96-041
Response
March 6, 1996
XXXXX:
I
am requesting an advisory opinion on the following:
My
company is an operator of commercial aircraft operating under XXXXX. A private corporation or an individual is
interested in purchasing an aircraft for the purpose of leasing the aircraft to
my company for commercial charter flying.
The aircraft would be based in Utah and would fly both interstate and
intrastate commercial flights. It is my
understanding that the private corporation or individual would not have to pay
sales tax on the purchase of the aircraft.
My company would charge my charter customers a use tax on their flights
and I would remit this to the Utah State Tax Commission.
I
would appreciate it very much if you could respond to this request at you
earliest convenience.
Thank
you.
XXXXX
XXXXX
RE:
Advisory Opinion - Sales tax on purchase of an airplane
Dear
XXXXX
We
have received your request for an opinion as to whether a private corporation
may purchase an airplane tax free if that airplane will be leased to your
company for commercial charter service.
We find as follows:
Your
arrangement involves to transactions that raise sales tax issues. One transaction is the purchase of the
airplane by a private corporation. The
other is the lease of that airplane to your company. With regard to the initial purchase of the airplane, the buyer
may purchase the airplane tax free under the resale exemption so long as the
airplane was purchased with the intent to lease it to another party and so long
as the airplane actually is leased. If
the buyer purchases the airplane for its own use, then at some later time
decides to sell or lease the airplane to another party, resale exemption does
not apply.
Leases
of tangible personal property are normally subject to sales tax. However, sales or leases of vehicles to, or
use of vehicles by an authorized carrier are exempt from sales and use tax. An
“authorized carrier” is one who holds an FAA operating certificate or an air
carrier's operating certificate. Since
XXXXX holds an air carrier certificate, its lease is exempt from sales tax.
With
regard to charges to your customers for air transportation, all charges for
intrastate air transportation are subject to sales tax. Charges for interstate transportation are
subject to tax if the transaction occurs in Utah and some of the air services
occur in Utah. If XXXXX sells
transportation services outside of Utah, its sales may be subject to sales tax
in other states.
As
a vendor who is responsible for collecting and remitting sales tax, XXXXX must
have a sales tax license. If you do not
already have a license, you may use the enclosed form to apply for one.
Please
let us know if we can be of further assistance.
For
the Commission,
Alice
Shearer
Commissioner