Does an airplane leased to fly aerial pipeline-leak-detection surveys qualify as an exempt 'commercial aircraft' under New York's sales tax law?

Plain-English summary

Sales Tax Plus asked on behalf of a client in the gas-pipeline-leak-detection business. The client will lease a Cessna 208B aircraft and fly it, equipped with lasers and data/image-storage equipment, over underground gas pipelines to spot leaks — with the ultimate goal of commercializing the leak-detection technology itself.

New York exempts "commercial aircraft" from sales and use tax, but that term has a specific statutory definition: an aircraft used PRIMARILY either (1) to transport persons or property for hire, or (2) by its owner to transport that owner's own tangible personal property in the conduct of business, or (3) both. The client's aircraft clearly isn't hauling passengers or cargo for hire. The Department also rejected the second path: flying laser and camera equipment over pipelines to collect leak-detection data is an aerial SERVICE (like aerial photography or surveillance) — the plane is a platform for performing an inspection, not a means of "transporting" property from one place to another. Borrowing from the parallel commercial-vessel exemption's definition of interstate/foreign commerce ("the transportation of persons or property between states or countries"), the Department concluded intrastate transportation means moving persons or property between two or more points within New York — and simply flying an inspection route doesn't fit that definition either. Because the aircraft doesn't qualify as a commercial aircraft under either path, the client's lease of it is NOT exempt and remains fully subject to New York sales and use tax.

What this means for you

Aerial survey, inspection, and imaging companies

Don't assume every business aircraft used "in the conduct of business" is tax-exempt — the exemption requires the aircraft to actually TRANSPORT persons or property (for hire, or your own cargo) between places. Using a plane as a flying sensor platform for photography, surveillance, mapping, or infrastructure inspection is a service performed via aircraft, not "transportation," and doesn't qualify.

Pipeline, utility, and infrastructure companies leasing aircraft for inspections

Budget for full sales and use tax on aircraft leases used purely for aerial inspection/survey work — this is a distinct category from cargo-hauling or passenger aircraft, which can separately qualify for the exemption.

Accountants and tax professionals

The "transport vs. service platform" distinction here is a clean, reusable test for any aircraft-leasing question involving non-cargo, non-passenger uses (photography, surveying, spraying, filming, inspection) — the statutory definition of "commercial aircraft" is narrower than a plain-English reading of "aircraft used commercially" might suggest.

Common questions

Q: Does using an aircraft "in the conduct of business" automatically make it exempt?
A: No — the aircraft must be used primarily to transport persons or property (for hire, or the owner's own cargo); a service-performing use like aerial inspection doesn't count as transportation.

Q: Would this aircraft qualify if it were transporting the client's own equipment between job sites instead?
A: Potentially yes — an aircraft used primarily to transport an owner's own tangible personal property in the conduct of business can qualify, unlike using the aircraft as a survey/service platform.

Q: Is aerial photography or surveillance ever considered "transportation" for this exemption?
A: No — the Department expressly distinguished aerial work activities (photography, surveillance, pipeline inspection) from the transportation of persons or property.

Q: Can another aerial-services company rely on this Advisory Opinion?
A: No. It binds the Department only for the petitioner and facts described; another company's use of its aircraft needs to be evaluated on its own facts.

Citations and references

Statutes and regulations:

• Tax Law § 1101(b)(17) (commercial aircraft definition)
• Tax Law § 1115(a)(21) (commercial aircraft exemption)
• 20 NYCRR 528.9(a) (commercial vessel exemption; interstate/foreign commerce, by analogy)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2006.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a06_20s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-06(20)S
Sales Tax
June 27, 2006

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

PETITION NO. S051116A

On November 16, 2005, the Department of Taxation and Finance received a Petition for
Advisory Opinion from Sales Tax Plus, Inc., 3 Capri Drive, Rochester, New York, 14624-1313.
The issue raised by Petitioner, Sales Tax Plus, Inc., is whether an aircraft used by
Petitioner’s client in the conduct of its pipeline inspection business qualifies as a commercial
aircraft for sales tax purposes.
Petitioner submits the following facts as the basis for this Advisory Opinion.
Petitioner's client (Client) will be engaged in the business of detecting leaks in
underground gas pipelines. To this end, Client will lease a Cessna 208B aircraft. Client will use
the aircraft along with camera equipment and other tangible personal property in the conduct of
its business. Client will fly the airplane over pipelines using the equipment to detect leaks. The
equipment consists primarily of lasers, which are used to collect data indicating leaks in the
pipelines, and equipment used to store the digital data and images that are created using the
lasers.
Currently, the Client is focusing on the development of the leak detecting system. The
goal is advancing technology and developing new products which can be commercialized. At
that time, Client will use the aircraft in the conduct of its business.
Applicable law
Section 1101(b) of the Tax Law provides, in part:
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:
*

*

*

(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 1115(a) of the Tax Law provides, in part:

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TSB-A-06(20)S
Sales Tax
June 27, 2006

Receipts from the following shall be exempt from the tax on retail sales imposed
under subdivision (a) of section eleven hundred five and the compensating use tax
imposed under section eleven hundred ten:
*

*

*

(21) 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.
Opinion
Client will lease a Cessna 208B aircraft for use in facilitating its inspection of gas
pipelines. It does not appear that Client will use the aircraft to transport persons or property for
hire. However, an aircraft may also qualify as a commercial aircraft exempt from sales and use
tax under section 1115(a)(21) of the Tax Law if the aircraft is used to transport an owner's
tangible personal property in the conduct of its business, and the aircraft is used primarily in
intrastate, interstate or foreign commerce. See section 1101(b)(17) of the Tax Law. It is clear
that an aircraft used by its owner to transport its own cargo (e.g., raw materials, inventory,
finished goods) from one place to another in intrastate, interstate, or foreign commerce qualifies
for the exemption.
Section 528.9(a) of the Sales and Use Tax Regulations, while not strictly applicable to
commercial aircraft, does provide insight into what is meant in section 1115(a)(21) of the Tax
Law by the phrase “primarily engaged in intrastate, interstate or foreign commerce.” In
interpreting similar language for the purposes of the exemption for commercial vessels, section
528.9(a)(5) provides that “Interstate or foreign commerce means the transportation of persons or
property between states or countries.” This implies that intrastate commerce would similarly be
construed as the transportation of persons or property between two or more points within
New York State.
In the present case, Client will lease an aircraft for use in performing an aerial
photography and imaging function for purposes of pipeline inspections. Aerial work activities
such as aerial photography, aerial surveillance and aerial pipeline inspections are not considered
the transportation of persons or property for hire for purposes of subparagraph (i) of section
1101(b)(17) of the Tax Law. Further, such activities are not the transportation of property
between points within New York State or between states and countries in the conduct of Client’s
business. Webster's II New College Dictionary (1999) defines transport as follows: "To convey
from one place to another." Client's use of the aircraft to perform its photography and imaging
service, therefore, will not constitute the use of an aircraft primarily in the transportation of
tangible personal property in the conduct of its business as contemplated by subparagraph (ii) of
section 1101(b)(17). Accordingly, as used by Client, the subject aircraft will not qualify as a

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TSB-A-06(20)S
Sales Tax
June 27, 2006

commercial aircraft pursuant to section 1101(b)(17) and Client's lease of such aircraft will not be
exempt from sales and use tax under section 1115(a)(21) of the Tax Law.

DATED: June 27, 2006

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.