Understanding The Basics of Aircraft Tax Planning In The United States

At the time of planning to buy an aircraft people emphasize upon a single factor. It is whether they are going to trigger transfer taxes, explains a skilled Aircraft Tax Planning consultant with years of experience in the profession. This transfer taxes can be done in many ways, like excise tax, transaction privilege tax, stamp taxes, sales and use taxes and value added taxes or VAT. As a matter of fact, VAT is more relevant to the Asian and European nations whereas stamp taxes are levied when a purchase contract gets executed and is applied to in the same jurisdiction. Transfer taxes – as such – easily reach up to tens of thousands (if not millions) of dollars pretty easily depending on the price of an aircraft.  

Under normal circumstances, explains a leading Aircraft Tax Planning consultant, taxes that you pay for buying an aircraft are based on certain factors. The factors include –

•    The place where the aircraft is located at the time your sell or purchase
•    The place where the aircraft will be based and mainly be used once you purchase it
•    Whether third parties will be allowed to use the aircraft for compensation (like under post-closing leases)

The issues mentioned above arise in every aircraft purchase. It does not matter whether it is a commercial passenger aircraft, general aviation aircraft or a business jet that you are purchasing the issues remain the same. Wherever in the world you may be purchasing an aircraft, you must analyze the situation with a cool head and take benefits of the appropriate exemptions before making the purchase, suggests a skilled and trained Aircraft Tax Planning. It is relevant mentioning in the ongoing context that the task of tax analysis is particularly complex in the United States of America. This is because America is comprised of 50 different states and thus there are 50 unique jurisdictions to consider. Moreover, there are no less than hundreds of local jurisdictions to cover within each state. Each of these entities has its own set of rules and conventions.  

As far as the majority of American states are concerned, aircrafts are typically subjected to sales, use or other transfer taxes. The sales tax is applied by the state where the buyer is purchasing the aircraft from. Furthermore, the Aircraft Tax Planning consultant explains, use tax is typically applied in the circumstance where the aircraft is purchased in one state but will be based or used in another.

As far as most of the states are concerned, a seller of an aircraft has to charge sales tax on selling price to the buyer. The amount has to be remitted to the state taxation authority in case the buyer does not produce an appropriate exemption. As such aircraft purchase agreements usually places the responsibility of clearing the taxes on the shoulders of a buyer. For more information visit here: Advocate Consulting Legal Group, PLLC.

How Aviation Industry Benefits Through Aircraft Compliance Program

The Aircraft Compliance program has been designed to use the non-enforcement methods of FAA. It is supposed to rectify the unintentional noncompliance or deviations of aircraft operators or authorities. It may result from the defective systems, flawed procedures, diminished skills, simple mistakes and lack of understanding. The non-enforcement methods of FAA are known as compliance actions. The reason behind using the compliance action is to restore compliance after identifying the underlying the causes that led to deviation.

The FAA personnel try to rectify these mistakes by using the Aircraft Compliance program. They try to correct the deviations on the spot or improve the skills of aircraft operators through additional training. The application of compliance actions is supposed to ensure transparent exchange of safety information between the FAA personnel and aircraft operators or owners. FAA uses the ‘Compliance Action’ to resolve an issue if an individual or organization co-operates. The purpose of using the ‘Compliance Action’ is to avoid using the enforcement action as long as possible. However, FAA is going to use the ‘enforcement actions’ if the aircraft operators or owners are not cooperating or unable to comply with the guidelines of FAA. An individual or organization is going to be considered ineligible for Compliance Action if deviation from FAA guidelines seems to be intentional. The ‘enforcement actions’ are also used by the FAA if there is any evidence of criminal or reckless behavior.

Therefore, FAA uses the ‘Enforcement Actions’ when the situation does not permit the application of ‘compliance actions’. The main objective of using Aircraft Compliance program is to encourage transparent exchange of information between FAA and aircraft operators or owners. It enables FAA to understand the safety problems associated with operating or owning any type of aircraft or associated with operating an airline business. The voluntary exchange of information is encouraged through the aircraft Compliance Program.

The application of enforcement may seem unnecessary in many scenarios. It prohibits the exchange of information between FAA personnel and owners or operators of aircraft. The Aircraft Compliance program was introduced due to this reason. It has become possible for the FAA to identify the upcoming problems and anticipate the safety risks associated with operating any type of aircraft. With voluntary exchange of information, it has become possible for the FAA to remain updated about the performance of aviation system. The continuous sharing of data has resulted in the continuous improvement of the system.

The Aircraft Compliance Program can be used by the FAA to avail rapid compliance. It limits the possibility of deviation and minimizes the safety risks. The use of Compliance Actions welcomes positive changes. It is possible for the Federal Aviation Administration to address the noncompliance without using the Enforcement Actions with introduction of the Aircraft Compliance Program. For more information visit here: Advocate Consulting Legal Group, PLLC.