AeromarineTaxPros.com: Is There a Legal Way To Avoid Sales Tax?

Every person who has contemplated an aircraft				rational evaluation of facts dissipates. Normal clear
purchase in the last few years has asked the				thinking adults who regularly make decisions about
question, "Is there a legal way to avoid sales				good and evil, where to spend their money, and
tax?" Most of these people ponder this question				where to go on vacation, lose this innate ability
with the same seriousness as "Will I win the Lotto				when they think about taxes on an aircraft
tonight?"				purchase.
Many people have heard the horror story of a				There isn't a plot by state agencies to attack
friend who tried one of those schemes and would				aircraft owners. The single issue that creates the
wind up with penalties and interest that doubled or				confusion is the fact that a transaction involving
tripled the tax. A few have been embarrassed				an aircraft isn't bound by the limitations that
when their attorneys and CPAs laughed at them				almost every other purchase is. Obviously, you
for asking the question.				don't walk into Wal-Mart to buy a power drill and
People who purchase aircraft fall into one of the				think about taxes because of the low price. What
following categories.				isn't so obvious is that the power drill can't change
1. Those who hope they can avoid sales tax on				its physical location for the purpose of the
their upcoming purchase.				transaction.
2. Those who pay the sales tax.				The truth is that a lot of the strategies used by
3. Those who tried and failed to avoid sales tax				people to legally avoid sales tax on the purchase
on their last purchase.				of aircraft are available on a purchase of any kind
4. Those who successfully avoided sales tax on				of property. It is the mobility of the product as
their last purchase.				well as the price that forces taxpayers into the
5. Those who tried to avoid sales tax on their last				box of thinking that the tax exemptions are only
purchase by eluding the tax agency and are				available to limited products.
functioning under the illusion they'll never get				The mythology of sales tax exemptions further
caught.				confuses the issue. There are a significant number
6. Those who have so much money they'd rather				of people who perpetually confuse potential
pay the tax than think about dealing with a tax				buyers by repeating unsubstantiated stories. For
collector.				example, there is the arrogant blowhard who
7. Those who believe that only millionaires with a				blithely proclaims "it's simple all you have to do
large staff of accountants and lawyers can legally				park it out of state." Research indicates that he
avoid sales tax.				has heard stories from other know-it-alls and
8. Those who believe that professionals who claim				repeats them without prejudice even though his
to be able to assist them to legally avoid tax				statements are totally false.
operated out of a covered wagon selling snake oil				The only reason he gets away with it generally
in a previous life.				rests in inconsistent enforcement of their own
The Supreme Court proclaimed that every citizen				rules within the taxing agencies. This does make it
of the United States has a right as well as an				possible for Mr. Know-it-all to have some
obligation to avoid taxes. What is against the law				substantiated cases of proof he is correct. The
is evading taxes. A quick reading of the dictionary				real reason may be because of fairly lengthy
should point out the difference between "avoid"				statutes of limitations in some states it can take
and "evade".				nearly a decade before the case is actually
According to Webster's New College Dictionary				challenged. Additionally if a state charges fraud,
the definitions of "avoid" include:				there is no statute of limitations. As a matter of
1. To keep away from: shun.				practicality it is possible if they discover an aircraft
2. To keep from happening.				transaction occurred that is outside the statute of
3. Law. To annul or make void: invalidate.				limitations in their state they will charge fraud so
According to Webster's New College Dictionary				they can assess the tax.
the definitions of "evade" include:				The other historical problem is one of
1. To escape or avoid by cunning.				nomenclature. People in the aircraft industry tend
2. a. To avoid the performance of fulfillment of				to use buzz words to communicate. These buzz
their responsibilities. b. To fail to make payment				words have a tendency to stick when they are
of.				attached to certain subjects, even though when
3. To avoid giving a direct answer to.				compared to tax law they fail. The confusion the
4. To elude or baffle.				swirls around the use of the term "Part 135
Too many people have successfully "evaded"				exemption" has trapped many aircraft owners
sales tax on aircraft purchases by slight of hand				into interest and penalties.
and cunning. They have established a culture that				When you mix an industry that misuses definitions
leads prospective buyers down the path to				with horribly inconsistent tax code enforcement
believing that only those who participate in illegal				you can easily see the tax traps that are set by
schemes get away with not paying taxes. This is				the industry personnel for its own members. I
so far from the truth that it should be out of				have no evidence of a plot by any tax agency
sight for aircraft owners.				against aircraft owners. Usually the problems are
The true statement is anyone can successfully				creating by bad advice mixed with a flagrant
avoid sales tax on an aircraft purchase. There is				desire to avoid taxes of any nature.
