State Sales And Use Tax Forum: July 2009
Regional update on the Western United States
Jul 7, 2009 | By Christopher Younger
This month sees the fourth installment in a series of quarterly columns that will describe recent changes to aviation related state sales and use taxes and, where pertinent, other aviation related tax issues in various regions of the United States.
Each quarterly column will focus on a particular region of the United States - including the Northeastern, Southern, Mid-Western and Western States. This quarter, we review any recent changes to state sales and use taxes in the states located in the western region of the United States, namely Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Texas, Utah, Washington and Wyoming.
Without further ado, here’s a lowdown on state sales and use taxes within the individual states and any changes introduced, or due, within said state:
ALASKA
Alaska does not have state sales and use taxes. However, some local jurisdictions impose local sales taxes. Municipal sales tax rates range from a low of 1% to a high of 7%. There have been no recent material changes to Alaska’s sales and use tax laws with respect to aircraft and aviation related matters.
ARIZONA
Arizona has a state sales tax which is referred to as ‘the Transaction Privilege Tax’. The transaction privilege tax is not a true sales tax because it is not imposed on each sale of tangible personal property; its base is generally the gross receipts from such sales. The statewide transaction privilege tax rate is 5.6% with additional countywide sales taxes imposed in certain counties.
There have been no recent material changes to Arizona’s sales and use tax laws with respect to aircraft and aviation related matters.
CALIFORNIA
California has a state sales and use tax imposed at a rate of 8.25% (7.25% after June 30, 2011). In addition, California has many special taxing jurisdictions that are funded by a aircraft sales and use tax rate that is added to the standard state-wide rate of 8.25%.
Also worth note: the requirements for qualifying for each of two exemptions from California sales and use taxes (for common carriers and for interstate travel), which aircraft purchasers/owners have commonly relied on in the past were substantially altered effective for transactions closing on or after September 30, 2008. Therefore, it is important for an aircraft purchaser/owner to carefully review the California requirements for the application of these exemptions if such purchaser/owner intends to rely on either, or both of them.
COLORADO
Colorado has a state sales and use tax imposed at a rate of 2.9%. In addition, Colorado localities may impose additional sales and use taxes at rates between 1% and 5.5%. There have been no recent material changes to Colorado’s sales and use tax laws with respect to aircraft and aviation related matters.
HAWAII
Hawaii has a state sales tax (which is referred to as ‘the General Excise Tax’ and is actually a tax on a seller’s gross receipts from sales of tangible personal property) and a state use tax, each of which is imposed at a rate of 4% (or 4.5% in Oahu). There have been no recent material changes to Hawaii’s sales and use tax laws with respect to aircraft and aviation related matters.
IDAHO
Idaho has a state sales and use tax imposed at a rate of 6%. There have been no recent material changes to Idaho’s sales and use tax laws with respect to aircraft and aviation related matters.
MONTANA
Montana does not have state sales and use taxes.
NEVADA
The general state-wide Nevada sales and use tax rate was 6.5%. Effective July 1, 2009, the rate increased to 6.85% until June 30, 2011, when it is scheduled to revert back to 6.5%. Additional local sales taxes may be imposed at a rate up to 1% in addition to the statewide sales and use tax rate.
The NBAA recently reported that Nevada officials have implemented a program to determine if Nevada residents have evaded Nevada sales and use taxes by registering property in a state or jurisdiction with a lower sales/use tax or no such tax. A determination by the program that a resident evaded the tax could result in the assessment of a 10% percent penalty on the amount owed plus 1% percent interest per month.
NEW MEXICO
In New Mexico, the sales tax is referred to as ‘the Gross Receipts Tax’ (GRT) and the use tax is referred to as ‘the Compensating Tax’ (CT). The GRT rate is from 5.0% to 7.9375% of value; the CT rate is 5.0% of value. There have been no recent material changes to New Mexico’s sales and use tax laws with respect to aircraft and aviation related matters.
OREGON
Oregon does not have state sales and use taxes.
TEXAS
Texas has a state sales and use tax imposed at a rate of 6.25%. In addition, Texas counties and localities may impose additional sales and use taxes at rates not to exceed 2%. There have been no recent material changes to the sales and use tax laws in Texas with respect to aircraft and aviation related matters.
UTAH
There have been no recent material changes to Utah sales and use tax laws with respect to aircraft and aviation related matters. Utah imposes a state and local tax on taxable transactions equal to the sum of the state tax rate of 4.70% plus the rate of supplemental state tax if the location of the transaction is in a city, town or unincorporated area in which the state imposes supplemental tax, plus a local tax equal to the sum of all local taxes on the transaction.
WASHINGTON
The state-wide sales and use tax rate is 6.5% in Washington. This state has a wide variety of local sales and use tax rates. As a result, notwithstanding the 6.5% statewide rate, actual rates vary from 7.0% to 8.9% depending on location. There have been no recent material changes to Washington sales and use tax laws with respect to aircraft and aviation related matters.
WYOMING
There have been no recent material changes to Wyoming’s sales and use tax laws with respect to aircraft and aviation related matters. Wyoming imposes a state-wide sales/use tax at a rate of 4% plus local sales/use taxes at rates between 0.25% and 2%.
That concludes our 2009 review of the western region of the United States. In the October issue of World Aircraft Sales Magazine, we will revisit and review the north-eastern United States.
Christopher Younger is an attorney at the Law Offices of Christopher B. Younger, LLC. He is a tax and FAA specialist concentrating in the areas of corporate aircraft transactions and aviation taxation. He has extensive experience in planning and implementing unique aircraft ownership and operating structures on a global level. He has worked on numerous tax audits with the IRS and with various state taxing authorities. The firm’s services include Code Section 1031 tax-free exchanges, federal tax and regulatory planning, state sales and use tax planning, and preparation and negotiation of transactional documents commonly used in the business aviation industry, including aircraft purchase agreements, leases, joint-ownership and joint-use agreements, management and charter agreements, and fractional program documents.
Mr. Younger can be reached at the firm’s offices at 47 East All Saints Street, Frederick, Maryland 21701; telephone (301) 696 5735; email: cbyounger@cbyoungerlaw.com
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