail recently from the KS. Dept of Rev. inquiring about my airplane's tax status....I didn't pay any when I bought the plane....shudder!!. I was instructed to call the tax investigator with a explaination.

I called my tax accountant and he called the Kansas Tax Hotline. It turns out in Ks. if you buy the airplane from a individual you don't pay sales tax, if you buy from a dealer, you DO.

A bunch of my friends were in a panic because they also had recieved the same letter.

I called the investigator and told her that my airplane was purchased from a individual, then sent her a email with the details and got a letter yesterday stating the matter was closed.
 
$100

Frank,
The .4% annual Utah property tax is for certified aircraft. We'll pay $100.00 per year per the new 2009 tax code.
I don't know how Weber County will handle the sales tax deal. I'll let you know in the spring.

Steve
 
Tax Issue

Honesty is the best policy! Looks like all you future builders in Kansas should buy from an individual -- Richard VanGrunsven!:D
 
New Mexico

In New Mexico we face a yearly "Registration Fee" and they are pretty good about tracking you down and collecting it. That is the bad news.

The good news is that it isn't much money. It is based on maximum gross weight. The bill sitting on my desk right now is $6.61 for my glider and $17.00 for the RV-6.

What used to be the really bad news was that they insisted you put a sticker on your beautiful paint every year. They finally stopped with the sticker.
 
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Maine has a use tax form we can fill out for out of state purchases it made it much more afforadable paying the tax 5% on the kits as i got them instead of the whole amount at the end and the tax is on the parts you bought out of state and not the value of the airplane

We also have to regester the airplane with the state but for expermentals it is only $20.00 a year there is no way around that unless you keep it at a private strip but for 20 bucks it is cheap peace of mind

It is also a good idea to keep all the records that you have paid the sales tax because a year after i was flying my -7 i got a letter from the state telling me to pay the sales tax i sent them copies and end of story

cold in maine
 
Excuse my ignorance, but does anyone know if this type of tax applies for all states, namely Georgia?

I (think I) know we don't have to pay sales tax on out of state purchases, or purchases from individuals. Maybe I'll talk to some local builders and see what they're doing.
 
Don't know about Georgia

But many states have sales/use tax. It usually isn't well known, but once the state finds large items it can cash in on, they jump on the band wagon.
 
steveKs. said:
...I called my tax accountant and he called the Kansas Tax Hotline. It turns out in Ks. if you buy the airplane from a individual you don't pay sales tax, if you buy from a dealer, you DO...
Click to expand...

This is the way the system works in Arizona, also.

n5lp said:
...What used to be the really bad news was that they insisted you put a sticker on your beautiful paint every year. They finally stopped with the sticker.
Click to expand...

Arizona also insists that we place a reg. sticker on the tail of our planes. Not very many people comply, neither do I. I just file the sticker with the reg. cert. in the cockpit and have a chip ready and available to place on my shoulder in case I'm ever hassled about it.

It always cracks me up when I see an airplane tail just covered with these stickers... :rolleyes:
 
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Job idea

fstringham7a said:
Anybody know of any job opening for an old retired Chemistry Teacher......with an MBA no less!!!!!!

I choose to start a new thread on Sales Tax that is infact a thread on honesty. I get it NOW!!!!!!!!!!!!!:D

Frank @ SGU RV7A........Not Done Yet...But Getting Close.....anybody see the tax man in the pattern please advise!!!!!!!!!!!!:eek:
Click to expand...

Frank,

I applaud your honesty, though I know how it can be to have to pay the taxman. As far as a job, I am not sure what you are up for but, I am a pilot with Delta Air Lines and I fly with our regional feed airline Skywest a fair amount or used to when I was based in SLC. I meet a retired school teacher who took a job as a Flight Attendant with Skywest. He liked the interaction with people but more importantly he liked the travel benefits, you can fly anywhere Delta or Skywest flies for free if there is an open seat, now that is the trick the open seat, but you can also use any open cabin jumpseats.

I am sure this is not what you were thinking of and it does have some drawbacks but can be fun and rewarding. The airlines like a diverse pool of workers and are not averse to hiring the retired. I am not sure how pay would compare to other options you have. A better idea if you have a commercial license and the hours is to get a job as a pilot with Skywest. I heard some regional airlines need pilots so bad they have lowered the minimum hours to approx. 500hours. Can't tell you how much I enjoyed the flying from SLC to the various cities in Montana. I kept my fly fishing gear in a locker and took them along when I could get a long layover in Montana.
 
MacNab said:
It always cracks me up when I see an airplane tail just covered with these stickers... :rolleyes:
Click to expand...

