Tax Alert: New York Exempts General Aviation Aircraft from Sales and Use Tax
Effective September 1, 2015, a new law (N.Y. Tax Law § 1115(a)(21-a)) provides an exemption from New York state and local sales and use tax for sales and use of “general aviation aircraft.” Previously, sales and use of “general aviation aircraft” were fully taxable in New York at a rate of up to 8.875 percent.
The new law defines “general aviation aircraft” as an aircraft that is used in civil aviation, other than commercial aircraft, military aircraft and unmanned aerial vehicles or drones. For example, “general aviation aircraft” generally includes corporate business jets. New York law already provides a sales and use tax exemption for commercial aircraft primarily engaged in intrastate, interstate or foreign commerce.
Pursuant to guidance issued by the New York State Department of Taxation and Finance, the new exemption applies to the receipts for the aircraft itself; other property that is affixed to the aircraft, such as furniture, fixtures, built-in appliances, window coverings, climate control systems or entertainment systems; and property that the aircraft is outfitted with at the time of sale that is necessary for its normal operation, such as avionics, radios, weather radar systems, and navigation and emergency lighting.
However, any accessories added to the purchase price of the aircraft, such as items of décor, tableware, small appliances, linens or other ancillary property, are not exempt. Such items remain fully taxable and should be invoiced separately from the price of the aircraft itself.
Machinery or equipment that is installed on general aviation aircraft subsequent to its purchase and that is necessary for equipping the aircraft, or for the aircraft’s normal operation, also is exempt from sales tax under this new law.
Because sales and use tax is typically passed through to the purchaser, this new exemption provides a significant reduction in the after-tax purchase price of general aviation aircraft sold in New York. The new exemption makes New York more competitive with other neighboring states that already provide similar exemptions (such as Connecticut and Massachusetts) as a market for the sale and basing of such aircraft. Unlike the corresponding Connecticut aircraft exemption (which limits eligibility for such exemption to aircraft with a maximum certificated takeoff weight of 6,000 pounds or more), the new New York exemption does not impose a minimum payload capacity restriction on eligibility for the sales and use tax exemption.
The new exemption for general aviation aircraft and machinery or equipment to be installed on general aviation aircraft applies to sales or uses occurring on or after September 1, 2015. The exemption also applies to sales made under a contract entered into prior to September 1, 2015, provided that the purchaser takes delivery of the aircraft or the machinery or equipment on or after September 1, 2015.