Virginia Law

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.