84(R) - 2015
Relating to the tax on the sale and use of aircraft; imposing a tax; providing civil and criminal penalties.
A fiscal note dated April 30, 2015 anticipates no significant fiscal implication to the State or units of local government. It adds that the fiscal implications of the bill are uncertain but
are not expected to be significant.
Senate Bill 1396 would amend the Tax Code to create Chapter 163 on sales and use taxation of aircraft.
Senate Bill 1396 would define, for purposes of Chapter 151 of the Tax Code related to sales and use taxes, "certificated or licensed carrier" as a person authorized by the Federal Aviation Administration to operate an aircraft to transport persons or property in compliance with the certification and operations specifications requirements of 14 C.F.R. Part 121, 125, 133, or 135.
It would exempt the acquisition of an aircraft, be it a purchase, lease, or rental, by a certificated carrier from taxes imposed under Chapter 151 of the Tax Code, as it applies under Section 151.328(a)(1).
Senate Bill 1396 would define as a sale for resale the sale of an aircraft to a purchaser who acquires the aircraft for the purpose of leasing, renting, or reselling the aircraft to another person in the United States of America or a possession or territory of the United States of America or in the United Mexican States in the form or condition in which it is acquired. Such leasing or renting would require the transfer of operational control of the aircraft from a lessor to one or more lessees pursuant to one or more written agreements in exchange for consideration. The status of sale for resale would still apply whether the purchaser, in addition to leasing, renting, or reselling the aircraft also uses the aircraft, as long as more than 50 percent of the aircraft's departures for the first year after the purchase are made under the operational control of one or more lessees. Section 151.154(a) of the Tax Code would not apply.
An aircraft brought into the state of Texas for the sole purpose of being completed, repaired, remodeled, or restored, or if the person bringing the aircraft into Texas did not acquire the aircraft directly from a seller by means of a purchase, as that term is defined by Section 151.005, would not be subject to the use tax.
No use tax would be imposed to an aircraft brought to Texas if it is mainly used outside this state (that is more of 50 percent of departures are outside of the state) for a period of one year beginning on the later of the date of acquisition, or the date the aircraft was substantially complete in the condition for its intended use and conducted its first flight for the carriage of persons or property.
Aircraft acquisitions not subject or exempted from the sales and use tax would remain not subject to or exempt from the tax whether the acquisition transaction is between related or unrelated persons.
An affiliate of the purchaser of the aircraft or an owner or member of an affiliate would not be subject to the use tax if the purchaser of the aircraft paid the sales and use tax or the purchaser's purchase was exempt from the tax other than for a sale for resale or for an occasional sale.
The purchase, sale, or use of an aircraft that is operated pursuant to 14 C.F.R. Part 91, Subpart K (operated under fractional ownership) would no be subject to the sale and use tax.
The second chamber sponsor is Representative Chris Paddie.
Vote Recommendation Notes
No amendments or modifications have been made to the bill since we reported on it. We continue to support it.
First chamber analysis below:
According to the statement of intent for the bill, current law regarding the taxation of the purchase of an aircraft is unclear and has led to costly litigation for the state. The aviation industry also complained about cases of double taxation (when an aircraft was purchased for lease, rental or resale, for example).
Senate Bill 1396 intends to clarify the law on the taxation of aircraft by clearly defining when the purchase of an aircraft is not subject to or exempt from the sales and use tax, leaving other cases subject to taxation more evident. The clarification is based on the way taxation is modeled on other tangible personal property, such as in the case of the sale for resale exemptions (to avoid double taxation). It would not create a new tax.
Senate Bill 1396 would hence favor both a transparent and limited government by making unclear statute on taxation less subject to interpretations. It would also favor the free market system as it would avoid cases of double taxation and remove the uncertainty about the taxation system. As a consequence, we support Senate Bill 1396.