QUESTION REGARDING SALES AND USE TAX TREATMENT OF FLIGHT SCHOOL AIRCRAFT (TEXAS SPECIFIC)

N-2N aircraft from NAS Pensacola, 1936

Tax Planning opportunity (and potential pitfall): N.B. - Individual situations differ. This is proffered as general information. Please contact me, another qualified CPA specializing in aviation related taxation, or a qualified attorney.

A purchaser of an aircraft used for flight training is exempt from Sales or Use tax within Texas. Additionally, maintenance and parts used on that specific aircraft are not taxed, so long as they are required for the continuing airworthiness of the aircraft, and are not merely tangental to the operation.

If you utilize the aircraft for a non-exempt activity (e.g. a rental to a rated pilot for a cross country not in pursuance of a rating), the tax exempt status of the aircraft as well as it's maintenance becomes open to question depending upon the facts involved.


I was asked about this issue a couple weeks ago and did a bit of research to clarify the matter. According to the Texas Administrative Code, Title 34, Part 1, Chapter 3, Subchapter O, Rule § 3.297:

(c) Aircraft other than aircraft used by licensed and certificated carriers.

  (1) The term "aircraft" does not include rockets or missiles, but does include:

    (A) a fixed-wing, heavier-than-air craft that is driven by propeller or jet and is supported by the dynamic reaction of the air against its wings; . . .

  (7) Sales or use tax is not due on aircraft purchased by a person who uses the aircraft to provide flight instruction that is recognized by the Federal Aviation Administration (FAA), under the direct or general supervision of an FAA certified flight instructor, and designed to lead to a pilot certificate or rating issued by a rule or regulation of the FAA. See §3.287 of this title (relating to Exemption Certificates).

  (8) A student enrolled in an FAA approved program may claim a tax exemption when renting aircraft for flight training, including solo flights and other flights, under an instructor's direction. When completing an exemption certificate claiming sales tax exemption, the student must identify the flight school (name and address) or if the student is not enrolled in a flight school, the student must list his or her primary flight instructor with the instructor's address. The student must also retain copies of written tests and instructors endorsements. Without evidence that the student is in pursuit of a flight rating, he or she will owe tax on aircraft rentals. . . .

(d) Licensed and certificated carriers, flight schools, and flight school instructors.

  (1) Sales or use tax is not due on aircraft used by persons defined in subsection (a)(1) of this section in the regular course of business of transporting persons or property for hire.

  (2) The following items or services used in the repair, remodeling, or maintenance of aircraft or aircraft engines or component parts by or for a person qualified under subsection (a)(1) or (c)(7) of this section are exempt if purchased by the aircraft owner or operator, by the aircraft manufacturer, or by a repair facility.

    (A) Machinery, tools, supplies, and equipment used directly and exclusively in the repair, remodeling, or maintenance. Included in the exemption is equipment used to sustain or support safe and continuous operations or to keep the aircraft in good working order by preventing its decline, failure, lapse, or deterioration, such as battery chargers or diagnostic equipment.

    (B) Repair, remodeling, and maintenance services.

  (3) Tax is not due on tangible personal property that is permanently affixed or attached as a component part of an aircraft owned or operated by a person described in subsection (a)(1) or (c)(7) of this section or that is necessary for the normal operations of the aircraft and is pumped, poured, or otherwise placed in an aircraft owned or operated by a person described in subsection (a)(1) or (c)(7) of this section. Exempt component parts include air cargo containers that are secured or attached to the aircraft while in flight, radar equipment or other electronic devices used for navigational or communications purposes, food carts, smoke detectors, fire extinguishers, and seats. Pillows, blankets, trays, ice for drinks, kitchenware, or toilet articles are not exempt from tax.

  (4) Tax is not due on electricity or natural gas used in the off-wing processing, overhaul or repair of a jet turbine engine or its parts for a person described in subsection (a)(1) of this section.

  (5) Machinery, tools, and equipment that support the overall carrier operation such as baggage loading or handling equipment, garbage and other waste disposal equipment, or reservation making or booking machinery and equipment, do not qualify for exemption.

(e) Taxable uses of tangible personal property purchased tax free. Persons making a taxable use of tangible personal property purchased tax free, including aircraft purchased for flight training, should refer to §3.285 of this title (relating to Resale Certificate; Sales for Resale) and §3.287 of this title (relating to Exemption Certificates).