AIRCRAFT AND TEXAS SALES AND USE TAX

You can claim a sales tax exemption when buying, leasing or renting an aircraft if:

• You are a certificated or licensed carrier. A "certificated or licensed carrier" is a person authorized by the FAA to operate an aircraft to transport people or property in compliance with the certification and operations specifications requirements of Title 14 of the Code of Federal Regulations, Part 121, 125, 133 or 135.

Chartering an aircraft with a pilot or crew is a nontaxable transportation service. You do not have to collect tax on your charges for chartered flights as long as the pilot and crew remain under your supervision and control during the flights.

Tax is not due on the sale, lease or rental of an aircraft operated under the fractional ownership provisions of the FAA regulations (Title 14 of the Code of Federal Regulations, Part 91, Subpart K).

Tax is not due on the sale, lease or rental of an aircraft bought for flight instruction.

To qualify for the exemption, you must meet all of the following criteria:

• You must have a sales tax permit.
• You must hold a current flight school or flight instructor certificate issued by the FAA.
• The flight instruction must be:
  • recognized by the FAA;
  • under the supervision of a flight instructor certified by the FAA;
  • designed to lead to a pilot certificate or rating by the FAA; or
  • required by the FAA.

A student cannot buy an aircraft tax free for flight instruction, but can rent an aircraft on an hourly basis tax free for exclusive use in FAA-approved flight instruction, including solo flights. The student must give the seller a Form 01-339, Texas Sales and Use Tax Exemption Certificate (PDF), that includes the flight school or flight instructor’s contact information.

Tax is not due on the sale, lease or rental of an aircraft purchased to be used at least 95 percent of the time for certain qualifying agricultural activities.

Qualifying agricultural activities include:

• predator control;
• wildlife or livestock captures;
• wildlife or livestock surveys;
• wildlife or livestock census counts;
• animal or plant health inspection services; and
• agricultural aircraft operations, including crop dusting, pollination or seeding.

If you purchase an aircraft for agricultural use and use it in a taxable manner more than 5 percent of the time, you lose the sales tax exemption and must pay sales and use tax based on the purchase price of the aircraft.

Sales tax is not due on the sale or lease of an aircraft you use and register in another state or country before using it in Texas. An aircraft purchased under the fly-away exemption can be used in Texas within the first year, as long as it is predominantly used outside of Texas for that first year.

Activities not considered "use" include:

• completing, repairing, remodeling, maintaining or restoring the aircraft;
• flights necessary for troubleshooting and testing the aircraft;
• flights between service locations under an FAA-issued ferry permit; and
• flight training to get used to the aircraft.

The "fly-away" exemption does not apply to the short-term rental of an aircraft in Texas and flown in another state.

To claim the fly-away exemption, you must give the seller a Form 01-907, Texas Aircraft Exemption Certificate Out-of-State Registration and Use (PDF). Both you and the seller must sign the certificate. The seller must send a copy of the certificate to the Comptroller’s office within 30 days of the sale.

Tax is not due on the sale, lease or rental of an aircraft to a foreign government.

Purchase From an Occasional Seller

If you do not have a Texas Sales and Use Tax Permit and are not required to have one, you can buy an aircraft tax free from someone who is not in the business of selling, leasing or renting taxable items or services.

You must get a Form 01-917, Statement of Occasional Sale (PDF), from the aircraft seller.

Identifiable Business Segments

You can buy an aircraft that is an identifiable segment of a business tax free. Before you buy the aircraft, the income and expenses attributable to it must be separately established in the seller’s records. Both you and the seller must keep records to document the exemption.