APA and Tax Advisor
When to get an aviation tax advisor involved?
In the past few months, ATC has handled a flurry of aircraft acquisitions, numerous first time buyers and many last minute transactions trying to beat the tax deadline of December 31. What we have also experienced, unfortunately, is that many clients did not receive proper tax counsel in the early stage of the transaction, specifically, in the negotiation of the Aircraft Purchase Agreement (APA).
There are 50 states in the United States with 50 variations of state sales and use tax laws, personal property tax regulations, and aircraft registration requirements. Some states have unique fly-away exemption requirements. For example, Florida requires a registered dealer’s involvement, timely filed fly-away exemption form and supporting documents in order for a buyer to claim the exemption. Not as simple as close, buy some fuel, and fly away.
A not-well-thought-out closing location may take a buyer 3 hours of flight time to wintry Montana during the hectic holiday season, for an aircraft closing that could have been held in sunny Arizona 35 minutes away. I can think of numerous reasons why a closing flight to Montana in December is a bad idea. Failure to require the seller to provide an exemption certificate or tax affidavit can cost a buyer hundreds of thousands of sales tax payments.
Once an APA is executed, buyer has very little leverage to negotiate any tax or other closing items. Therefore, getting expert tax advice on some very unique aviation tax issues in the early stage of an aircraft acquisition can make the process go smoothly and likely save you money and headaches.
Daniel Cheung, CPA
Source: Aviation Tax Consultants