Is a corporate flight subsidiary's aircraft-leasing and in-house air-transportation setup exempt from New York sales tax as a 'commercial aircraft,' and does a corporate merger of the flight subsidiary trigger sales tax on the transferred plane?

Plain-English summary

A corporation ("Company A") ran its own in-house flight department through a wholly owned subsidiary, XYZ, which leased two aircraft. At first, XYZ was just an informal cost center: Company A paid all its expenses, and XYZ flew Company A's people around for free. In 2002, as Company A prepared to acquire a second plane, it formalized things — XYZ and Company A signed a real transportation-services agreement where XYZ charged Company A a fee covering all its operating costs, while XYZ kept full legal and practical control: its own pilots, its own maintenance decisions, its own scheduling, its own books, its own office space. XYZ was later merged into a sister payroll company, MNO, which stepped into XYZ's shoes and kept flying under the same arrangement. On the side, XYZ (and later MNO) occasionally flew a friendly outside company, "123," which Company A paid for as a guest — never more than 10% of total flight time.

New York exempts a "commercial aircraft" — one used primarily (over 50% of the time) to transport people or property for hire — from sales and use tax, along with its parts, maintenance, and repair services. The Department found that because XYZ (and then MNO) retained complete dominion and control over the aircraft and genuinely provided transportation services rather than renting the plane to Company A, the arrangement qualified: transportation services aren't a taxable enumerated service at all, so the fees Company A paid were untaxed, and the aircraft itself counted as exempt commercial aircraft going forward (with a proper Form ST-121 exemption certificate). The 123 flights didn't hurt this — since Company A paid for them, the plane was still "used for hire," just with Company A footing the guest's bill.

The one sour note: XYZ's very first lease, taken out in 1999 before any of this formal fee structure existed, was correctly taxed in full up front (New York collects tax on the entire multi-year lease value at the first payment for aircraft leases of a year or more), and that tax doesn't get refunded just because the arrangement later qualified for exemption — the exemption only reaches leases, purchases, and options entered into after the qualifying transportation-service structure was in place. Separately, the 2003 merger of XYZ into MNO was a tax-free transfer, since assets moved to a corporation solely for stock in a genuine merger.

What this means for you

Companies running an in-house corporate flight department

If your flight subsidiary genuinely controls the aircraft (its own pilots, maintenance decisions, scheduling, insurance, and a separate corporate identity) and charges its parent or affiliates a fee that reasonably reflects true operating costs for more than half of total flight time, you're providing an exempt transportation service, not a taxable equipment rental — and the aircraft itself, along with its parts, maintenance, and repairs, can qualify for the commercial-aircraft exemption. Occasional flights for non-affiliated "guests" the parent pays for don't break the "for hire" test, as long as they stay a small share of total flight time.

Companies about to formalize an informal aircraft-sharing arrangement

Timing matters. A lease entered into before you set up the fee-for-transportation-services structure gets taxed under the old (rental) analysis and stays taxed — New York collects tax on an aircraft lease of a year or more in one lump sum at the first payment, based on the facts as they existed then, and there's no retroactive refund once your arrangement later qualifies. Structure the fee agreement and dominion/control facts before signing a new lease or purchase, not after.

Corporations merging an aircraft-holding subsidiary into another affiliate

A genuine merger where assets transfer solely for stock isn't a taxable retail sale, and the surviving entity can carry forward the commercial-aircraft exemption analysis as if nothing changed — provided the transportation-service arrangement itself stays intact.

Common questions

Q: Is my company's private jet automatically tax-exempt if I use it for business?
A: No. The exemption is narrow: the aircraft must be used more than 50% of the time to transport people or property "for hire" — meaning someone pays a fee that reasonably reflects the true cost of operating the aircraft — not merely used for the owner's own business travel.

Q: Does charging an affiliate for flights automatically make it a taxable rental instead of an exempt service?
A: No, the opposite: charging a cost-based fee while the aircraft's operator retains full dominion and control (own pilots, own maintenance, own scheduling) is what makes it a transportation service, which isn't a taxable enumerated service under Tax Law § 1105 at all. If the owner instead hands over the keys and lets the affiliate crew and control the plane, that looks like a taxable rental.

Q: What happens to sales tax already paid on an earlier lease if the arrangement later qualifies for exemption?
A: It's not refunded. The taxable status of a multi-year aircraft lease locks in at the date of the first lease payment; a later restructuring that would qualify for exemption doesn't reach back and undo tax that was correctly due when the lease began.

