Experimental aircraft purchase - Do I need to pay sales tax and how? (California USA)

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Built2Fly

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I am buying a small experimental aircraft in California USA. The price is around $6000. It is a registered N-numbered aircraft so I will have it registered under my name when I have it.

My question is: do I need to pay the sales tax? Do I just wait for the bill to come from the state agency, or do I pay for the tax when I register it under my name, or is there some other ways to deal with it, or nobody will bother with it at all? Does FAA collect state sales tax (DMV for cars issue me a state license plate, but FAA is not a state agency)?

It is the first aircraft purchase for me so I am a little bit confused. Any help or personal experience is very much appreciated.
 

TFF

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FAA does not collect sales tax. My state had a form for expensive things like airplanes. Sent it in with a check. Goggling your state and airplane sales tax will come up with answers. I think my state sent it to me after I registered the plane in my name so they are paying attention.
 

Kiwi303

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more questions...

Is it a private sale or from a commercial source or broker?

Do private sales have to pay sales tax? or only those who are "in Business"?




Here in New Zealand you only pay sales tax (GST, Goods and Services Tax, a Value-Added taxation) if you are a in business and trading over a set limit a year. Is CA similar?
 

D Hillberg

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County tax assessors look at the FAA database then assess THEIR idea of what it's worth.
Register it out of state where there's lower or no sales tax and never disclose where it's hangared.
Nothing like getting a tax bill from a numbnuts fool who thinks your $6,000 toy is assessed a $80,000 tax bill.
 

rdj

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Check out this website:

CA Use Tax Overview

Like every other state agency in CA, the FTB (Franchise Tax Board) was found inept and corrupt by a court a few years ago, so the default CA government response was implemented: keep the old agency around but strip it of certain powers, and create yet another bureaucracy and give it those stripped powers and more. So now the FTB is left collecting the state income tax, and the new 'CA Department of Tax and Fee Administration' (CDTFA) collects the sales and use taxes. Twice the fun for business owners and residents alike.

In general, a registered seller (ie possessing a resale license) pays sales tax, and a buyer pays use tax. You'll need to pay use tax on the purchase to the CDTFA. Check the 'Aircraft' and 'Resources' tabs in the link above for more info. And D Hillberg is right: once the registration hits the FAA database, the county will come looking for property taxes as well.
 

davidb

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It is a private sale. I bought it from another seller, sight unseen, over the phone. There is no dealer involved.
Are you a CA resident? If yes, then you are liable for the initial sales tax and property tax for the years to follow that you own it. There’s no practical way of avoiding it. The bill of sale will serve as proof for assessing the value. They will find you soon after you register it.
 

cluttonfred

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I am not even from California but I did follow that link out of curiosity. It appears to indicate, from the source, that you don't have to pay sales *and* use tax on the same thing (emphasis added by me)

You must report your purchase of an aircraft subject to use tax to the CDTFA. In general, use tax applies to purchases of aircraft for use in this state when an amount for sales tax is not paid to a California dealer. This includes purchases from out-of-state sellers, private parties, or California dealers when delivery of the aircraft is taken out of state. Unless an exemption or exclusion applies, you must pay use tax on your aircraft purchase directly to the CDTFA.

Are you a CA resident? If yes, then you are liable for the initial sales tax and property tax for the years to follow that you own it. There’s no practical way of avoiding it. The bill of sale will serve as proof for assessing the value. They will find you soon after you register it.
 

davidb

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I am not even from California but I did follow that link out of curiosity. It appears to indicate, from the source, that you don't have to pay sales *and* use tax on the same thing (emphasis added by me)



Right. “Use tax” is what you pay if sales tax doesn’t apply. For example, if you bought it in another state that doesn’t charge sales tax (Oregon) but operate in California, you owe use tax which is the equivalent of sales tax. It’s one or the other but essentially the same thing.
 