only one thing that a prospective aircraft owner				The desire to avoid taxes is admirable, the ability
should have to consider when it comes to sales				to get good sales tax information is blatantly
tax. Are the steps necessary to legally avoid tax				non-existent. The problem's existence is simple to
more costly than the tax?				explain. Sales tax law is a highly specialized area
At this point the federal government collects				that doesn't attract much professional attention
taxes by primarily using an income tax, therefore				because the potential size of the market is
the questions about sales tax are related to				minuscule. Lawyers and C.P.A.'s can afford to
different rules in every state.				spend time learning about IRS rules because most
For example, If you are considering a purchase of				of the population of the U.S. pays income tax.
a $200,000.00 aircraft and you live in a state that				Further, many avenues of education exist for
has a sales tax rate of four-percent you are				professional to learn about income tax. None exist
facing a tax of $8,000.00. The same purchase in				for sales tax, other than within the agency for its
a state like California is subject to over				employees.
$16,000.00 in tax. When you add on the city,				Sales tax is typically the responsibility of the
county and various other special districts it can go				retailer, therefore the problem primarily exists
even higher. Conversely, there are currently five				only for the fraction of the population that has
states that have no sales tax. They are Alaska,				seller's permits. For example, in California, with a
Delaware, Montana, new Hampshire and Oregon.				population nearing 40 million, the real market is
To further aggravate your search for information				less than 500,000 businesses.
each state has specialized rules about aircraft				The sad result is that professionals often advise
purchases. Some examples of conflicting state				their clients to just pay the tax, or lead a potential
rules are:				taxpayer down a path that results in additional
1. In Kansas some transactions between two				tax. This doesn't happen because of
people, in which neither party is in the business of				incompetence. It occurs because tax agencies
selling aircraft are exempt. In California a				often have a unique way of conflicting with their
transaction between two people, in which neither				own rules in order to collect taxes. If your lawyer
party is in the business of selling aircraft, the				or accountant doesn't have the savvy of
buyer owes the tax not the seller.				understanding how to get access to the inner
2. In some states, when a resident of that state				workings of a tax agency you can be at risk.
buys an aircraft outside of the state where he is				A simple reading of a tax code never is the only
a resident it is exempt of sales tax. However as				place to gather understanding. A sales tax
soon as he brings the aircraft into his state it is				professional must be willing to spend thousands of
subject to use tax. The rules vary from state to				hours getting to know the nuances of each law
state as to the right of the purchaser to use his				and how an agency historically has dealt with it.
aircraft outside of his state for a period of time				Upon studying the history of a tax agency, a
that renders the transaction exempt. In some				sales tax expert will be able to build an effective
cases it takes three months and in some states it				strategy even in the face of diametrically
takes twelve months.				opposed decisions by the tax agency on facts
3. Some states only tax a purchaser on the				that are the same. The cost for a taxpayer to
difference between the sales price and the value				educate himself sufficiently in the nuances of sales
of the trade-in. Some tax the retail price of the				tax laws will exceed the potential tax. The
transaction without regard to a trade-in.				educational process for a do-it-yourself sales tax
4. If a purchaser regisaters his purchase in one of				expert is paved with failed attempts that often
the "sales tax-free" states to avoid the sales tax				times double and triple the original amount of tax
he may be subject to a 50% penalty in his home				due.
state.				The most efficient and effective manner of legally
5. If a purchaser is not careful about his method				avoiding sales and use tax rests clearly in the
of taking possession outside of his state of				decision to hire a sales tax expert with a proven
residency he may create a sales tax liability in one				track record of victories for their clients before
state and a use tax liability in another.				the sales tax agency. Asking for client referrals is
It is this maze of confusing rules and inconsistent				your best source of verifying the claims.
requirements state by state that causes many				It shouldn't be a long drawn out process.
people just throw their hands up and pay the tax.				Remember there are very few firms in the entire
They are very aware that they don't have to				country that specialize in sales tax cases. A
confront this issue on most other purchases so				review of the yellow pages in all the major cities
they can become paralyzed by the fear that				in the country may reveal that several major
some hidden danger will imperil them when they				metropolitan areas have none. It will still be worth
buy an aircraft.				the long distance phone call to save yourself from
It is this fear that agitates them to the point that				overpaying your taxes.

Ourks

AeromarineTaxPros.com: Is There a Legal Way To Avoid Sales Tax?

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