Q: Can commonly owned companies always rely on being treated as separate legal entities for this exemption?
A: No. If the companies are so commingled or dominated by a common parent that they're really operating as alter egos rather than genuinely separate businesses, the Department will disregard the corporate structure entirely — and the aircraft would then be treated as ordinary taxable self-use property, not exempt commercial aircraft.

Citations and references

Statutes and rules:

• Tax Law § 1101(b)(4), (17) (retail sale/merger exclusion; commercial aircraft definition)
• Tax Law § 1105(a), (c)(3) (sales tax on retail sales and enumerated services, with commercial-aircraft carve-out)
• Tax Law § 1111(i) (lump-sum tax on aircraft leases of a year or more)
• Tax Law § 1115(a)(21), (dd) (commercial aircraft exemption; aircraft repair/maintenance services exemption)
• 20 NYCRR 526.6(d) (merger/consolidation exclusion)
• TSB-M-96(14)S; TSB-M-80(4)S (commercial aircraft guidance memoranda)

Prior advisory opinions relied on:

• Pasquale & Bowers, TSB-A-96(49)S; CB Applications, LLC, TSB-A-00(6)S; Philip Morris Management Corp, TSB-A-00(38)S (over-50%-for-hire test)
• John J. Bischoff, TSB-A-99(20)S (single-customer use doesn't disqualify the exemption)
• Federal Express Corporation, TSB-A-96(81)S; KPMG LLP, TSB-A-03(12)S (maintenance/equipment purchases)
• Harfred Operating Corporation, TSB-A-86(28)S (alter-ego/commingling disregard of corporate structure)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2005.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a05_13s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-05(13)S
Sales Tax
April 27, 2005

Office of Tax Policy Analysis
Technical Services Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S031021A

On October 21, 2003, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Ernst & Young, LLP, 830 Bausch & Lomb Place, Rochester, New York,
14604. Petitioner, Ernst & Young, LLP, submitted additional information pertaining to the
Petition on January 14, 2005.
The issues raised by Petitioner are:
1.

Whether charges paid for leasing an aircraft are subject to New York sales
and use tax.

2.

Whether charges for transportation services are subject to New York sales
and use tax.

3.

Whether maintenance costs and related equipment purchases in connection
with the use of the aircraft are subject to New York sales and use tax.

4.

Whether the merger of related companies, one of which had been engaged
in the provision of transportation services, affects the application of
New York sales and use tax to the merged company’s transportation
property.

5.

Whether the provision of transportation services to a third party will affect
the purchased property’s eligibility for “commercial aircraft” exemptions.

Petitioner submitted the following facts as the basis for this Advisory Opinion.
XYZ Company, Inc. (“XYZ”) is a corporation wholly owned by Company A. XYZ has
leased an aircraft (“A1") since 1999. New York State sales tax was paid at the inception of the
lease on the total of lease payments due for the lease of A1. Prior to July 2002, all of XYZ’s
expenses were paid by Company A, and XYZ provided air travel services for Company A and its
related companies at no charge.
In 2002, Company A started to investigate the potential purchase or lease of a second
aircraft for use in its business. Such aircraft was also to be acquired by XYZ. Thereafter, in
anticipation of acquiring a second aircraft (“A2"), XYZ and Company A formalized, by contract,
the arrangement regarding XYZ’s aircraft services in the following manner:

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•

XYZ and Company A entered into a transportation services agreement under which XYZ
agreed to provide air transportation services to Company A for a fee. This fee will be in
an amount that covers all direct and indirect operating costs of A1 and A2.

•

Although other companies related to XYZ and Company A may use the aircraft, XYZ
will not separately contract for air transportation services with any of these companies.
Instead, Company A will be XYZ’s only customer. Company A will pay all charges for
use of A1 and A2. Company A will not pass any charges through to its related
companies for their use of either aircraft; all charges will be borne exclusively by
Company A.

•

XYZ will not be certified as an air carrier under Part 135 of the Federal Aviation
Regulations, but will operate its aircraft under Part 91 of the Federal Aviation
Regulations.

•

XYZ will employ and provide licensed pilots as well as continual pilot training, pilot
medical examinations and uniforms.

•

XYZ will retain possession and control of the airplane during the term of the lease and
the transportation service agreement.

