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Noonan’s Notes Blog is written by a team of Hodgson Russ tax attorneys led by the blog’s namesake, Tim Noonan. Noonan’s Notes Blog regularly provides analysis of and commentary on developments in the world of New York and multistate tax law. Noonan's Notes Blog is a winner of CreditDonkey's Best Tax Blogs Award 2017.

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Ariele Doolittle
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New York Is Almost Open for Flying: A Sales and Use Tax Update

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Private jetPiggy-backing on my colleague Drew’s sales tax update last week on new use tax rules for yachts already in effect, I’m writing with another timely update on New York’s soon-to-be-effective sales and use exemption rules for “general aviation aircraft”. 

In less than 40 days, the exempt status previously reserved only for “commercial aircraft” will be extended to include “general aviation aircraft” in New York, which include recreational planes, private and corporate jets and helicopters, etc.—basically, aircraft used in civil aviation that aren’t “commercial aircraft.” As part of the 2015-2016 budget bill, the New York Legislature adjusted the rules imposing sales and use tax on nonresident—and resident—aircraft owners alike. The Legislature added a new exemption to Tax Law section 1115 for general aviation aircraft, which is defined to include all aircraft “used in civil aviation,” except commercial aircraft used to transport persons or property for hire. It joins the exemption already on the books for sales and use tax on commercial aircraft primarily engaged in intrastate, interstate, or foreign commerce. The new rule will also exempt sales of machinery or equipment installed on the aircraft. The rule does not exempt drones—sorry, all you early adopters out there.  

As my colleagues pointed out in an overview of the 2015-2016 budget bill, somehow this exemption has generated less fanfare than the new use tax rules on yachts, but these aircraft rules actually go beyond what the new yacht rules will accomplish.

On September 1, 2015, when the new rules and exemption for “general aviation aircraft” go into effect, maybe the level of excitement will change. Air traffic controllers should be ready, because the skies and—more importantly—runways and tarmacs in New York will be truly friendly. This new rule, like me, is kind of a big deal. A bigger deal, though, is the potential for new jobs and revenue associated with folks and companies hangaring, servicing, and selling general aviation aircraft in New York, and the influx of employees based in and new jobs moved to New York, where in the past people and companies may have been afraid to land a plane on a New York runway. Indeed the aviation industry appeared to be a driving force behind lobbying for the exemption.

If you’re considering bringing one of these planes into New York for the first time in the next few weeks or purchasing one of these planes in New York in the near future, consider another plan. By landing in New York, we don’t think you should automatically incur New York use tax on the plane, but you can probably avoid a shocking audit or assessment notice from the New York Tax Department if you can hold out just a bit longer.

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