One of my friends has a Skyhawk based at DVT. He's got a row of the stickers. It reminds me of those people who've had their car for years and don't realize that you can put the annual stickers on top of each other, so their plates are covered.

Me, well, the only stickies gonna be on my airplane are the pinstripes, N number, and tail art.
 
Yep... Georgia too...

DaX said:
Excuse my ignorance, but does anyone know if this type of tax applies for all states, namely Georgia?

I (think I) know we don't have to pay sales tax on out of state purchases, or purchases from individuals. Maybe I'll talk to some local builders and see what they're doing.
Click to expand...

Google works....:)

Apparently it's been the law in Georgia since 1951.....

Hey, the state even provides you with a nice form to report it on...:D

http://www.dor.ga.gov/salestax/st3forms/TSD_Use_Tax_Reporting_Form_ST3USE.pdf

It appears that GA may not even have the "buy from an individual" exemption, but just poke around your state tax web site and I'm sure it will detail that...

gil A
 
Moving between states...

Check your local State tax rules if you moved and took an RV project with you.

AZ has this gem tucked away in it's Use Tax info. sheet.

Property purchased by a nonresident individual
whose first actual use or consumption of the property
occurred outside the state is not subject to the use tax if
the property is not used in conducting a business.

Exemptions....

9. Tangible personal property brought into Arizona by
an individual who was a nonresident at the time the
property was purchased for his own storage, use or
consumption if the first actual use or consumption
of the property was outside the state, unless such
property is used in conducting a business in
Arizona.

I'm not a tax lawyer, and hate staying in Holiday Inn Expresses... but that tells me if you used (i.e., assembled) the "bits and stuff" you bought in another state in your RV project, and then moved the project into AZ, there is no use tax collected.... Other states may be similar...

gil A - fingers crossed....
 
Job idea

fstringham7a said:
Anybody know of any job opening for an old retired Chemistry Teacher......with an MBA no less!!!!!!

I choose to start a new thread on Sales Tax that is infact a thread on honesty. I get it NOW!!!!!!!!!!!!!:D

Frank @ SGU RV7A........Not Done Yet...But Getting Close.....anybody see the tax man in the pattern please advise!!!!!!!!!!!!:eek:
Click to expand...

Frank,

I applaud your honesty, though I know how it can be to have to pay the taxman. As far as a job, I am not sure what you are up for but, I am a pilot with Delta Air Lines and I fly with our regional feed airline Skywest a fair amount or used to when I was based in SLC. I meet a retired school teacher who took a job as a Flight Attendant with Skywest. He liked the interaction with people but more importantly he liked the travel benefits, you can fly anywhere Delta or Skywest flies for free if there is an open seat, now that is the trick the open seat, but you can also use any open cabin jumpseats.

I am sure this is not what you were thinking of and it does have some drawbacks but can be fun and rewarding. The airlines like a diverse pool of workers and are not averse to hiring the retired. I am not sure how pay would compare to other options you have. A better idea if you have a commercial license and the hours is to get a job as a pilot with Skywest. I heard some regional airlines need pilots so bad they have lowered the minimum hours to approx. 500hours. Can't tell you how much I enjoyed the flying from SLC to the various cities in Montana. I kept my fly fishing gear in a locker and took them along when I could get a long layover in Montana.
 
Georgia Property Tax - Gwinett County

DaX said:
Excuse my ignorance, but does anyone know if this type of tax applies for all states, namely Georgia?

I (think I) know we don't have to pay sales tax on out of state purchases, or purchases from individuals. Maybe I'll talk to some local builders and see what they're doing.
Click to expand...

I called on Gerogia (Gwinett County) earlier this week, the property tax is about $38 per $1,000 of value! (each year)


I am not sure about the sales tax
 
I've decided to go ahead and pay the use tax on my tail, and do so with each part of the kit I buy as I buy it.

Now help me understand - I purchased my wings from an individual - therefore I do NOT have to pay use tax on them, correct? In Georgia we do not have to pay tax on used items (like buying a used car from an individual in the AutoTrader). I can't find an "Occasional Sale" form on the Georgia Tax website to use - the guy I'm buying the wings from lives in Texas and has shown me the occasional sale exemption form they have (http://cpa.state.tx.us/taxinfo/taxforms/01-917.pdf). I guess in the meantime I'll just get a bill of sale and show it to the tax guy if he ever asks.

For those paying the use tax, do you get something back like a receipt for proof of payment?

EDIT:

OK, I dug a little and if I am reading this right, I don't have to pay taxes on resale items as long as I can prove it was a resale with a Bill of Sale:

O.C.G.A. § 48-8-38
 
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Wow!

steve murray said:
I called on Gerogia (Gwinett County) earlier this week, the property tax is about $38 per $1,000 of value! (each year)


I am not sure about the sales tax
Click to expand...