•

XYZ will maintain the right to hire and fire the pilots.

•

XYZ will use its discretion in performing the air transportation services and will select
the routes to be taken.

•

XYZ will be responsible for scheduling the use of the aircraft.

•

XYZ will directly pay all operating expenses, including wages, insurance, fuel, hangar
and general storage fees, weather services, etc.

•

XYZ will arrange for the aircraft to be inspected, maintained, serviced, repaired,
overhauled, and tested in accordance with approved Federal Aviation Administration
(“FAA”) standards and guidelines.

•

XYZ will keep all records, logs, and other materials required by FAA to be maintained
with respect to the aircraft.

•

During periods the aircraft are not being utilized to provide air transportation service to
Company A, its related companies and employees, XYZ will retain the right to use the
aircraft and to retain any money it earns in the use of the aircraft.

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•

XYZ will have some officers and directors that are not also officers and directors of
Company A. XYZ will hold separate board meetings with minutes taken.

•

XYZ is a separate legal entity and will maintain its own books and records, as well as its
own checking account in order to pay operating expenses.

•

XYZ will hire its own employees which are distinct from Company A’s employees.

•

None of the related companies holds an ownership interest in the aircraft.

•

XYZ will have separate space that it rents for its operations.

•

If XYZ uses any of Company A’s services or property, it will pay fair market value for
these items.

In June 2002, XYZ contracted for the lease of another plane (“A2"). No New York sales
tax was paid on this lease.
Early in 2003, XYZ was merged into MNO Company, Inc. (“MNO”), another wholly
owned subsidiary of Company A. MNO, as a common paymaster, provides payroll services for
Company A as well as for all management personnel of Corporation A’s subsidiaries. Company
A has 60 subsidiaries which have 700 employees working in approximately 100 locations across
the United States.
The previously referenced transportation services agreement that covered the
transportation services provided by XYZ to Company A remained in full force and effect
between MNO and Company A. There were no changes to this arrangement as a result of the
merger of XYZ into MNO. Therefore, the above statement of facts applies equally to MNO as
of the date of the merger of XYZ and MNO.
On occasion, XYZ would, and MNO currently does, provide air transportation services
for 123 Company, Inc. (“123"), an entity outside the affiliated group of Company A. XYZ did
not, and MNO does not, have a contract or formalized agreement with 123. XYZ was, and MNO
is, compensated by Company A for the air transportation services provided for 123 which, as a
non-affiliated entity, is considered by the parties to be a guest of Company A. The use of the
aircraft in providing services for 123 did, and continues to, amount to considerably less than 50%
(less than 10% on average) of the total amount of operational time for A1 and A2 during any
given month.
Applicable law and regulations
Section 1101(b) of the Tax Law provides, in part:

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When used in this article for the purposes of the taxes imposed by subdivisions
(a), (b), (c) and (d) of section eleven hundred five and by section eleven hundred ten, the
following terms shall mean:
*

*

*

(4) Retail sale. (i) A sale of tangible personal property to any person for any
purpose, other than (A) for resale as such or as a physical component part of tangible
personal property, or (B) for use by that person in performing the services subject to tax
under paragraphs (1), (2), (3), (5), (7) and (8) of subdivision (c) of section eleven hundred
five where the property so sold becomes a physical component part of the property upon
which the services are performed or where the property so sold is later actually
transferred to the purchaser of the service in conjunction with the performance of the
service subject to tax. . . .
*

*

*

(iv) The term retail sale does not include:
(A) The transfer of tangible personal property to a corporation, solely in
consideration for the issuance of its stock, pursuant to a merger or consolidation
effected under the law of New York or any other jurisdiction.
*

*

*

(17) Commercial aircraft. Aircraft used primarily (i) to transport persons or
property, for hire, (ii) by the purchaser of the aircraft primarily to transport such person’s
tangible personal property in the conduct of such person’s business, or (iii) for both such
purposes.
Section 1105(a) of the Tax Law imposes sales tax on the receipts from every retail sale of
tangible personal property, except as otherwise provided.
Section 1105(c) of the Tax Law imposes sales tax on the receipts from every sale, except
for resale, of the following services:
*

*

*

(3) Installing tangible personal property . . . or maintaining, servicing or repairing
tangible personal property . . . not held for sale in the regular course of business . . .
whether or not any tangible personal property is transferred in conjunction therewith,
except:
*

