CO GIL 18-005 Sales & Use Tax 2018-02-12

Are aircraft parts that are permanently affixed to an aircraft exempt from Colorado sales and use tax even when the aircraft is NOT used in interstate commerce by a commercial airline?

Short answer: Yes. Tangible personal property permanently affixed as a component part of an aircraft is exempt from Colorado sales and use tax, and — unlike the exemption for the sale of the aircraft itself — there is NO requirement that the aircraft be used in interstate commerce by a commercial airline. Examples include fuselage parts, aircraft-engine parts, seats permanently affixed to the aircraft, and paint. (This is a General Information Letter: general guidance only, not binding on the Department.)

Disclaimer: This is an official Colorado Department of Revenue General Information Letter (GIL). A GIL provides a general overview of the relevant tax issues but is NOT binding on the Department; it makes no specific determination and represents only the good-faith opinion of Department personnel. It does not address sales or use taxes administered by self-collected home-rule cities. This summary is informational only and is not legal or tax advice. Consult a licensed Colorado tax professional about your situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked at the bottom of this page, or PDF in the sidebar) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

Colorado has a sales-and-use-tax exemption for aircraft and for parts permanently affixed to aircraft — but the two halves of that exemption have different conditions, and that's the whole point of this letter.

The exemption for the aircraft itself is narrow: it applies only to an aircraft used in interstate commerce by a commercial airline.
The exemption for parts permanently affixed to an aircraft is broader: there is no requirement that the parts go on a commercial interstate aircraft. So a permanently affixed component part can be exempt even if the aircraft is a private plane that never flies interstate commercial routes.

The Department's reasoning is straightforward statutory reading: the "used in interstate commerce by a commercial airline" limit is written into the aircraft clause, and there is no similar requirement attached to the parts clause. The letter gives concrete examples of exempt permanently affixed property: fuselage parts, parts for aircraft engines, seats permanently affixed to the aircraft, and paint.

The exemption reaches state tax, RTD/SCFD special-district tax, county tax, and state-collected local taxes. As always, home-rule cities run their own show and must be asked separately.

Because this is a General Information Letter, it's general guidance only and not binding on the Department.

What this means for you

Aircraft owners and operators (including private/general aviation)

If you buy parts that become permanent component parts of your aircraft, Colorado's exemption can apply even if your aircraft isn't a commercial airliner flying interstate. The "commercial interstate" condition is a limit on exempting the whole aircraft, not on exempting affixed parts. The key fact is that the property is permanently affixed as a component part (engine parts, fuselage parts, bolted-in seats, paint) — not loose or removable equipment.

Aircraft-parts dealers and MRO (maintenance/repair/overhaul) shops

You can treat sales of permanently affixed component parts as exempt without first proving the aircraft is a commercial interstate airliner. Keep documentation that the item is a permanently affixed component part. Loose gear, tools, and removable items aren't covered by this "permanently affixed" language.

Accountants and tax professionals

This GIL isolates a clean drafting distinction in § 39-26-711(1): subsection (1)(a) limits the aircraft exemption to interstate-commerce commercial-airline use, while subsection (1)(b) exempts permanently affixed component parts with no such limit. The Department points to its own FYI Sales 85 for the worked examples. The same permanently-affixed-parts principle appears in Colorado PLR 18-003, which applied § 39-26-711 to affixed aircraft components — a useful cross-reference.

Common questions

Q: Do aircraft parts have to be on a commercial interstate airliner to be exempt in Colorado?
A: No. That requirement applies only to exempting the aircraft itself. Tangible personal property permanently affixed as a component part of an aircraft is exempt with no interstate-commerce/commercial-airline condition.

Q: What counts as exempt permanently affixed property?
A: The letter lists fuselage parts, parts for aircraft engines, seats permanently affixed to the aircraft, and paint, "but not limited to" those. The common thread is that the item is permanently affixed as a component part.

Q: Which taxes does the exemption cover?
A: State tax, RTD/SCFD special-district tax, county tax, and state-collected local taxes. Home-rule cities aren't covered — contact them directly.