That means my RV, which I bought for $87,000 would cost me $3306 each year! I thought Illinois was bad when I paid sales tax of almost $6000. At least that was a one-time event!
 
RE: Texas Property Taxes...

"Hobby aircraft that are not used for business or commercial purposes
are not subject to the property tax."

Sales tax is another story, the way I read the statute is that we will owe sales tax upon aircraft completion based on fair market value at that time, assuming it was purchased (even in kit form) from out of state (e.g. Vans).

Even so, I can deal with a one-time sales tax hit since I don't have to deal with recurring property taxes.
 
Missouri Info?

After doing a bit of web searching Missouri Charges a Personal property tax rate on KIT built planes of 5%. It reads as follows:

(4) Motor vehicles which are eligible for registration as and are registered as historic motor vehicles pursuant to section 301.131, RSMo, and aircraft which are at least twenty-five years old and which are used solely for noncommercial purposes and are operated less than fifty hours per year or aircraft that are home built from a kit, five percent; :rolleyes:

How they guesstimate is beyond me anyone from Missouri care to share?

As far as sales tax is concerned is appears we have to pay that as well.

It can be read here http://www.moga.mo.gov/statutes/C100-199/1440000043.HTM

It basically states there is an exemption for anyone who purchases the kit and moves it out of state, but for the rest of us residents we pay the $$$. :confused:

Good thread BTW.

Chris
 
MO Tax

That rate is correct. 5% is the value for property tax. If the aircraft is valued at $50,000, then the tax is on $2500. At $5 per hundred, your tax should be about $125 per year for taxes, assuming the aircraft value doesn't change a lot. I think a legislator who also homebuilds got that measure inserted. Make sure your assessor knows about that, as some will try to assess you at the same rate as a certified aircraft.
The hard part of course is knowing the true value of your aircraft.
 
Originally Posted by steve murray
I called on Gerogia (Gwinett County) earlier this week, the property tax is about $38 per $1,000 of value! (each year)

I am not sure about the sales tax

Bubblehead said:
That means my RV, which I bought for $87,000 would cost me $3306 each year! I thought Illinois was bad when I paid sales tax of almost $6000. At least that was a one-time event!
Click to expand...

There's one, not so minor detail, that was left out. I'm looking at relocating to Georgia. I confirmed with several Georgia county tax offices that the Assessed Value is 40% of the Fair Market Value. The calculation should be:

Fair Market Value (87,000) X 40% = Assessed Value (34,800)

Tax or Millage Rate ($38/1,000) x Assessed Value (34,800) / 1,000 = Annual Property Tax (They call it Ad Valorem Tax)

In this case, the annual property tax is $1,322.40, NOT $3,306. It's still egregiously excessive for the "privilege" of basing on airplane in the state.

States in the southeast, notably Virginia, North and South Carolina, and Georgia, to name those I'm aware of, cling to the notion of Annual Personal Property Taxes levied on cars, boats, airplanes and mobile homes. I've heard that Kansas nails you, also.

I'm a native of Illlinois and they did away with the Personal Property Tax nonsense while I was in my youth. It is much cheaper to own airplanes in the `Midwest and mid-Atlantic states including, Illinois, Indiana, Ohio, Pennsylvania and Maryland, which do not have any annual property taxes.

Ohio might be the cheapest as the only annual cost is a $30 Registration Fee for 2 seat airplanes.
 
alcladrv said:
States in the southeast, notably Virginia, North and South Carolina, and Georgia, to name those I'm aware of, cling to the notion of Annual Personal Property Taxes levied on cars, boats, airplanes and mobile homes. I've heard that Kansas nails you, also.
Click to expand...

I think South Carolina has a maximum tax of $300. Please somebody correct me if this is wrong. Many people and companies in Savannah register their cars in South Carolina to avoid the Georgia personal and business property tax. In Georgia you have to pay business taxes on the stuff you have in inventory at the end of the year.
 
Thanks for the info on Missouri

Wzenheimer & Masterplumber:

After reading this thread, I looked at my county PP tax receipt and saw a hefty assessed value ($13,670) for my 6A.

I contacted my county assessor's office today (after locating/printing the on-line Missouri statutes) and asked how my plane was assessed. The answer regarding airplanes: assessed value is 33% of appraised value. When I pointed out the statute they were immediately willing to make the change and refund me, provided I send them the original tax bills. Apparently, it was my failure for not telling them it was a home built. Well, I guess no one can know everything, so thanks to you guys for the information.

The office told me that they appraised my 6A at $41,000 so, from what I can calculate on the tax bill, my assessed value is now going to be $2050 (@ 5%)and the tax bill (@ 6.2594%) will drop from about $855.66 annually to $128.32 annually.


