ment was “constructively attached” to the aircraft and therefore subject to sales tax. But the appellate court explained that it could no more accept this argument than it would believe that a critically ill person could be “constructively dead.” The de- tached equipment, which entered the stream of foreign commerce once it was placed on the purchased aircraft at the manufacturer’s plant, was not taxable. In this Florida decision, the same air- craft equipment intended for the same use by similar purchasers was treated differ- ently by the same court because of whether it was affixed to the aircraft. Once installed, the equipment lost its in- dependent identity and became part of the aircraft and was no different than the cool- ing, heating or radar systems for the air- craft. Sales tax applied because the state was taxing the equipment as equipment and not as an aircraft. The detached equipment was only equipment. The pur- chaser’s future intent to install the equip- ment did not matter. The court looked at
the status of the equipment at the time it was purported subject to tax, not the equipment’s theoretical or future status. There are no bright line tests. Whether aircraft parts are taxable as personal prop- erty or subject to sales and use tax will de- pend on the nature of the part, if and how it is affixed to and used in the aircraft, whether it performs an essential aviation function, where it is affixed and used, as well as on the laws of the taxing jurisdic- tion and, as always, the motivations of the taxing officials. ❚
Brent Auberry concentrates his practice in the area of state taxation. He has represented aircraft owners in dozens of sales and use tax appeals before the Indiana Department of Revenue and the Indiana Tax Court. Brent has also represented airport operators before the Indiana General Assembly regarding sales and use tax legislation affecting the leasing of aircraft.
www.ROTORCRAFTPRO.com • March 2010
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