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STATE SALES & USE TAX FORUM
Regional update on the Western United States

This column is the fourth installment in the second annual series of quarterly columns describing recent changes to aviation related state sales and use tax issues and- where pertinent- other aviation related tax issues in various regions of the United States. As was the case with the last series of quarterly columns- each quarterly column will focus on a particular region of the United States – namely the Northeastern- Southeastern- Mid-Western and Western States.

In this column- 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.

Faced with severe budget shortfalls- states are raising sales and use tax rates- eliminating or narrowing sales and use tax exemptions and ramping up their efforts to collect sales and use taxes from taxpayers. Therefore- it is more important than ever- when considering the purchase of an aircraft- to be aware of the sales and use tax ramifications of that acquisition. 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 6.6% from June 1- 2010 through May 31- 2013.

Prior to the temporary increase on June 1- 2010- the rate was 5.6%. After May 31- 2013- the rate is scheduled to return to 5.6%- and effective July 1- 2021 the rate is scheduled to decrease to 5%.

Certain counties also impose additional countywide sales taxes. 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 sales and use tax rate that is added to the standard statewide rate of 8.25%.

Also note that 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% (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:
Effective July 1- 2009 through June 30- 2011- the general statewide Nevada sales and use tax rate increased to 6.85%. The rate is scheduled to revert back to 6.5% on July 1- 2011. Additional local sales taxes may be imposed at a rate up to 1% in addition to the statewide sales and use tax rate.
The governor of Nevada recently signed a budget bill that includes a tax amnesty program for taxpayers subject to a tax- fee- or assessment required to be paid to the Department of Taxation- including the sales and use tax. The program begins on July 1- 2010- and ends on October 1- 2010. It relieves a qualifying taxpayer of all the monetary penalties and interest imposed with regard to the unpaid tax- fee or assessment.

To qualify- the person must file a request for relief with the Department of Taxation- and must pay the unpaid tax- fee- or assessment in full to the Department of Taxation. The program applies only to taxes- fees- and assessments that are due and payable before July 1- 2010- and does not apply to any person who has entered into certain compromises or settlement agreements with the Department of Taxation or the Nevada Tax Commission.

New Mexico:
In New Mexico- the sales tax is referred to as the “Gross Receipts Tax” and the use tax is referred to as the “Compensating Tax” (respectively- “GRT” and “CT”).

As of July 1- 2010- the GRT rate is imposed at a rate of 5.125% to 7.95% of value and the CT rate is 5.125% of value. Except for the foregoing increase in the GRT and CT rates (which were previously 5% at the state level) there have been no recent material changes to New Mexico’s sales and use tax laws with respect to aircraft and aviation related matters.

Pursuant to recently enacted legislation- the New Mexico Taxation and Revenue Department (TRD) has announced that- from June 7- 2010 to September 30- 2010- it is offering individuals and businesses relief from the interest and penalties associated with unreported state taxes- including the GRT and CT- which were due prior to January 1- 2010. Qualifying taxpayers who enter into an Amnesty Agreement will not be assessed penalties- and if they pay the resulting assessment of taxes due within 180 calendar days of assessment- no interest will be due.

To be eligible for the amnesty- at the time of entering the amnesty program's managed audit- a taxpayer could not have already received a notice regarding the commencement of a TRD audit. More information on this program is available from the TRD.

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 further 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 4.7%- 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 statewide sales and use tax rate in Washington is 6.5%. Washington also 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. A recent tax proposal contained in proposed legislation introduced in each of the Washington state house and senate would have added a 0.5% tax on all aircraft or would have imposed an alternative taxation method based on a chart of aircraft types and manufacture dates.

The respective chambers of the Washington state legislature ultimately voted against enacting either proposal into law. The Washington Department of Revenue has updated its aircraft tax brochure to explain the application of sales and use tax- aircraft excise tax- and personal property tax to aircraft acquisitions and ownership.

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 statewide sales/use tax at a rate of 4% plus local sales/use taxes at rates between 0.25% and 2%.

Next Time:
In the October 2010 issue of World Aircraft Sales Magazine- we will take a state-by-state look at the north-eastern United States- which we previously reviewed in the October 2009 issue of the magazine. 

 

 


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