Does Colorado charge sales or use tax on an aircraft that was bought out of state but is then based in or flown into Colorado?

Plain-English summary

An on-demand charter air carrier set up a hangar in Colorado and asked whether it owed Colorado tax on aircraft that an affiliated company had bought out of state and was now flying and storing in Colorado. The Department gave a two-part answer: no Colorado sales tax, but yes Colorado use tax.

The reason is the difference between the two taxes. Colorado sales tax applies to a retail sale and is sourced to wherever the buyer takes possession of the item. Because the aircraft were purchased and possession was taken outside Colorado, no Colorado sales tax was ever due on the purchase. But Colorado also has a use tax — a backstop that applies when property bought elsewhere is stored, used, or consumed inside Colorado. Once the aircraft were based in and operated from Colorado, that use triggered Colorado use tax.

The company couldn't escape the use tax through Colorado's special aircraft exemption, because that exemption only covered aircraft kept in the state purely for final assembly, maintenance, modification, or completion — and, more decisively, it expired after June 30, 2019. Aircraft flown in to run a charter business don't fit, and the exemption was gone anyway.

What this means for you

Aircraft owners and operators

Buying an aircraft out of state does not, by itself, make it Colorado-tax-free. If you then base it in Colorado or use it here, you owe Colorado use tax measured by the purchase price. This is the classic trap: a clean out-of-state purchase still owes Colorado use tax once the plane lives or works here. The amount of time it spends in Colorado does not reduce or eliminate the tax.

Charter and on-demand air carriers

The structure in this ruling — one affiliate owns the aircraft, another operates the charter, hangar in Colorado — did not avoid use tax. Operating on-demand air carrier service from Colorado is exactly the kind of "use" that triggers the tax. Note also that the once-available aircraft use-tax exemption (§ 39-26-711.8) does not apply after June 30, 2019.

Accountants and tax professionals

This is a textbook sales-vs-use-tax sourcing case. Sales tax follows possession (§ 39-26-104(3)); use tax follows in-state storage/use (§ 39-26-202(1)(b)). A credit is generally available for like tax paid to another state — here, none had been paid anywhere. Confirm whether any current statutory exemption applies before assuming this expired one does. Watch the home-rule-city caveat.

Common questions

Q: I bought a plane in another state. Do I owe Colorado tax if I keep it here?
A: You won't owe Colorado sales tax on an out-of-state purchase, but you will owe Colorado use tax once the aircraft is based in or used in Colorado. The two taxes are designed so one or the other reaches the transaction.

Q: Does a short stay in Colorado avoid the use tax?
A: No. The ruling states there is no reduction of or exemption from the tax based on how long the property is used or stored in Colorado. Use can be temporary and still trigger the tax.

Q: Isn't there an aircraft exemption?
A: There was a narrow one (§ 39-26-711.8) for aircraft kept in Colorado only for final assembly, maintenance, modification, or completion, but it did not apply after June 30, 2019, and aircraft used to run charter service wouldn't have qualified anyway.

Q: Can my business rely on this ruling?
A: No. A private letter ruling binds the Department only for the taxpayer and facts it was issued to, and explicitly cannot be relied on by anyone else. It shows the Department's reasoning, but your facts may differ.

Q: Does this cover city tax too?
A: No. The Department administers state and state-administered local sales and use tax only. Self-collected home-rule cities set their own rules and may tax differently. Check with each home-rule city.

Citations and references

Statutes and rules:
- § 39-26-104(1)(a), C.R.S. (imposition of sales tax on retail sales)
- § 39-26-104(3)(a)(I), (3)(a)(II), (3)(d)(II), C.R.S. (sourcing a sale to where the buyer takes possession)
- § 39-26-202(1)(b), C.R.S. (use tax on storing, using, or consuming property in Colorado)
- § 39-26-711.8, C.R.S. (aircraft use-tax exemption; expired after June 30, 2019)
- 1 CCR 201-4, Rule 39-26-202(3) (scope of "use")

