Information Release

ST 2008-04 - Sales and Use Tax: Aircraft Parts and Repair– Issued August 2008, Revised January 2009  

 

Am. Sub. H.B. 420 of the 127th Ohio General Assembly included an amendment to the recently-enacted sales and use tax exemption for aircraft maintenance and repair transactions.  This release is a revision of Information Release ST 2008-04, issued in August 2008 to incorporate the changes enacted in Am. Sub. H.B. 420.

Am. Sub. H.B.562 of the 127th Ohio General Assembly included a new sales and use tax exemption, found in Ohio Revised Code section 5739.02(B)(49).  That exemption was effective Aug. 1, 2008 and applied to:

(49) Sales of materials, parts, equipment, or engines used in the repair or maintenance of aircraft or avionics systems of such aircraft, and sales of repair, remodeling, replacement, or maintenance services at a federal aviation administration certified repair station in this state performed on aircraft or on an aircraft's avionics, engine, or component materials or parts. As used in division (B)(49) of this section, "aircraft" means aircraft of more than six thousand pounds maximum certified takeoff weight or used exclusively in general  aviation.

Effective Feb. 1, 2009, Am. Sub. H.B. 420 deleted the phrase “at a federal aviation administration certified repair station” from the above language.  Thus, as of Feb. 1, 2009, the exemption will apply to:

*** sales of repair, remodeling, replacement, or maintenance services in this state performed on aircraft or on an aircraft’s avionics, engine, or component materials or parts.

The first part of the exemption dealing with sales of “materials, parts, equipment, or engines of aircraft or avionics systems of such aircraft” is unchanged.

What is Covered by the Exemption?

 

The first portion of the new statutory provision exempts “Sales of materials, parts, equipment, or engines used in the repair or maintenance of aircraft or avionics systems of such aircraft.”  Thus, any purchase of materials, machinery, parts, tools, or engines used in the repair of aircraft or the avionics of aircraft qualifies for exemption.  Note: tools or equipment that may be used for repair or maintenance of aircraft and avionics that are also used by the consumer for other purposes would be exempt only if the primary (majority) use of the item purchased will be in the repair or maintenance of aircraft or avionics.

From Aug. 1, 2008 through Jan. 31, 2009, the second portion of the exemption applies to “sales of repair, remodeling, replacement, or maintenance services at a federal aviation administration certified repair station in this state performed on an aircraft or on an aircraft’s avionics, engine, or component materials or parts.”  Repair, remodeling, replacement or maintenance transactions that occur at a repair facility that is not a Federal Aviation Administration (FAA) certified repair station during this period do not qualify for this exemption.  Beginning Feb. 1, 2009 all such aircraft repair, remodeling, replacement or maintenance transactions qualify for the exemption regardless of whether the repair facility is an FAA certified repair station.

What is an “Aircraft” for Purposes of this Exemption?

 

A general definition of an “aircraft” includes essentially any vehicle that is able to fly.  This includes both lighter than air vehicles such as balloons and heavier than air vehicles such as fixed wing aircraft and helicopters.  For purposes of this exemption, an “aircraft” includes those aircraft that are either “of more than six thousand pounds maximum certified takeoff weight” or are “used exclusively in general aviation.”  To qualify, an aircraft must meet one of the two criteria; it need not meet both.  The Aircraft Owners and Pilots Association website provides the following definition of “general aviation”:

General aviation is all civilian flying except scheduled passenger airlines.

Military aviation and scheduled passenger flights are not considered to be “general aviation.  However, other exemptions may apply to repair and maintenance parts and services for aircraft used for military or scheduled passenger aviation.  Generally, parts for and repairs to military aircraft would be exempt as sales to an exempt government entity.  Scheduled passenger airlines that operate under a “Certificate of Public Convenience and Necessity” issued by the United States Department of Transportation are considered public utilities under R.C. 5739.01(P) and are entitled to exemption on parts and repairs to those aircraft used in that service.

Examples

The following are some examples, in question and answer format, dealing with the application of this exemption.

Q1. What is the effective date of the new exemption?

