Does transferring an aircraft's legal title into an FAA-compliance owner trust trigger Georgia sales or use tax, when the owner keeps beneficial ownership and already paid use tax?

Plain-English summary

A company bought a business aircraft outside Georgia, brought it into Georgia, and paid Georgia use tax on the full purchase price. The company is a subsidiary of a foreign parent. Federal (FAA) rules let a U.S.-state corporation register an aircraft in the United States only if it is sufficiently U.S.-citizen-owned and controlled; a foreign-controlled owner faces a restriction that at least 60% of flights must begin and end in the U.S. To comply without crippling its operations, the company put the aircraft's legal title into a revocable "owner trust" with a U.S. trustee, naming itself as grantor and sole beneficiary, and signed an Aviation Operating Agreement to keep operating the plane itself. It asked whether transferring title to the trustee — or using, storing, and maintaining the aircraft in Georgia afterward — created any Georgia sales or use tax.

The Department said no new tax is due, applying substance over form. In a trust, ownership splits into legal title (held by the trustee) and equitable title (held by the beneficiary). Here the trustee holds bare legal title only — it can't manage, control, use, sell, or deal with the aircraft, bears no ownership costs, and received no payment for the transfer. The company kept exclusive possession and use, pays all operating costs, bears all risk of loss, and owes all the operating-agreement obligations. So in substance the company is still the owner; it is effectively contracting with itself.

Because separating legal from equitable title was not a sale, and the sole purpose of the transfer was FAA compliance, the company remains the aircraft's owner for use-tax purposes. Having already paid Georgia use tax on the full purchase price, it owes no additional sales or use tax.

What this means for you

Aircraft owners using owner trusts

Placing an aircraft's legal title in an FAA-compliance owner trust — where the trustee holds bare legal title and you keep beneficial ownership, control, costs, and risk — generally is not a taxable sale in Georgia. But the protection comes from the substance: the trustee must truly hold only bare title, and you must retain the ownership rights and burdens. Keep the trust and operating documents consistent with that.

Trust and aviation tax advisors

The Department looked past the labels to who actually holds the rights and obligations of ownership. Structure owner trusts so the beneficiary/grantor retains possession, control, cost responsibility, and risk of loss, and so no consideration passes for the title transfer. Document that the trust's purpose is regulatory compliance, not a disposition of the asset.

Accountants and businesses

If Georgia use tax was already properly paid on the aircraft's purchase price, a later title move into a controlled owner trust should not generate a second tax. Retain proof of the original use-tax payment and county rate.

Common questions

Q: Did moving the aircraft's title into the trust create a taxable sale?
A: No. The trustee received only bare legal title with no ownership rights, no payment changed hands, and the company kept full beneficial ownership — so separating legal from equitable title was not a sale.

Q: Why did the company use an owner trust at all?
A: To satisfy FAA rules. As a foreign-controlled subsidiary, it could not meet U.S.-citizen ownership requirements for registration, and an owner trust with a U.S. trustee let it register and operate without the 60%-domestic-flight restriction.

Q: Does the company owe more Georgia use tax after the transfer?
A: No. It is still treated as the owner in substance, and it had already paid Georgia use tax on the full purchase price, so no additional sales or use tax is due.

Q: What legal principle drove the result?
A: Substance over form — the substance of a transaction controls its tax treatment rather than the label the parties give it.

Q: Can another aircraft owner rely on this ruling?
A: No. It is binding on the Department only for the taxpayer and facts presented, and no other taxpayer may rely on it.

Citations and references

Statutes and rules:

• O.C.G.A. §§ 48-8-1, 48-8-30(a) (imposition of sales and use tax)
• O.C.G.A. § 48-8-30(b)(1) (dealer collection of tax)
• O.C.G.A. § 48-8-30(c)(1)-(3) (use tax on property purchased at retail out of state; credit for like taxes paid elsewhere)

Case authority:

• Footpress Corp. v. Strickland, 242 Ga. 686 (1978) (substance of a transaction controls its tax treatment)
• Hancock County Bd. of Tax Assessors v. Dickens, 208 Ga. App. 742 (1993) ("shall" denotes mandatory legislative intent)