*

*

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(v) such services rendered with respect to commercial aircraft, machinery or
equipment and property used by or purchased for the use of such aircraft as such
aircraft, machinery or equipment, and property are specified in paragraph twenty­
one of subdivision (a) of section eleven hundred fifteen of this article; . . .
(Emphasis added)
Section 1111(i) of the Tax Law provides, in pertinent part:
(A) Notwithstanding any contrary provisions of this article or other law, with
respect to any lease for a term of one year or more of . . . noncommercial aircraft having a
seating capacity of less than twenty passengers and a maximum payload capacity of less
than six thousand pounds, or an option to renew such a lease or a similar contractual
provision, all receipts due or consideration given or contracted to be given for such
property under and for the entire period of such lease, option to renew or similar
provision, or combination of them, shall be deemed to have been paid or given and shall
be subject to tax, and any such tax due shall be collected, as of the date of first payment
under such lease, option to renew or similar provision, or combination of them . . . For
purposes of this subdivision, (1) a lease for a term of one year or more shall include any
lease for a shorter term which includes an option to renew or other like provision (or
more than one of such option or other provision) where the cumulative period that the
lease, with or without such option or provision, may be in effect upon exercise of such
option or provision is one year or more and (2) receipts due and consideration given or
contracted to be given under any such lease or other provision for excess mileage charges
shall be subject to tax as and when paid or due.
Section 1115(a)(21) of the Tax Law exempts commercial aircraft from the sales tax
imposed by section 1105(a) of the Tax Law and from the compensating use tax imposed under
section 1110, as follows:
Commercial aircraft primarily engaged in intrastate, interstate or foreign
commerce, machinery or equipment to be installed on such aircraft and property used by
or purchased for the use of such aircraft for maintenance and repairs and flight simulators
purchased by commercial airlines. (Emphasis added)
Section 1115(dd) of the Tax Law exempts services to aircraft from the sales tax imposed
by section 1105(a) of the Tax Law and from the compensating use tax imposed under section
1110, as follows:
(1) Services otherwise taxable under paragraph three of subdivision (c) of section
eleven hundred five or under section eleven hundred ten of this article, and tangible
personal property purchased and used by the person who sells such services in
performing such services, where such property becomes a physical component part of the
property upon which the services are performed or where such property is a lubricant

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applied to aircraft, shall be exempt from tax under this article where such services are
performed on aircraft.
(2) The service of storing an aircraft provided by a person who sells a service
exempt under paragraph one of this subdivision, when such storing is rendered in
conjunction with, and during the rendering of, such service to such aircraft, shall be
exempt from the tax imposed under paragraph four of subdivision (c) of section eleven
hundred five of this article.
Section 526.6(d) of the Sales and Use Tax Regulations provides, in part:
Exclusions relating to corporate and partnership transactions. (1) The following
transfers of property are not retail sales:
(i) The transfer of property to a corporation, solely in consideration for the
issuance of its stock, pursuant to a merger or consolidation effected under the law
of New York or any other jurisdiction.
*

*

*

(6) Mergers and consolidations. (i) A merger under the law of New York is the
procedure whereby two or more corporations merge into a single corporation which is
one of the participating corporations.
(ii) A consolidation under the law of New York is the procedure whereby
two or more corporations consolidate into a single corporation which is a newly
organized corporation.
(iii) A merger or consolidation under the law of any other jurisdiction is
one that qualifies under section 368(a)(1)(A) of the Internal Revenue Code or
which meets the requirements of the law of the State, District of Columbia or
territory pursuant to which it was effected.
Example 6: Corporation A is merged into Corporation B.
*

*

*

(iv) Where a corporation purchases another corporation's assets in
consideration of issuance of stock of the purchasing corporation, or the parent of
the purchasing corporation, such as under section 368(a) (1) (C) of the Internal
Revenue Code, the transaction does not qualify as a merger or consolidation, even
if the selling corporation is subsequently liquidated.