My thanks to Wzenheimer, Masterplumber, and Doug for such great help.
 
tax discussion in maine

thursday the 31st maine is having a meeting in agusta of possibly removing the taxes on aviation sales and use taxes, the problem is they will have a 1.5 million short fall

If this would pass i hope taht they don't tax the avgas any more maine loves to tax things i have already paind my use tax for my -7 and don't want to pay again with fuel tax

If any body wants a link to state of maine for this meeting let me know email [email protected] i will not be able to go to the meeting my wife and i are going to FL for a week

cold in maine
 
wzenheimer said:
After doing a bit of web searching Missouri Charges a Personal property tax rate on KIT built planes of 5%. It reads as follows:

(4) Motor vehicles which are eligible for registration as and are registered as historic motor vehicles pursuant to section 301.131, RSMo, and aircraft which are at least twenty-five years old and which are used solely for noncommercial purposes and are operated less than fifty hours per year or aircraft that are home built from a kit, five percent; :rolleyes:

How they guesstimate is beyond me anyone from Missouri care to share?
Click to expand...

My personal property tax on my RV was less than that on my C140 in TY2006 as I flew the C140 more than the 50 hours. With the RV flying the C140 did not get the 50 hours in TY2007 so its tax will drop to the 5%.
 
keithschult said:
The office told me that they appraised my 6A at $41,000 so, from what I can calculate on the tax bill, my assessed value is now going to be $2050 (@ 5%)and the tax bill (@ 6.2594%) will drop from about $855.66 annually to $128.32 annually.


My thanks to Wzenheimer, Masterplumber, and Doug for such great help.
Click to expand...

Glad that it helped somebody out.

My only question is how MO does its SALES tax on a homebuilt, anyone have any info on that?

Chris
 
MO sales tax

I think most people pay a "use tax" on their annual taxes due April 15th. There is a special section in the tax form for things bought out of state. In state purchases are already taxed when you buy them. Legally you are supposed to pay a use tax on anything bought out of state i.e. internet purchase without tax.
They came to our office and pulled receipts for everything and then taxed us for anything we bought out of state and not taxed, but this is a business and I assume they are tougher there. They can do the same thing for home purchases as well, but would be much more difficult to do, as you don't deduct home stuff and so not as visible. Rumor has it that they get records from FAA when the plane is registered and then go looking to see if the tax is paid. They are supposed to get sales tax on certified aircraft bought out of state.
 
Use Tax

Masterplumber said:
I think most people pay a "use tax" on their annual taxes due April 15th. There is a special section in the tax form for things bought out of state. In state purchases are already taxed when you buy them. Legally you are supposed to pay a use tax on anything bought out of state i.e. internet purchase without tax.
Click to expand...

In MO you only need to pay Use Tax on purchases over $2000 in a calander year from out of state or online purchases.

http://dor.mo.gov/tax/business/sales/
 
In Oklahoma you pay 3.25% of the kit price when you get your "N" number then $10 a year starting the second year.On my -8A I paid $819 in 2007 will pay $10 this year.
 
Get the law changed

alcladrv said:
In this case, the annual property tax is $1,322.40, NOT $3,306. It's still egregiously excessive for the "privilege" of basing on airplane in the state.
Click to expand...
Just do like everyone else does - pony up some cash and get the law changed.
 
<<Legally you are supposed to pay a use tax on anything bought out of state i.e. internet purchase without tax>>

Which of course most folks don't do, they know the purchases are very hard for a tax agency to track. It can be a significant tab for us, given our avionics, hardware, maintenance, and pilot supply purchases.

Ya'll might want to take a look at the link below, in particular if you happen to be a vendor. The state legislatures want to move the monkey to your back, and they have support in Congress:

http://www.ncsl.org/programs/fiscal/tctelcom.htm
 
Sales Tax Oklahoma

Hey Dan:

Did you ever hear anything back about the tax issue we discussed, where my state has no sales tax on aircraft parts or repairs and whether or not your state could collect sales tax on a/c parts purchased in our states since OK doesn't allow its own citizens to be taxed on these items? Would be interesting to know if there is any precedent set or a ruling by the tax commission.
 
rgbewley said:
Hey Dan:

Did you ever hear anything back about the tax issue we discussed, where my state has no sales tax on aircraft parts or repairs and whether or not your state could collect sales tax on a/c parts purchased in our states since OK doesn't allow its own citizens to be taxed on these items? Would be interesting to know if there is any precedent set or a ruling by the tax commission.
Click to expand...


I don't know which state Dan is in, but here in Ohio, you would be expected to declare and pay sales tax when you file your annual income tax on all parts purchased out of state.
 
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