Article
Lease payments on non-transportation aircrafts subject to sales and use tax
May 12, 2024 · Authored by Shane Griffiths
The Washington Department of Revenue (DOR) provided guidance on the sourcing of lease payments for non-transportation aircrafts, clarifying the tax implications for both lessors and lessees.
The primary property location of the aircraft determines the sourcing of lease payments, and intermittent use of the aircraft across states doesn’t change its primary location.
The guidance determined lease payments for non-transportation aircrafts are subject to retail sales and use tax, as well as retailing business and occupation (B&O) tax in Washington State.
This article explores key definitions, exemptions, and sourcing examples to help taxpayers navigate the complexities of leasing non-transportation aircrafts in Washington State.
Definitions
Common terms used throughout this article are defined as follows.
Transportation equipment
An aircraft operated by air carriers that’s authorized and certified by the United States Department of Transportation (DOT) or other federal or foreign authority to engage in the transport of persons or property in interstate or foreign commerce.
Non-transportation aircraft
Any aircraft that doesn’t meet the definition above for transportation equipment. A small, personal aircraft used for recreation or business purposes other than transportation of persons or property for hire is likely considered a non-transportation aircraft.
Primary property location
The location where the aircraft is primarily based or hangared and ready for use.
Intermittent use of aircrafts across states
Intermittent use of an aircraft across states doesn’t change the primary property location of that aircraft during the lease period. This intermittent use includes flight time or any other time spent in a state other than the primary location state. There’s no apportionment of a non-transportation aircraft lease payment based on days in state and out of the state.
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The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.