One of the aspects of aircraft taxation that adds to its complexity is the fact that different states have different ways of assessing tax.
We’re on top of the various ways aircraft owners try to evade their tax responsibility. Quite frankly, it’s easier to do in Texas.
Texas has more airports than any other state. Along with California and Florida, Texas residents own more private planes than residents in any other state. The sheer number of private flights in and out of various Texas counties makes it hard to track everything.
Then there’s this.
Texas is one of the only states that separates aircraft taxation based on personal vs business use. Only tax aircraft used for business are taxed. Being able to write off your aircraft, fuel, and leveraging depreciation is possible when you’re aircraft is used to produce business income.
If you use this aircraft for business use, you should be paying taxes in Texas. An aircraft used for personal needs, on the other hand, isn’t subject to taxes. (Neither are aircraft used for agricultural purposes.)
I think we all know what owners are going to do.
The Many Ways Texas Aircraft Owners Avoid Taxes
Texas aircraft owners may register with an out-of-state LLC or register the aircraft to an individual but use it for business. Sometimes there's an individually owned aircraft that’s leased to a charter company. On the surface, it looks like it’s personal use. But it isn’t.
These methods immediately keep this aircraft off the radar for tax assessments. Unless you're really willing to dig in and look at the facts and the stats in the different ways that these guys do it, they're going to get missed.
Everyone acknowledges they get missed. That's where we come in.
Flight Patterns Tell the Story
We’d partnered with a Texas county to help them ensure compliance. Using our proprietary process, we found several aircraft avoiding taxation. Here is one example:
The county sent a notice out.
The aircraft owner came back and claimed the aircraft was only for personal use. To prove this, the county the owner to submit a legal document stating the aircraft was personal use only.
Thanks to data provided by us, the assessor was able to confidently ask the owner to explain why their flights primarily visited the same 5 locations where their business operated. The owner would need to explain why this aircraft was used minimally outside of these primary routes. Their documentation would need to explain how that aircraft was only flying to their business locations yet not being used for business purposes. Lastly, the assessor requested to see their tax returns to ensure they’re not using anything associated with that aircraft as a tax write-off.
Five days later, we received a check in the mail. They dropped their appeal. And they’ve been paying their taxes since.
Personal Registration Hides a 135
When a Texas aircraft owner registers an aircraft to an individual, they're likely going to escape the tax department’s attention. What happens, however, is that while an individual owns it, they’re leasing it to somebody else who’s operating that plane on a 135, or commercial charter company.
They can lease that plane to an air management service, while they're not using it to help pay for its costs. After all, we’re talking about planes that cost $1M.
That owner might be paying $50,000 a month in maintenance, but that air management company might be making them $40,000 or $60,000. They're able to travel for free and make money off of that plane.
When the county looks at that aircraft, they’ll see it's registered to a single person. At face value, they think that can’t tax it. It’s only when someone can look at how that plane's operating and where it’s flying to that you’ll see things aren’t what they seem.
Our process is designed to do just that, and more.