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Example 9: Corporation A will transfer its assets to Corporation B in
consideration for B's issuance of shares of its stock. Corporation A will continue
to exist for discharging its expenses, and then will be dissolved. The transfer of
tangible personal property will be subject to tax, as it is carried out under a plan of
reorganization but is not a statutory merger or consolidation.
Technical Services Memorandum, entitled Tax Law Defines Commercial Vessels and
Commercial Aircraft, November 7, 1996, TSB-M-96(14)S, states, in part:
Statutory changes in the definitions of commercial vessels and commercial
aircraft have expanded the current sales and use tax exemptions for commercial vessels
and aircraft, effective December 1, 1996. The expanded exemptions now also include
vessels and aircraft that transport, in qualifying commerce, tangible personal property in
the conduct of the business of the purchaser of the vessels or aircraft. (Purchaser
includes, for example, a buyer, renter or lessee of the vessel or aircraft.) The exemption
covers certain purchases of tangible personal property necessary to operate the exempt
vessels and aircraft, and also exempts maintenance and repair services to the exempt
vessels or aircraft, and fuel used by the exempt vessels and aircraft.
Previously, only vessels and aircraft used by the purchaser primarily (at least 50%
of the time) in the transportation for hire of other persons or their property qualified for
the exemption. Thus, self-use of a vessel or aircraft to transport one’s own property was
not a qualifying use.
*

*

*

Commercial Aircraft
The expanded definition of a commercial aircraft is an aircraft used primarily:
•

to transport persons or property, for hire;

•

by the purchaser of the aircraft primarily to transport the purchaser’s own
tangible personal property in the conduct of the purchaser’s business; or

•

for both of the above purposes.

To be exempt, a commercial aircraft must be primarily engaged in intrastate,
interstate or foreign commerce. . . .
In addition to the exemption applicable to the aircraft, the exemption also applies
to:

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•

machinery and equipment installed on the aircraft;

•

property used by or purchased for the use of the aircraft for maintenance
and repairs;

•

the services of maintaining, servicing and repairing the aircraft,
machinery or equipment installed on the aircraft, and property used by or
purchased for the use of the aircraft; (Emphasis added)

•

flight simulators purchased by commercial airlines.

Permanent air cargo containers suitable for repeated use, and specifically
designed to facilitate the carriage of goods on aircraft, are exempt from New York State
sales and use taxes. Repairs to air cargo containers are likewise exempt.
For more information about the exemptions granted to commercial aircraft
primarily engaged in intrastate, interstate or foreign commerce, see TSB-M-80(4)S,
Exemptions For Commercial Aircraft, and TSB-M-80(4.1)S, Air Cargo Containers. In
reading TSB-M-80(4)S, please read-in the expanded definition of a commercial aircraft
. . . and also substitute 50% for the out-of-date 75% threshold for determining when a
commercial aircraft is primarily used in the qualifying commerce.
Opinion
In 2002, XYZ and Company A formalized the arrangement for XYZ’s aircraft services.
Essentially, XYZ was contracted to provide air transportation services to Company A for a fee.
Pursuant to its service agreement with Company A, XYZ will provide air transportation services
to officers and employees of Company A and guests of Company A, whether such guests be
employees and officers of Company A’s affiliates or others (e.g., 123 Company, Inc.). Company
A will pay all charges related to the transport of these passengers. Early in 2003, XYZ was
merged into MNO. The transportation agreement for services provided by XYZ to Company A
remains in full force and effect between MNO and Company A.
On occasion, XYZ would, and MNO currently does, provide air transportation services
for 123 which is not an affiliate of Company A. XYZ was, and MNO is, compensated by
Company A for the air transportation services provided for 123. On average, the transportation
services provided for 123 amount to less than 10% of the total amount of operational time for A1
and A2 during any given month.
The taxability of XYZ’s and MNO’s leases of A1 and A2 depends upon whether the
aircraft qualify as commercial aircraft as defined by section 1101(b)(17) of the Tax Law. If over
50% of an aircraft’s use is devoted to transporting customers for compensation, and the
compensation reasonably reflects the cost of operating the aircraft, such aircraft may qualify as a