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2015-20

Original ruling text

Georgia Letter Ruling: LR-SUT-2015-20
Dated: December 11, 2015
Topic: Aircraft
Facts as Provided by Taxpayer1
On [redacted date_1], Taxpayer purchased a [redacted make/model] (the “Aircraft”). The Aircraft was purchased
outside of Georgia and first used in Georgia on [redacted date_1]. Taxpayer paid Georgia use tax on the full purchase
price of the Aircraft at the [Redacted] County rate. The use tax payment was submitted by Taxpayer to the Department
on [redacted date_2].
Taxpayer has owned and operated the Aircraft for transportation purposes within and outside the State of Georgia and
the United States in the ordinary course of Taxpayer’s business. Taxpayer has maintained and hangered the Aircraft
in Georgia. However, in [redacted date_3] Taxpayer determined that it must re-register the Aircraft in order to comply
with federal law that allows an aircraft owned by a corporation organized under the laws of a U.S. state to be registered
in the United States only if (1) the president and at least two-thirds of the board of directors of the corporation are U.S.
citizens, and (2) at least 75 % of the voting interest in the corporation is controlled by persons that are U.S. citizens.
As a subsidiary of a foreign company, Taxpayer does not meet these requirements. An aircraft owned by a non-U.S.
citizen corporation is subject to the restriction that at least 60% of all flights must originate and end within the United
States. Such a restriction on Taxpayer’s ability to use the Aircraft would severely restrict Taxpayer’s business
operations.
Consequently, on [redacted date_4], Taxpayer formed a revocable trust2 (the “Trust”) “for the purpose of acquiring
title” to the Aircraft, naming itself as grantor and sole beneficiary. 3 [redacted name] (“Trustee”) was named as the
trustee of the Trust.4 The general terms of the Trust are as follows:
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Taxpayer will convey title to the Aircraft to Trustee.
Trustee will hold the title for the use and benefit of Taxpayer.
Taxpayer shall reimburse Trustee for all reasonable costs and expenses incurred in operating the Trust.
Trustee will not have a duty to insure the Aircraft or pay taxes assessed related to the Aircraft.
Trustee must maintain all money received as separate Trust Funds.
Trustee cannot act in an individual capacity at any time.
Trustee will not be required incur any expenses associated with the transaction.
Trustee will not be liable to Taxpayer other than for the performance of its duties under the Trust.
Trustee must distribute any payments received as directed by Trustee.
Taxpayer will indemnify Trustee from and against any and all liability, obligations, losses, damages,
penalties, taxes, etc. relating to or arising out of the Trust.
Upon termination of the Trust, Trustee must convey Trust Estate to Taxpayer.

For the purpose of operating the Aircraft, Trustee executed an Aviation Operating Agreement5 (“AOA”) with
Taxpayer for Taxpayer to act as operator of the Aircraft. The AOA was signed on the same day that the Trust was
formed: [redacted date_5]. The effective date of the AOA was [redacted date_5]. As the operator of the Aircraft,
Taxpayer will transport its employees in and maintain and manage the Aircraft. The AOA requires Taxpayer to provide
the following Aircraft services:
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Provide and supervise pilots, mechanics, and flight operations personnel.

Citations to Exhibits are references to documents provided by [redacted name] to Georgia Department of Revenue.
The Trust Agreement is governed by [redacted state] law, pursuant to Section [redacted] of the Agreement. In
[redacted state], the term “Revocable, as applied to a trust, means revocable by the settlor without the consent of the
trustee or a person holding an adverse interest.” [redacted state] Code § [redacted code] (emphasis added). Taxpayer
is the settlor in this case. [redacted state] § [redacted code].
3
Exhibit B.
4
Id.
5
Exhibit D.
2

Georgia Letter Ruling: LR-SUT-2015-20
Dated: December 11, 2015
Topic: Aircraft
Page 2 of 3

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Arrange and supervise the Aircraft maintenance.
Obtain and maintain the insurance required of Trustee.
Liaise with aviation regulatory agencies.
Provide flight and maintenance scheduling and communications.
Arrange for hangar and office space at the Aircraft’s operating base.
Provide storage for the Aircraft at temporary operating bases and other locations.
Provide travel support services associated with the daily operation, maintenance, flight schedule, and
administration of the Aircraft.
Supervise and update the log books, records, reports, and subscriptions of or for the Aircraft.
Provide bookkeeping and accounting services.
Provide other services as may be agreed to by the parties.

