How is Kansas sales tax handled when a dealer buys aircraft for resale and the buyer is an out-of-state resident?

Plain-English summary

An entity buying aircraft asked how Kansas sales tax applies to its purchases and later sales of the aircraft.

The nonresident "fly-away" exemption. K.S.A. 79-3606(k) exempts "any . . . aircraft sold and delivered in this state to a bona fide resident of another state, which . . . aircraft is not to be registered or based in this state and which . . . aircraft will not remain in this state more than 10 days." This is the exemption for aircraft that are bought in Kansas but promptly leave for an out-of-state home.

Buying for resale. Because the corporation "is acquiring the aircraft for purposes of resale and taking possession of the respective aircraft in the state of Kansas, they would be required to provide the aircraft vendor a properly completed Kansas resale exemption certificate." To use a resale certificate, "the . . . Corporation will need to be registered for Kansas sales tax." The Department enclosed a Business Tax Application to register.

The eventual resale. "If the final user or consumer of the aircraft can meet the criteria that is established in the above statute, then the . . . Corporation would not be obligated to collect and remit any Kansas sales tax(es)." In other words, the dealer's resale to an out-of-state buyer who satisfies the fly-away test is itself exempt.

Bottom line: a dealer buys aircraft for resale exempt by giving the vendor a Kansas resale certificate (and registering), and its resale to a bona fide nonresident who will not register/base the aircraft in Kansas and removes it within 10 days is exempt under the K.S.A. 79-3606(k) fly-away exemption.

What this means for you

Two different exemptions, two different roles

Buying inventory for resale uses a resale exemption certificate. Selling to an out-of-state buyer who takes the aircraft away uses the nonresident fly-away exemption. Know which one applies to each leg of the transaction.

To buy for resale, register and use a resale certificate

If you take possession of aircraft in Kansas to resell them, you must register for Kansas sales tax and give your vendor a properly completed Kansas resale exemption certificate. That keeps your purchase tax-free.

Document the fly-away conditions on a resale

The fly-away exemption on your sale requires proof that the buyer is a bona fide resident of another state, the aircraft will not be registered or based in Kansas, and it will not remain in Kansas more than 10 days. Keep records showing each condition is met.

Common questions

Q: Can a dealer buy aircraft in Kansas without paying sales tax?
A: Yes, for resale — by registering for Kansas sales tax and giving the vendor "a properly completed Kansas resale exemption certificate."

Q: When is the dealer's sale of the aircraft exempt?
A: When the final buyer meets K.S.A. 79-3606(k): a bona fide resident of another state, the aircraft not registered or based in Kansas, and not remaining in Kansas more than 10 days.

Q: What if the buyer does not meet those fly-away conditions?
A: Then the resale is not covered by K.S.A. 79-3606(k), and the dealer (as a registered retailer) would generally have to collect and remit Kansas sales tax on that sale.

Citations and references

• K.S.A. 79-3606(k) — the nonresident "fly-away" exemption for aircraft sold and delivered in Kansas to a bona fide resident of another state, not to be registered or based in Kansas and not remaining in Kansas more than 10 days.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-145

Original ruling text

Private Letter Ruling

Body:

Office of Policy and Research

June 24, 1999

TTTTTTTTTTTT
TTTTTTTTTTTT
TTTTTTTTTTTT
TTTTTTTTTTT

Dear Mr. TTTTTTTT:

We wish to acknowledge receipt of your letter dated April 30, 1999, regarding the application of Kansas Retailers’ Sales tax.

K.S.A. 79-3606(k) exempts from sales tax: “any. . . aircraft sold and delivered in this state to a bona fide resident of another state, which. . . aircraft is not to be registered or based in this state and which. . . aircraft will not remain in this state more than 10 days.”

Since, TTTT Corporation is acquiring the aircraft for purposes of resale and taking possession of the respective aircraft in the state of Kansas, they would be required to provide the aircraft vendor a properly completed Kansas resale exemption certificate. In order to accomplish this task, the TTTT Corporation will need to be registered for Kansas sales tax. If the final user or consumer of the aircraft can meet the criteria that is established in the above statute, then the TTTT Corporation would not be obligated to collect and remit any Kansas sales tax(es). For your convenience, I have enclosed a Kansas Department of Revenue Business Tax Application, along with the applicable instructions.

This is a private letter ruling pursuant to K.A.R. 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This ruling will be revoked in the future by the operation of law without further department action if there is a change in the statutes, administrative regulations, case law, or published revenue ruling, that materially effects this private letter ruling.

If I may be of further assistance, please contact me at your earliest convenience at (785) 296-7776.

Sincerely yours,

Thomas P. Browne, Jr.
Tax Specialist

TPB

Enc

Date Composed: 07/09/1999 Date Modified: 10/11/2001

Table 1

Table 2