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commercial aircraft primarily engaged in intrastate, interstate or foreign commerce for purposes
of section 1115(a)(21) of the Tax Law. (See Pasquale & Bowers, Adv Op Comm T & F, August
1, 1996, TSB-A-96(49)S; CB Applications, LLC, Adv Op Comm T&F, February 1, 2000,
TSB -A-00(6)S; Philip Morris Management Corp, Adv Op Comm T&F, October 11, 2000,
TSB-A-00(38)S.)
Since XYZ did retain, and MNO similarly retains, complete dominion and control over
the operations and maintenance of the aircraft, XYZ’s charges to Company A were, and MNO’s
charges to Company A are, for the provision of transportation services and are not considered to
be charges to Company A for the rental, lease or license to use such aircraft. Such transportation
services are not included among the enumerated services taxable under section 1105 of the Tax
Law, and charges for such transportation services are not subject to sales tax.
The fact that transportation services are provided to a single customer does not disqualify
either XYZ or MNO for the commercial aircraft exemption provided by section 1115(a)(21) of
the Tax Law. See John J. Bischoff, Adv Op Comm T&F, April 8, 1999, TSB-A-99(20)S. Thus,
assuming more than 50% of A2’s use is to provide air transportation services for hire to
Company A, the lease of A2 to XYZ, and subsequently to MNO as successor to XYZ, would
qualify for the exemption provided by section 1115(a)(21) for commercial aircraft. The merger
of XYZ into MNO does not affect the application of this exemption to the aircraft. A properly
completed Exempt Use Certificate, Form ST-121, should be provided to the lessor of the aircraft.
(See Pasquale & Bowers, supra; CB Applications, LLC, supra; Philip Morris Management
Corp, supra.)
Neither XYZ nor MNO is entitled to a refund of sales tax paid on the initial lease of A1.
When XYZ leased A1 in 1999, the aircraft did not qualify for exemption as a commercial aircraft
under section 1115(a)(21) of the Tax Law since it was not used to provide air transportation
services to Company A for hire. Since the initial lease of A1 was for a term of one year or more,
sales tax was due on the total amount of the lease payments for the entire lease term at the time
the first lease payment was made, provided that A1 has a seating capacity of less than 20
passengers and a maximum payload capacity of less than 6,000 pounds. See section 1111(i) of
the Tax Law. The taxable status of the lease transaction is determined at the time of such first
lease payment. However, any new lease of A1 subsequently executed, or subsequent exercise of
an option to purchase A1 by MNO, can qualify for the exemption provided by section
1115(a)(21) for commercial aircraft, if the statutory requirements for exemption are met.
Current maintenance costs in connection with the use of A1 and A2 by MNO qualify for
exclusion from tax under section 1105(c)(3)(v) of the Tax Law. Current purchases by MNO of
machinery or equipment to be installed on the aircraft, and of property to be used for the
maintenance and repair of the aircraft, are exempt under section 1115(a)(21) of the Tax Law.
See Federal Express Corporation, Adv Op Comm T&F, December 26, 1996, TSB-A-96(81)S;
KPMG LLP, Adv Op Comm T&F, March 25, 2003, TSB-A-03(12)S.

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The transfer of tangible personal property to a corporation solely in consideration for the
issuance of its stock is not a retail sale subject to tax, if such transfer is pursuant to a merger or
consolidation effected under the laws of New York or any other jurisdiction. See section
1101(b)(4)(iv)(A) of the Tax Law and section 526.6(d)(1)(i) and (6) of the Sales and Use Tax
Regulations. Assuming the merger of XYZ into MNO was such a qualifying merger, the transfer
of assets from XYZ to MNO solely in consideration for MNO’s stock would not have been
subject to sales tax.
The use of the aircraft to provide transportation services for the unaffiliated entity, 123,
less than 10% of the total operational time for the aircraft does not affect the eligibility of the
aircraft for the exemption under section 1115(a)(21) of the Tax Law. Since XYZ was, and MNO
is, compensated by Company A for providing transportation services for 123, the aircraft is
considered to be used for hire when providing such services for 123.
The above analysis presumes treatment of XYZ, MNO, Company A and related
companies as separate legal entities. However, if the activities of XYZ, MNO, Company A or
their related companies are so dominated and controlled by the parent or each other, or their
activities were so commingled, that they would be considered to be operating as alter egos of
each other rather than separate legal entities, then the corporate structures would be disregarded
and the conclusions reached in this opinion would not apply. See Harfred Operating
Corporation, Adv Op St Tx Comm, July 18, 1986, TSB-A-86(28)S. If the related entities in the
present case should be disregarded as separate legal entities for purposes of sales tax, the aircraft
would not be considered to be commercial aircraft but rather property purchased for self use by
the related entities. Under such circumstances, the purchases by XYZ or MNO of the aircraft,
and equipment and maintenance supplies for the aircraft would not qualify for the commercial
aircraft exemption. However, purchases of repair and maintenance services performed on such
aircraft by third party service providers would be exempt from tax pursuant to the provisions of
section 1115(dd) of the Tax Law.

DATED: April 27, 2005

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.