Virginia Administrative Code › Title 23 - TAXATION › Agency 10 - DEPARTMENT OF TAXATION › Chapter 220 - AIRCRAFT SALES AND USE TAX › Section 23VAC10-220-5 - Definitions

Current through Register Vol. 40, No. 24, July 15, 2024
The following words and terms when used in this chapter shall
				  have the following meanings unless the context clearly indicates
				  otherwise:
"Aircraft" means any contrivance used or designed for and
				  capable of untethered navigation or flight in the air carrying one or more
				  persons at an altitude greater than 24 inches above the ground, except such
				  term shall not include a parachute or a "hang glider." (See § 5.1-1 of the
				  Code of Virginia.)
"Commissioner" means the Tax Commissioner.
"Dealer" means any person the Tax Commissioner finds to be in
				  the regular business of selling aircraft and who owns five or more aircraft at
				  anytime during the calendar year that are held for resale or used for
				  compensation. The term "owns" includes aircraft acquired under leases
				  qualifying as sales as defined in this section.
"Gross receipts" means hourly rental, maintenance, and all
				  other charges for use of such aircraft. Also, unless separately stated on the
				  invoice, "gross receipts" includes all charges for services of pilots or
				  instructors in such aircraft.
"Person" means every natural person, firm, partnership,
				  association, corporation, or other entity.
"Sale" means any transfer of ownership or possession, or
				  both, exchange, barter, lease or rental, conditional or otherwise, in any
				  manner or by any means whatsoever, of an aircraft, including transactions
				  whereby possession is transferred but title is retained by the seller as
				  security. The term "lease or rental" shall be restricted to include only a
				  lease or rental for a period of time substantially equal to the remaining life
				  of the aircraft as determined at the beginning of the lease term or a lease or
				  rental in which the payments during the term of the lease will substantially
				  equal the value of the aircraft.
1. The remaining life of the aircraft shall be estimated in
				  accordance with generally accepted accounting principles, considering factors
				  such as physical deterioration, normal obsolescence, maintenance, and intensity
				  of use.
2. The term "substantially equal" shall mean "equal to or
				  exceeds 80%."
3. The term "value of the aircraft" shall mean the current
				  market value of the aircraft in accordance with such publications or other data
				  as are customarily employed in ascertaining the maximum sale price of an
				  aircraft.
The same sale will not be subject to the tax more than once.
				  However, unless it is an exempt transfer, each time a transfer of ownership or
				  possession takes place, the new owner will be subject to the tax on the
				  transfer.
"Sale" does not include the following:
1. Any transfer of ownership or possession which transfer is
				  made to secure payment of an obligation.
2. Any transfer of ownership or possession that is incidental
				  to repossession under a lien and under which ownership is transferred to the
				  lien holder, his nominee, or a trustee, pending ultimate disposition or sale of
				  the collateral.
3. Any transfer of ownership or possession that is part of
				  the sale of all or substantially all the assets of a business. The exemption
				  applies only to aircraft upon which Virginia aircraft sales and use tax has
				  been paid upon acquisition or use by the transferor and does not include
				  nonlicensed aircraft held for resale by a dealer or manufacturer or any other
				  aircraft held or used for exempt purposes by the transferor. The tax status of
				  such aircraft will be determined by the transferee's purposes and use of the
				  aircraft. The term "substantially all the assets" shall mean "80% or
				  more."
4. Any transfer of ownership or possession by survivorship,
				  inheritance, or gift. The exclusion from "sale" referred to in this subdivision
				  4 is limited to bona fide gifts without consideration. A gift for services
				  rendered or any other form of consideration is a sale and is subject to
				  Virginia aircraft sales tax.
5. Any transfer of ownership or possession from an individual
				  or partnership to a corporation or from a corporation to an individual or
				  partnership if the transfer is incidental to the formation, organization,
				  reorganization, or dissolution of a corporation in which the individual or
				  partnership holds a controlling interest. For purposes of this exclusion, a
				  controlling interest means the ownership of at least 80% of all outstanding
				  shares of voting stock.
6. Any transfer of ownership from a partner to the
				  partnership in which he is a partner will be deemed a taxable sale only to the
				  extent of the aggregate interests of partners other than the transferring
				  partner. Similarly, any transfer of ownership from a partnership to a partner
				  will be deemed a taxable sale only to the extent of the aggregate interests of
				  partners other than the transferee partner.
7. Any transfer of ownership or possession between affiliated
				  corporations if Virginia aircraft sales and use tax or Virginia retail sales
				  and use tax was paid on the acquisition or use of the transferred aircraft by
				  the transferring corporation. For purposes of this exclusion, two or more
				  corporations shall be deemed affiliated if (i) one corporation owns at least
				  80% of the outstanding shares of voting stock of the other or others or (ii) at
				  least 80% of the outstanding shares of voting stock of two or more corporations
				  is owned by the same interests.