Subject

Sales and use tax on aircraft brought into Colorado

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/PLR-21-003.pdf

Original ruling text

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

PLR 21-003
June 17, 2021
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
Re: Sales and use tax on aircraft brought into Colorado
Dear XXXXXXXXXX;
You submitted a request for a private letter ruling on behalf of XXXXXXXXXX, (“Company A”),
regarding sales and use taxes on aircraft, to the Colorado Department of Revenue
(“Department”) pursuant to 1 CCR 201-1, Rule 24-35-103.5. This letter is the Department’s
private letter ruling. This ruling is binding on the Department to the extent set forth in 1 CCR
201-1, Rule 24-35-103.5. It cannot be relied upon by any taxpayer other than the taxpayer to
whom the ruling is made.
Issue
Is Colorado sales or use tax due on aircraft based in or brought into Colorado?
Conclusion
Colorado sales tax is not due on sales of aircraft whereby the purchaser takes possession of the
aircraft outside of Colorado. Aircraft based in or brought into Colorado are subject to Colorado
use tax.
Background1
Company A, a [State A] limited liability company, operates as an on-demand air carrier service.
Company A does not own the aircraft it uses. The aircraft are owned by Company B. Company
A is 100% owned by Company B, which is a [State B] limited liability company.
The agreement between Company A and XXXXXXXXXX (“Company B”) is an "Aircraft Charter
Management Agreement," in which Company A, for Federal Aviation Administration ("FAA")
purposes, is in operational control of the aircraft operated under Federal Aviation Regulations
("FAR") Part 91 and has "possession, command and control." Pertaining to flights under FAR
1 This section generally recites the statements of fact set forth in the request as required by paragraph (4)(b)(ii) of 1

CCR 201-1, Rule 24-35-103.5. The recitation of particular facts in this section is not an indication that the
Department found such facts relevant to its analysis. Some relevant facts may be redacted as required by section
24-35-103.5(5), C.R.S. The terms used in this section to describe the factual background are generally those of the
requester.

PLR 21-003
June 17, 2021
Page 2

Part 135, Company A has sole and exclusive operational control of the aircraft. The language
for FAR Part 91 and FAR Part 135 is necessary to allow Company A to operate pursuant to
various FAA regulations. Company A charges Company B a [nominal] per year management
fee and a [nominal] conformity fee. Flight crew training, maintenance, and third-party
maintenance are all billed at cost by Company A to Company B. All revenue earned from
chartering is paid to and retained by Company B.
Company A recently opened a location, which comprises solely of hangar storage, in
XXXXXXXXXX, Colorado. Company B has no locations in Colorado. Company A will be using
the aircraft in Colorado to operate its on-demand air carrier services. The aircraft were acquired
by Company B outside of Colorado. No sales or use tax has been paid by Company B to any
state on the acquisition of the aircraft.
Discussion
Colorado imposes sales tax on retail sales of tangible personal property made within the state.2
In general, a sale of tangible personal property is sourced to the location where the purchaser
takes possession of the property.3 Since Company B took possession of the aircraft outside of
Colorado, that sale is not subject to Colorado sales tax.
Colorado imposes a use tax for the privilege of storing, using, or consuming tangible personal
property within the state.4 Use is sufficient for the imposition of the tax whenever the property is
actually used or made available for use after the purchaser (or the purchaser’s designee) takes
possession of the property, even if such use is temporary.5 Additionally, use tax applies to the
keeping, storing, withdrawing from storage, moving, installing, and to the performance any other
act by which dominion or control over the property is assumed by the purchaser unless the
property is otherwise exempt.6 The use of aircraft in Colorado to operate on-demand air carrier
services is subject to Colorado use tax.
Section 39-26-711.8, C.R.S., authorized a use tax exemption for aircraft that meet certain
criteria. One of the requirements for the exemption is that the aircraft will remain in the state
only for the purpose of final assembly, maintenance, modification, or completion. Company B’s
aircraft are brought into and based in Colorado to operate its on-demand air carrier services.
Also, the exemption does not apply after June 30, 2019. Company B’s aircraft do not qualify for
this exemption.
Miscellaneous
This ruling is premised on the assumption that Company A has completely and accurately
disclosed all material facts, and that all representations are true and complete, and Company A
has otherwise complied with the requirements of section 24-35-103.5, C.R.S., and the rules
promulgated pursuant thereto. The Department reserves the right, among others, to
independently evaluate Company A’s facts, representations, and assumptions. The ruling is null
2 §§ 39-26-102(9) and -104(1)(a), C.R.S.
3 § 39-26-104(3)(a)(I), (3)(a)(II), and (3)(d)(II), C.R.S.
4 § 39-26-202(1)(b), C.R.S.
5 1 CCR 201-4, Rule 39-26-202(3).
6 1 CCR 201-4, Rule 39-26-202(3).

PLR 21-003
June 17, 2021
Page 3

and void if any such fact, representation, or assumption is incorrect and has a material bearing
on the conclusions reached in this ruling. This ruling is binding on the Department and is subject
to modification or revocation, in accordance with 1 CCR 201-1, Rule 24-35-103.5.
The Department administers state and state-administered local sales and use taxes. This letter
does not address sales and use taxes administered by self-collected home-rule cities. You may
wish to consult with those local governments that administer their own sales or use taxes about
the applicability of those taxes. Visit our website at tax.colorado.gov for more information about
state and local sales taxes.
Thank you for your request.
Sincerely,
Office of Tax Policy Analysis
Colorado Department of Revenue
This ruling cannot be relied upon by any other taxpayer other than the taxpayer to whom
the ruling is made.