Q: Can I rely on this letter?
A: No. It's a General Information Letter — general guidance only, not binding on the Department. Your facts may differ; consider a private letter ruling for a binding answer.

Citations and references

Statutes and references:
- § 39-26-711(1), C.R.S. (exemption for aircraft used in interstate commerce and for parts permanently affixed to aircraft)
- § 39-26-711(1)(a), C.R.S. (aircraft exemption limited to aircraft used in interstate commerce by a commercial airline)
- § 39-26-711(1)(b), C.R.S. (exemption for tangible personal property permanently affixed as a component part of aircraft)
- Department of Revenue FYI Sales 85 (Sales Tax Exemption on Aircraft and Aircraft Parts)
- See also Colorado PLR 18-003 (applying § 39-26-711 to permanently affixed aircraft components)

Source

Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-18-005.pdf

Original ruling text

Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]

GIL-18-005
February 12, 2018
XXXXXX
Attention: XXXXXX
XXXXXX
XXXXXX
Re: Tangible Personal Property Permanently Affixed to Aircraft
Dear XXXXXX,
You submitted a request for guidance on behalf of your client (“Company”) to
interpret the sales tax exemption for tangible personal property that is permanently
affixed to aircraft in C.R.S. 39-26-711(1)(b).
The Colorado Department of Revenue (“Department”) issues general information
letters and private letter rulings. A general information letter provides a general
overview of the relevant tax issues, but is not binding on the Department. A private
letter ruling provides a specific determination for a specific set of facts, is binding
on the Department but not on the taxpayer, and requires payment of a fee. For
more information about general information letters and private letter rulings, please
see Department Rule 1 CCR 201-1, 24-35-103.5.
The Department treats this request as a general information letter. It is important
to remember that general information letters, such as this one, are general
discussions of tax law and are not binding on the Department. If Company would
like the Department to issue a private letter ruling on the issue raised here,
Company can submit a request and pay the fee in compliance with Department
Rule 1 CCR 201-1, 24-35-103.5.
Issue
Are aircraft parts that are permanently affixed as a component part of an aircraft,
which is not an aircraft used in interstate commerce by a commercial airline,
subject to sales and use tax?
Discussion
Aircraft used in interstate commerce and parts permanently affixed to aircraft are
exempt from sales and use tax.1 Although the exemption for the sale of aircraft is
1 §39-26-711(1), C.R.S.

limited to aircraft used in interstate commerce by a commercial airline,2 there is no
similar requirement that aircraft parts must also be used on aircraft used in
interstate commerce in order to be exempt.3 Examples of exempt tangible personal
property permanently affixed to aircraft include, but are not limited to, fuselage
parts, parts for aircraft engines, seats permanently affixed to the aircraft, and
paint.4 This exemption applies to state, Regional Transportation District/Scientific
and Cultural Facilities District, county and state-collected local taxes. Home-rule
cities should be contacted to determine their regulations.
Miscellaneous
This letter represents the good faith opinion of Department personnel who are
knowledgeable on state taxes issues. However, the Department does not make a
specific determination here on any of the issues raised and the Department is not
bound by this general information letter.
The Department administers state and state-administered local sales and use
taxes. This letter does not address sales and use taxes administered by home-rule
cities and home-rule counties. You may wish to consult with local governments
which administer their own sales or use taxes about the applicability of those
taxes. Visit our web site at www.colorado.gov/tax for more information about state
and local sales taxes.
Enclosed is a redacted version of this letter. Pursuant to statute and regulation,
this redacted letter will be made public within 60 days of the date of this
letter. Please let me know in writing within that 60 day period whether you have
any suggestions or concerns about this redacted letter.
Sincerely,

Office of Tax Policy
Colorado Department of Revenue

2 §39-26-711(1)(a), C.R.S.
3 Id.

4 Department of Revenue FYI Sales 85: Sales Tax Exemption on Aircraft and Aircraft Parts

DR 4010A (06/11/14)