Ga. Comp. R. & Regs. R. 560-12-2-.04 - Aircraft Sales, Rentals and Service

(1) Definitions.

(a) Aircraft Sales and Service Dealers--An aircraft sales and service dealer is engaged in the business of purchasing aircraft and related property solely for resale or rental and not for use in providing any services such as crop dusting. Such dealers should purchase tax free such aircraft, accessories, tires, repair parts, fuels and lubricants for resale under certificates of exemption. Such certificates do not include property not purchased for resale, and such property is taxable at the time of purchase.

(b) Aircraft Service Operations--A person engaged in an aircraft service operation is engaged in the business of using aircraft solely in providing services for their customers. For example, a person employing an aircraft in a crop-dusting service business is engaged in providing services. Similarly, a person purchasing aircraft to be used by him solely in providing transportation services for hire is engaged in an aircraft service operation. Purchases by persons engaged in aircraft service operations are taxable at the time of purchase unless otherwise exempt under the Sales and Use Tax Act.

(c) Dual Operators--Dual operators are persons engaged both in sales or leases of aircraft and in aircraft service operation, and who cannot determine at the time of purchase whether the property is to be resold or is to be used by him in providing services. Such dual operators may, upon approval by the Commissioner, purchase such property tax free under certificates of exemption. At the time such property is allocated to full time personal use or to full time service operations, such as crop dusting or flight training, the dual operator must -remit the tax on the purchase or cost price, as provided in the Act.

(d) The term "charter" is frequently used in the industry but is of little aid in determining the taxable nature of the "charter" operations. The term is used to cover both transactions involving a lease or rental of the entire aircraft and transactions involving the furnishing of transportation services. However, leases and service transactions are not identically treated under the Act. For purposes of ascertaining tax liability, a "charter" transaction where the aircraft operator is employed and paid directly by the aircraft owner will be presumed to be a transportation service transaction unless the terms of the agreement or the surrounding circumstances indicate a lease. A "charter" transaction where the aircraft operator is employed and paid by the customer of the aircraft owner will be considered a lease transaction, unless the terms of the agreement or the surrounding circumstances indicate a service transaction.

(2) Use by dealers or dual operators pending sales.

(a) The Act provides that if a purchaser who purchases under a certificate of resale makes any use of the property other than retention, demonstration or display while holding it for resale in the regular course of business, the use is taxable. Liability is computed by applying the tax rate to the cost of the property except where the dealer exercises the permitted options listed below under Section (3). Unless the dealer exercises the options permitted, the tax computed on cost price will accrue on the first use but not on any subsequent use. In addition, receipts from such uses and any subsequent retail sale of the aircraft may also be taxable. For example, if an aircraft dealer makes a personal or business use of the aircraft, the dealer becomes liable for the tax on the cost of the aircraft. If the aircraft cost the dealer $10,000, the dealer's liability would be $400. If there is a subsequent use, no liability would accrue on the second use. A subsequent retail sale of the aircraft, however, would be taxable.

(b) A use of the aircraft in providing a service, such as transporting persons or property for hire or in flight instruction, is a use other than retention, demonstration and display.

(c) If a dealer in all cases makes a charge for the demonstration to the prospective customer of the aircraft in flight, such use will not be considered by reason of such charges a use other than demonstration. The charges, however, will be considered taxable to the extent that they represent a lease or transportation of persons for hire transaction, or otherwise represent the sale of tangible personal property.

(3) Options where use is solely rental or transportation service.

(a) If the sole use by a dealer of aircraft held for sale in the regular course of business is the lease or rental of such aircraft or the use of such aircraft in providing transportation of persons for hire, or both, then the following rules apply:

1. Rental. If the use by a dealer of aircraft held for sale in the regular course of business is the lease or rental of the aircraft, then such use will result in the liability computed on the dealer's cost price, subject to the election described below under Section (3)(b) to compute liability on the lease charges.

2. Transportation of persons for hire. If a dealer uses an aircraft in the transportation of persons for hire while holding the aircraft for sale in the regular course of business, then such use will result in liability computed on the dealer's cost price subject to the option under Section (3)(b) to compute liability on the service charge.

(b) A dealer whose sole use is such transportation services and rental may, after April 1, 1970, elect in computing liability for such use to include in his gross sales charges made for such transportation of persons for hire and such lease or rental and to pay tax thereon rather than on the cost of the aircraft. Under such election, the dealer for each use must include all lease receipts and all charges made for transportation whether or not the dealer must also collect a tax on such charges from his customer. The measure of the tax on the dealer's use is not related to the taxability of the transaction itself. Such an election shall be made within three months after the effective date of this Regulation and shall govern all transactions after April 1, 1970. Such election shall be irrevocable except upon application approved by the Commissioner. The election is not available where the use is the transportation of property for hire.

1. The rules related to the dealer's option in computing liability for rental use apply only while the aircraft is held for sale in the regular course of business and there is no taxable use other than such rental or isolated transportation service. However, if a dealer withdraws an aircraft from sales inventory to use solely in rental operations, then no liability would be incurred subsequently if a taxable use is made of the aircraft while holding it for rental. Liability for use in transportation service while holding the property for rental is computed as set forth above.

2. The rules related to the dealer's liability for use in the transportation of persons for hire and the options in computing liability for such use apply only while the aircraft is held for sale in the regular course of business and there is no taxable use other than such service or rental of the aircraft. Use in providing transportation service must be isolated. If it is found that the dealer has committed an aircraft to use in providing transportation service in competition with persons regularly engaged in such business even though the dealer intends to sell at a future date, the dealer's liability will be computed using his cost price irrespective of a previous election. Commitment to service will be presumed where the dealer advertises to the public the availability of such aircraft for transportation service.

Notes

Ga. Comp. R. & Regs. R. 560-12-2-.04

Ga. Code Ann. Secs. 92-3438a, 92-8405, 92-8406, 92-8409, 92-8427.

Original Rule entitled "Aircraft Sales, Rentals, and Services" adopted. F. and eff. June 30, 1965. Repealed: New Rule entitled "Aircraft Sales, Rentals and Service" adopted. F. July 12, 1971; eff. August 1, 1971. Amended: F. June 17, 1994; eff. July 7, 1994.