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Dothetime

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Right. “Use tax” is what you pay if sales tax doesn’t apply. For example, if you bought it in another state that doesn’t charge sales tax (Oregon) but operate in California, you owe use tax which is the equivalent of sales tax. It’s one or the other but essentially the same thing.
If you wait until they find you, and they will, you may be liable for penalty’s and interest.
Just contact your state taxation office and get the form to pay the bill.
Dave
 

Pops

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County tax assessors look at the FAA database then assess THEIR idea of what it's worth.
Register it out of state where there's lower or no sales tax and never disclose where it's hangared.
Nothing like getting a tax bill from a numbnuts fool who thinks your $6,000 toy is assessed a $80,000 tax bill.
In this state they tax you in the county of your address and IF your airplane is based at another airport the assessor will go to the airports and get all the N numbers and you can get another tax from that county. I talked to the assessor about the double taxation, he said "get a lawyer". :( :(
They hope you will just pay instead of paying a lawyer. Honestly is a rare thing. Think I need to study up on French history. :)
 

BravoGolf

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In California the airports are required to report the N numbers of the aircraft kept there. So if you put it in a hangar with hopes that they won’t find it, they will. As mentioned earlier they continue to search the FAA database looking for CA based aircraft.

I made the mistake of reserving an N number during my build. Every year I got a letter about paying taxes with the ensuing discussion about its not an airplane yet.
 

tallank

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I am not even from California but I did follow that link out of curiosity. It appears to indicate, from the source, that you don't have to pay sales *and* use tax on the same thing (emphasis added by me)



A State can not collect "sales tax" on something that was sold from another State. So, the great State of CA invented the "Use Tax" to circumvent this Constitutional limitation. Totally unconstitutional.
 

D Hillberg

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In this state they tax you in the county of your address and IF your airplane is based at another airport the assessor will go to the airports and get all the N numbers and you can get another tax from that county. I talked to the assessor about the double taxation, he said "get a lawyer". :( :(
They hope you will just pay instead of paying a lawyer. Honestly is a rare thing. Think I need to study up on French history. :)
You'll get a different assessment in each county and it's BS as they'll pull the numbers out of their butts and send a bill after the October deadline for contesting the bill... and they say pay first then contest it more BS
I told them put a lean on it and eat dust, I'll be happy to pay the fair amount - Not their BS in two slices of bread.

As we all witness this Country is ripe for a Revolution and not a Mini 500 by Dennis Fetters
 

D Hillberg

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In California the airports are required to report the N numbers of the aircraft kept there. So if you put it in a hangar with hopes that they won’t find it, they will. As mentioned earlier they continue to search the FAA database looking for CA based aircraft.

I made the mistake of reserving an N number during my build. Every year I got a letter about paying taxes with the ensuing discussion about its not an airplane yet.
Never reserve an N number
Get it before the DAR makes his rounds [The taxers hate it but the FARs are what prevail]
 

Pops

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Just because you have a N number reserved in your name doesn't mean you have an airplane.
Before you start the paper work for the airworthiness inspection, you have to get an N number. I got the N number for the JMR on the last day of Nov 2019. Called the FAA in the last week of March of 2020 from the inspection. Call was transferred to a home phone and I was told that no one will be in the office until further noticed on account of the virus. Learned in the middle of June that they would be back in the office on the July 1, 2020. I called on July 1 and got an inspection date of July 7. Filling out my personal property tax form you are to declare PP on an aircraft on July 1. The JMR was not a legal airplane on July 1, the inspection making it an legal aircraft was one week latter. Before it was just a bunch of parts that I made. I didn't declare it and so far, I haven't heard from the assessor. I will fight it and will have the FAR's with me to back it up.
Some people reserve a block of N numbers hoping some company or rich person will want one of the numbers and pay them the money they want to un- reserve it. Just $5 a year each.
 

Built2Fly

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Sometime there was a hope for having an "inept" government. You thought they might "forget" something and we could get lucky. Yeah right!

In that case, it might be better to be preemptive with the $6000 tax, rather than having a bill showing up on my doorstep for $80,000 I don't own.
 

TFF

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He is submitting a bill of sale to the FAA. Unless it’s a P51 for $6000, he should be ok. Building something is a little harder when you submit bills for materials but the finished product is worth a lot more on the market. That might require some fighting.
 
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