Example 1: Corporation A purchased in 1980 an aircraft and
				  paid Virginia aircraft sales and use tax on the purchase. In 1983, Corporation
				  A acquired all of the capital stock of Corporation B and transferred its
				  aircraft to Corporation B. The transfer would not be subject to Virginia
				  aircraft sales and use tax because it would represent a transfer between
				  qualified affiliates (parent owning as least 80% of subsidiary).
Example 2: Corporation C purchased an aircraft in Delaware in
				  March 1982. In June 1982, Corporation C acquired all of the capital stock of
				  Corporation D, a Virginia corporation, and transferred its aircraft to
				  Corporation D. The acquisition of the aircraft by Corporation D is subject to
				  Virginia aircraft sales and use tax. While this would represent a transfer
				  between qualified affiliates, Virginia aircraft sales and use tax was not paid
				  on the acquisition of the transferred asset by the transferring
				  corporation.
Example 3: Individual A owns 100% of the voting stock of
				  Corporation E and 85% of the voting stock of Corporation F. Both corporations
				  operate businesses in Virginia. In 1982, Corporation E transfers to Corporation
				  F an aircraft which it had previously purchased and on that it had paid
				  aircraft sales and use tax. The transfer would not be subject to Virginia
				  aircraft sales and use tax because it would represent a transfer between
				  qualified affiliates (at least 80% of the voting stock of each corporation is
				  owned by the same owner) and because Virginia aircraft sales and use tax was
				  paid on the acquisition of the transferred aircraft by the transferring
				  corporation.
Example 4: Individual A is the sole owner of an aircraft. A
				  transfers the aircraft to Partnership ABC in which he is a partner owning a 1/3
				  interest in the partnership property. A's 1/3 interest in the aircraft is not
				  subject to tax since A is deemed to have retained 1/3 of his previous 100%
				  ownership on which he had paid aircraft sales and use tax. The 2/3 interest in
				  the aircraft owned by Partners B and C is subject to the aircraft sales and use
				  tax. To the extent of this interest, a transfer qualifying as a sale took
				  place.
Example 5: Partnership XYZ transferred its aircraft that it
				  had purchased and on which it had paid Virginia aircraft sales and use tax to
				  Partner Z on January 1, 1983. Each partner is deemed to own a 1/3 interest in
				  the aircraft. The taxable portion of the transfer is the 2/3 interest owned by
				  Partners X and Y.
8. Transfer of aircraft repair parts, accessories,
				  attachments, and lubricants, not included in the same transaction with the
				  transfer of aircraft. Sales of all such tangible personal property are subject
				  to the Virginia retail sales and use tax and reportable on Form ST-9, Dealer's
				  Retail Sales and Use Tax Return.
"Retail sale" means a sale to a consumer or to any person for
				  any purpose other than for resale and includes any transaction the
				  commissioner, upon investigation, finds to be in lieu of a sale.
"Retail sale" does not include the mere transfer of titled
				  ownership between husband and wife, where there has been no contractual
				  consideration for the transfer and where no loss resulting from the transfer
				  would constitute an allowable deduction for federal or state income tax
				  purposes. No substantive change in equity ownership has occurred and the
				  transfer is not subject to Virginia aircraft sales and use tax.
"Sale price" means the total price paid for an aircraft and
				  all attachments thereon and accessories thereto, without any allowance or
				  deduction for trade-ins or unpaid liens or encumbrances, but exclusive of any
				  federal manufacturers' excise tax.
"Attachments thereon" and "accessories thereto" as used
				  herein mean all tangible personal property that is physically attached to the
				  aircraft, including installation charges, or property that is customarily used
				  in aircraft, whether or not affixed to the structure of the aircraft, and that
				  was transferred in the same transaction as the aircraft as a part of the
				  aircraft sale. Such tangible personal property transferred other than in the
				  same transaction with the aircraft will be subject to the Virginia retail sales
				  and use tax imposed pursuant to Chapter 6 (§ 58.1-600 et seq.) of Title
				  58.1 of the Code of Virginia.
Charges for lettering and get-ready charges (i.e., cleaning,
				  washing, and preparing) are also included in the sale price when made in the
				  same transaction with the aircraft transfer.
Charges for federal manufacturer's excise tax, insurance, and
				  gasoline are excluded from the sale price, when separately stated on the
				  invoice.
Statutory Authority: § 58.1-203 of the Code of
					 Virginia.