Michigan Aircraft Lessor Not Liable for Use Tax

A Michigan lessor of an aircraft was not liable for Michigan use tax on the purchase price of an aircraft because it was entitled to make an election to pay use tax on the lease payments it received. The Michigan Tax Tribunal found that the taxpayer was engaged in the business of leasing tangible personal property for purposes of the rental receipts election. There was no evidence that the rental rate that the taxpayer charged was inconsistent with market rates. The taxpayer did not personally use the aircraft, indicating an absence of a personal motive for the purchase. The aircraft was only used for six months before it fell into disrepair, but the low amount of flight time and low rental receipts did not necessarily mean that the leasing business was not entered into with the purpose of generating profit. As such, the taxpayer was not liable for use tax on the purchase price of the aircraft. (Caledesi Holdings, LLC v. Department of Treasury, Michigan Tax Tribunal, No. 358183, March 13, 2012)

Posted on May 21, 2012