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Senate Bill would abolish plane sales tax exemption
KEITH ARNOLD
Special to the Legal News
Published: February 23, 2024
A Delaware lawmaker wants to make less attractive the practice of Ohioans purchasing manned aircraft and flying it out of state to close on the sale of the new plane.
Republican Sen. Andrew Brenner said the so-called “fly-away exemption” relieves the purchaser of having to pay sales tax when the sale of aircraft is completed in a state that either doesn’t have a sales tax or has the appropriate exemption.
“This exemption allows an aircraft to be flown from a state that charges sales tax, like Ohio, to a state like Indiana, Michigan or West Virginia, where the sale could be closed without state tax,” he said during a recent Ways and Means Committee hearing.
Senate Bill 172 seeks to equalize the state’s competitiveness with neighboring states by exempting the sale of manned aircraft from state and local sales and use tax, Brenner said.
“This change would be beneficial to the whole market, from manufacturers to those purchasing pre-owned aircraft, as commerce in this industry is routinely lost to states that do not apply these taxes to such sales,” he said.
Additionally, state airfields and airports presumably would no longer miss out on revenue from short-term storage, maintenance and fueling of aircraft that are hangered in other states at the closing of the sale.
Brenner said several of those states typically require that the aircraft be moved out of the state within a period of time after the sale is closed, “hence the term ‘fly away.’
“Purchasers routinely utilize this option in Ohio as the cost of moving aircraft to a neighboring tax-free state, or even farther like South Carolina and Kansas, can be far less than the tax exposure.”
Current state law offers several sales tax exemptions or reductions related to aircraft, according to analysis by the Ohio Legislative Service Commission.
SB 172 would not affect any of the existing provisions, which include:
• An exemption for the sale of materials, parts and equipment used in the repair or maintenance of aircraft or avionics systems and of maintenance and repair services;
• An $800 tax cap on the sale of shares of a qualified fractionally owned aircraft, such as an aircraft provided through a program through which individuals can purchase fractional ownership shares of an aircraft; and
• An exemption for the sale of goods and services for the maintenance and repair of qualified fractionally owned aircraft.
“The exemption proposed in SB 172 would benefit broad regions of the state,” Brenner said. “Akron Fulton and Canton Akron airports, for example, are home to a number of aviation maintenance and brokerage firms.”
He offered as another example, Cuyahoga County Airport, which is home to firms that provide aircraft maintenance services, brokers and others specializing in remanufacturing older aircraft and selling to the general public.
“There are also firms in central Ohio, in Fairfield County, that provide pre-purchase inspections for aircraft that would potentially benefit from the exemption,” he added. “With the passage of this bill, all of Ohio’s aviation industry would benefit from being able to sensibly close on sales at their home location rather than having to move aircraft to a neutral site.”
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