Flights are only provided to Taxpayer’s employees. All payments due under the AOA are made directly by Taxpayer.
Issue
Is Taxpayer liable for Georgia sales and use tax as a result of the transfer of title to the Aircraft by Taxpayer to Trustee
or as a result of any subsequent use, storage, or maintenance of the Aircraft in Georgia?
Analysis
Georgia levies and imposes a tax (subject to certain exemptions) on the retail purchase, retail sale, storage, use, or
consumption of tangible personal property and on certain enumerated services. 6 Every purchaser of tangible personal
property at retail in Georgia is liable for a tax on the purchase at a rate of 4 percent of the sales price of the purchase
plus any applicable local sales taxes. The dealer making the taxable sale must collect the tax from the purchaser and
remit the tax to the Department. 7 Thus, unless a specific exemption applies, the sale/purchase of tangible personal
property is subject to tax.
Georgia also imposes tax on the storage, use, or consumption of tangible personal property in Georgia if Georgia sales
tax was not paid on the purchase of the particular property. 8 O.C.G.A. § 48-8-30(c)(1) specifically provides that
“[u]pon the first instance of use, consumption, distribution, or storage within this state of tangible personal property
purchased at retail outside this state, the owner or user of the property shall . . . be liable for a tax at the rate of 4
percent of the cost price . . .”9 (emphasis added). Use of the word "shall" denotes a mandatory intent on the part of the
legislature.10 Thus, when a person purchases property outside Georgia and subsequently brings the property into
Georgia, that individual is liable for Georgia use tax, and a credit is allowed for like taxes previously paid in another
state.11
For sales and use tax purposes, the substance of a transaction controls its tax treatment rather than the appellation
chosen by the parties.12 In a trust relationship, ownership is divided into two elements, with the trustee possessing
legal title, and the beneficiary possessing equitable title. In this case, Trustee holds legal title to the Aircraft, but it
does not appear to possess any of the rights or obligations generally associated with property ownership. It holds bare
legal title only. Taxpayer is the sole beneficiary of the Trust and its rights in the Aircraft amount to nearly full
ownership. The following indicate that Taxpayer, and not Trustee, is in substance contracting with itself in the AOA
6

O.C.G.A. §§ 48-8-1, -30(a).
O.C.G.A. § 48-8-30(b)(1).
8
See generally O.C.G.A. § 48-8-30.
9
If the item were purchased outside Georgia and used outside Georgia for more than six months, the owner of the
property is then liable for tax at the rate of four percent of the cost price or fair market value of the property, whichever
is less. O.C.G.A. § 48-8-30(c)(2).
10
Hancock County Bd. Of Tax Assessors v. Dickens et al., 208 Ga. App. 742 (1993).
11
O.C.G.A. § 48-8-30(c)(3).
12
Footpress Corp. v. Strickland, 242 Ga. 686 (1978) (citing Grantham Transfer Co. v. Hawes, 225 Ga. 436 (1969)
and Hays v. Jordan & Co., 85 Ga. 741 (1889)).
7

Georgia Letter Ruling: LR-SUT-2015-20
Dated: December 11, 2015
Topic: Aircraft
Page 3 of 3

and is in substance the owner of the Aircraft:
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In practice, Taxpayer uses the aircraft as its corporate plane (e.g., for use by Taxpayer management).
Taxpayer has exclusive possession and use of the Aircraft and does not have to pay rent, license fees, or any
other form of payment for such exclusive possession and use of the Aircraft.
No cash or other form of payment was made in consideration for the transfer of legal title to the Aircraft from
Taxpayer to Trustee.
The AOA sets forth numerous contractual obligations, such as monthly services fees, which appear to be
owed by Taxpayer. Trustee has no duties under the AOA other than to hold title to the Aircraft and place
exterior or interior labels, tags, or other notifications of Trustee’s ownership as may be required by applicable
laws, rules, and regulations.
Taxpayer assumes all risk of loss associated with the use or operation of the Aircraft from any cause
whatsoever.
Trustee has no power, right, or authority to manage, control, use, sell, dispose of or otherwise deal with the
aircraft.
Taxpayer, not Trustee or the Trust, pays directly for AOA services.

In short, Taxpayer is the true owner, albeit not the legal title holder, of the aircraft in question. Trustee has no autonomy
in the relevant transactions: Taxpayer maintains complete control of the Aircraft, possesses all rights of ownership of
the Aircraft, and is burdened by all obligations of ownership of the Aircraft. Trustee may have entered into the AOA,
but it did so solely in its capacity as Trustee under the Trust. Taxpayer is the actual party liable for performance under
the AOA.
Ruling
The series of transactions vested only bare legal title in Trustee in the Trust that is controlled by Taxpayer. Separating
the legal ownership interest from the equitable ownership interest did not amount to a sale. Taxpayer enjoys the exact
same property rights and owes the exact same contractual obligations that it would have if it held legal title directly.
Because the substance of the transaction controls, and the sole purpose of the transfer of the Aircraft was to comply
with FAA rules and regulations regarding the international use of aircraft, Taxpayer would be treated as the owner of
the Aircraft for purposes of the imposition of use tax under O.C.G.A. § 48-8-30. Because Taxpayer paid Georgia use
tax on the full purchase price of the Aircraft at the [Redacted] County rate and submitted payment to the Department
on [redacted date_6], no additional sales or use tax is due on the Aircraft.
The opinions expressed in this ruling are based upon the information contained in your request and limited to the
specific transactions, facts, circumstances and taxpayer in question. Should the circumstances regarding the
transactions change, or differ materially from those represented, then this ruling may become invalid. In addition,
please be advised that subsequent statutory or administrative rule changes or judicial interpretations of the Statutes or
Rules upon which this advice is based may subject similar future transactions to a different tax treatment than that
expressed in this response.