A1.The exemption went into effect on Aug. 1, 2008.  The effective date of the amendment to the exemption is Feb. 1, 2009.

Q2. I operate an FAA certified repair station and I took an aircraft in to perform maintenance in July 2008.  I returned the aircraft to the customer and billed the customer for the repair in August.  Does the exemption apply?

A2. Under the facts described, the transaction would be exempt.  However, if the repairs were billed prior to August 1, or if the repairs were completed and delivered to the customer prior to August 1, the tax would apply.

Q2a. I operate a repair facility that is not an FAA certified repair station.  I took in an aircraft to perform maintenance in December 2008.  I returned the aircraft to the customer and billed the customer for the repair in February 2009.  Does the exemption apply?

A2a.  As noted in the answer to question 2, above, so long as the repairs were not completed and delivered to the customer, and the customer was not billed for the repair prior to Feb. 1, 2009, the exemption would apply.

Q3. I perform aircraft repair and am an FAA-qualified mechanic.  However, my business is not an FAA certified repair station.  Does the exemption apply to repairs or maintenance I perform on general aviation aircraft?  If not, what is the taxable price of my repairs or maintenance?

 

A3. No, for periods prior to Feb. 1, 2009.  The exemption for repairs and maintenance only applies to those services performed by an FAA certified repair station.  You should still collect and remit tax on your transactions performed in Ohio.  If you separate the charges for parts and labor in your bill to the customer, only the labor portion of the repair or maintenance service would be taxable.  If you do not separate the charges, the entire charge to the customer would be taxable.

For periods beginning Feb. 1, 2009, yes, the exemption applies.

Q4. I operate an FAA certified repair station and I repair commercial passenger aircraft.  Does the exemption apply to these transactions?

A4. Commercial passenger aircraft are not used in general aviation.  However, to the extent these aircraft are in excess of six thousand pounds maximum certified takeoff weight, the exemption would apply to your repair and maintenance of them.  Furthermore, commercial passenger airlines that hold a Certificate of Public Convenience and Necessity under 49 U.S.C. 41102 are defined as “public utilities” under Ohio Revised Code (“R.C.”) section 5739.01(P).  Repairs to items used directly in the rendition of a public utility service are exempt from Ohio sales or use tax.  See R.C. 5739.01(B)(3)(a) and 5739.02(B)(42)(a).  [Note: for transactions on or after February 1, this answer would apply regardless of whether the repair facility was an FAA certified repair station.]

Q5. I repair and maintain my own aircraft and aircraft that belong to others.  I  do not, however, operate an FAA certified repair station.  Do I need to pay tax on my purchases of parts or equipment used to repair and maintain my aircraft?  What about the parts and equipment I use to repair other persons’ aircraft?

 

A5. Even for periods prior to Feb. 1, 2009, the exemption for “sales of materials, parts, equipment, or engines used in the repair and maintenance of aircraft or avionics of such aircraft” is not limited to FAA certified repair stations.  So the exemption would apply to your purchases of these parts and equipment.  You should give your supplier a fully-completed exemption certificate when making an exempt purchase.

Q6. I had my general aviation aircraft repaired at a repair station outside Ohio.  Do I owe use tax on the receipt of the benefit of the repair service when I bring the airplane back to Ohio?

A6. If the repair was performed on or after Feb. 1, 2009, you would not owe use tax.  R.C. 5741.02 exempts from the Ohio use tax, “tangible personal property or services, the acquisition of which, if made in Ohio, would not be subject to (the Ohio sales tax).”

For repairs performed prior to Feb. 1, 2009, if the out-of-state repair station was FAA certified, you would not owe Ohio use tax. However, if the repair was performed at a repair station that was not FAA certified, Ohio use tax would be due.  If sales tax was properly charged and paid to the state where the repair was performed, you can claim a credit against the Ohio use tax up to the amount of the tax paid to the other state.

Q7. Does the exemption apply only to the state sales and use tax, or does it also apply to local sales and use taxes?

A7. The exemption applies to all state and local (county and transit authority) sales and use taxes.

Questions?

If you have any questions regarding this matter, you should direct your questions to one of our taxpayer service centers or call 1-888-405-4039.

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