Many times, aircraft owners may purchase an aircraft without considering Florida sales and use tax issues. These type of tax issues can be an unwelcomed surprise for owners, as they will oftentimes receive a letter in the mail from the Florida Department of Revenue (“Department”). Such a letter is the last thing an aircraft owner wants to see.
Sometimes, an aircraft purchase will be made outside of Florida. It is a true to say the purchase completed and delivered outside of Florida should not be subject to Florida sales tax. However, Florida may assess the owner with a “use” tax, which is meant to tax transactions occurring outside of Florida but where the property is brought to Florida.
How does the Department find out about your aircraft being brought into Florida? There are a couple of ways.
One way is via a rewards program the Department has setup. This program allows individuals to report other individuals and/or businesses to the Department. While there may be punitive motives behind an individual reporting someone else to the Department, there is perhaps a larger incentive – money. The Department will give the informant a cut of the money collected from the individual. The question becomes how does this translate to aircraft owners?
At some airports, individuals will sit at the end of a runway and record every single aircraft tail number they can spot. At the end of perhaps a week, the individual will report all of the spotted aircraft to the Department. The Department investigates the owner of the aircraft and where to send the audit notice. From there, the Department may (wrongfully) collect the money from the aircraft owner. The informant is then given his or her cut.
Of course, there are other ways the Department may find out about an aircraft potentially being in Florida. A prime way is for the Department to use the Federal Aviation Administration’s (“FAA”) Aircraft Registry. Why is this an important source for the Department? If an aircraft has a Florida address, then the Department automatically assumes the aircraft is subject to tax. Yes, you read that correctly. It does not matter if the aircraft never landed in Florida. The mere fact the aircraft has a Florida registered address is enough for the Department to assess.
There are a couple of ways you might fight back. First, do not list a Florida address in the FAA’s Aircraft Registry if you do not have to do so. If your aircraft is not going to Florida, then staying off of the Department’s radar from the beginning can be a good thing. Second, if you get a letter from the Department solely based on the FAA Aircraft Registry containing a Florida address for your aircraft but the aircraft was never in Florida, you are not out of hope. It may be beneficial to show the Department your aircraft logs or flight aware history to demonstrate the aircraft was never in Florida. The Department might remove the assessment at that point or close out the audit.
You could find yourself in the category of owning an aircraft that came into Florida with the Department hot on your trail. You can fight back. One way is if the aircraft is not owned by a Florida resident. The Department generally considers an individual to be a Florida resident if the individual has a Florida driver’s license, Florida voting card, and/or Florida homestead. If the aircraft owner is an artificial entity (corporation, limited liability company, etc.), then the Department not only looks to see if the artificial entity is a Florida entity but also whether the owners, officers, or directors are Florida residents. Assuming the entity or person owning the aircraft is not a Florida resident, then you get up to twenty (20) days within the first six months of ownership that the aircraft can be in Florida for any reason. If the aircraft is in Florida more than twenty (20) days for a nonexempt reason, then tax may be owed on the aircraft.
In some instances, the aircraft is owned by a Florida resident or entity. If that is the case, Florida unfortunately treats nonresidents better than Florida residents. If a Florida resident or entity owns the aircraft and the aircraft comes to Florida, then the owner may owe Florida use tax right away on the aircraft with no opportunity to take advantage of the twenty (20) day exemption.
Bottom line – if you owe Florida use tax on your aircraft, is there any hope? Absolutely! If the Department has not reached out to you already, you may be able to file a Voluntary Disclosure Request. A voluntary disclosure allows you to come clean on your liabilities, get penalties potentially waived, and sleep better at night. No longer do you have to worry about looking over your shoulder indefinitely. Yes, I mean indefinitely, as the Department could go back as far as possible to tax you if you never filed a sales and use tax return with the Department. The key is getting the voluntary disclosure application filed AS SOON AS POSSIBLE. Once the Department contacts you on the aircraft, voluntary disclosures are generally off of the table.
Unfortunately, you may find yourself having received an assessment. All hope is not lost at this point. You can fight back and appeal the assessment (called an informal protest). The key is you must timely appeal the assessment. If not, you will be facing an uphill battle of getting any meaningful movement on your case, even if you do not owe the tax. You may have as few as twenty (20) days to appeal the assessment! During the appeals process, the appeals officer may reduce/remove the assessment, offer some sort of settlement, or uphold the assessment. If an appeal does not produce the desired result, you may always litigate the assessment. Even if you otherwise owe the tax, the Department may have done something it should not have done potentially to invalidate the assessment.
In conclusion, use tax may be owed on aircraft purchased outside of Florida but brought into the state. The Department has tools it uses to find aircraft owners and assess them tax on the aircraft, even if the aircraft was never in Florida. An aircraft owner can take several steps to fight back, including fighting the assessment. Just because the Department issued an assessment does not mean the Department’s assessment is proper. You must timely appeal the assessment to keep the fight alive.
About the author: David Brennan is an associate attorney with Moffa, Sutton, & Donnini, P.A. His primary practice area is multistate tax controversy. David received a B.S. in Accounting and Finance, with a minor in Computer Science, from Florida State University. He worked as an accountant for a CPA firm before attending law school at Regent University. He received his Juris Doctor in 2013 and was licensed to practice law in Florida in the same year. In 2015, David earned his Masters of Laws in Taxation from Boston University. While working for the Florida Department of Revenue as a Senior Attorney, David focused on sales and use tax issues for cars, among other areas. You can read his BIO HERE.
At the Law Office of Moffa, Sutton, & Donnini, PA, our primary practice area is Florida taxes, with a very heavy emphasis in Florida sales and use tax. We have defended Florida businesses against the Florida Department of Revenue since 1991 and have over 150 years of cumulative sales tax experience within our firm. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of the situation as well as the legal side. We represent taxpayers and business owners from the entire state of Florida. Call our offices today for a FREE INITIAL CONSULTATION to confidentially discuss how we can help put this nightmare behind you.
AUTHORITY
Section 212.05, F.S., Sales, storage, use tax.
Rule 12A-1.007, F.A.C., Aircraft, Boats, Mobile Homes, and Motor Vehicles.
ADDITIONAL ARTICLES TO READ
FLORIDA SALES TAX INFORMAL WRITTEN PROTEST, published November 17, 2018, by James Sutton, C.P.A., Esq.
FLORIDA SALES & USE TAX APPORTIONMENT HANDBOOK, published March 28, 2019, by David J. Brennan, Jr., Esq.
FLORIDA SALES TAX - VOLUNTARY DISCLOSURE PROGRAM, published April 9, 2018, by Jeanette Moffa, Esq.
FLORIDA SALES TAX: AIRCRAFT 1% OF 6% RULE, published December 7, 2018, by David J Brennan, Jr., Esq.
SALES TAX ON AIRCRAFT PARTS AND REPAIRS IN FLORIDA, published December 10, 2017, by David J. Brennan, Jr., Esq.
SALES TAX ON AIRCRAFT LEASING IN FLORIDA, published March 31, 2017, by David J. Brennan, Jr., Esq.
NO FLORIDA SALES TAX ON AIRCRAFT PURCHASED BY NON-RESIDENT?, published November 6, 2016, by David J. Brennan, Jr., Esq.