Could an FAA Part 135 air taxi buy machinery, tools, and equipment tax-free for aircraft repair, remodeling, or maintenance?

Plain-English summary

The Comptroller treated FAA Part 135 air taxis as licensed and certificated carriers for sales-tax purposes.

Under the exemption effective September 1, 1989, machinery, tools, and equipment were exempt only when used or consumed directly and exclusively in repairing, remodeling, or maintaining aircraft used as common or contract carriers for hire, including qualifying aircraft component parts.

Component parts included permanently affixed property that might be removed temporarily for service, air-cargo containers, navigation and communications equipment, smoke detectors, fire extinguishers, and seats. The exemption did not cover every item bought for the shop or equipment supporting the overall carrier operation.

Common questions

Did Part 135 status qualify the air taxi as a carrier? Yes.

Was all shop equipment exempt? No. Direct and exclusive use in qualifying aircraft service was required.

Did the exemption cover component parts? Yes, including the examples listed in the ruling.

Citations and references

• 34 Tex. Admin. Code Rule 3.297(c)(5) and (c)(5)(E) (Carriers)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9002L0980A06

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

BOB BULLOCK
Comptroller February 14, 1990

Dear ****:

Thank you for your letter dated January 30, 1990, concerning the "Air
Carrier Exemptions Expanded" article in the December 1989 Sales Tax
Review.

Air taxis licensed and certificated under Part 135 of the Federal
Aviation Administration Regulations qualify as licensed and certificated
carriers for sales tax purposes.

Effective September 1, 1989, machinery, tools and equipment used or
consumed directly and exclusively in performing repair, remodeling, or
maintenance services to aircraft used as common or contract carriers of persons
or property for hire are not taxable. This includes machinery and equipment
used to repair the aircraft itself, as well as component parts of the aircraft.
You are not entitled to an exemption for "any equipment we buy in our shop."

Component parts include tangible personal property permanently affixed to
the aircraft (an item may be removed temporarily from the aircraft for
servicing), air cargo containers, navigation and communications equipment,
smoke detectors, fire extinguishers, and seats. Please refer to section (c)(5)
of the enclosed Rule 3.297 on carriers. As stated in section (c)(5)(E) of this
rule, the exemption does not include machinery, tools, and equipment that
support the overall carrier operation.

This opinion is based upon the facts you presented. If there are
additional or different facts, this opinion may change.

Please feel free to contact me if you have any additional questions. You
may write me, call toll free 1-800-252-5555 (ext. 3-4685) from anywhere in the
United States or phone 512/463-4685.

Sincerely,
Julie Pesl