Texas Discusses Aircraft Trade-Ins

The Texas Comptroller indicated that an aircraft transaction that qualifies as a tax free exchange exempt from federal taxation under IRC- Section 1031 does not impact the taxability of a transaction for Texas sales and use tax. The sale or lease of an aircraft by a dealer engaged in business in Texas is subject to Texas state and local sales tax based on the total consideration paid for the aircraft. The total consideration may be adjusted for the value of a trade-in if (1) the title to the trade-in (aircraft) must pass to the seller of the new aircraft; (2) the aircraft being traded in must be separately identified to the purchaser of the new aircraft on an invoice, billing, sales slip or ticket, or contract; and (3) the seller’s books and records must reflect the acceptance of the trade-in, the credit allowance for the trade-in, and the sale of the trade-in to a third party. (Letter No. 200903447L, Texas Comptroller of Public Accounts, March 30, 2009, received September 2009)

Posted on October 20, 2009