Business Personal Property Taxes Texas

July 11th, 2009

business personal property taxes texas

Out of State ownership can be a tax trap

When I flip through the pages of various aircraft publications and websites, I often run across Advertisements or articles telling potential owners of the sales and use tax benefits to owning an aircraft in one of state enterprises. This is also one of the first questions I asked when I received a call from a potential owner, as I set up a government corporation may purchase a Aircraft? My first question back, what kind of company will it be? The person at the other end says, there is no "business", it will be a company the aircraft hold.

It seems no matter if your passion for cars, boats or aircraft, someone from one of five states in the United States that no sales tax directed his tent on the side of the road and you start to sell the idea to avoid sales and use tax have. There is nothing in the law that prevents you from establishing a corporation in one of these states, it is perfectly legal. However, a corporation or LLC would be in a state that no sales tax does not prevent your company has made for VAT in another country.

If your accountant advises you to a corporation in a country other than the one in which you live for IRS Purpose use, he knows whereof he speaks. If your lawyer advises you to use a corporate culture structure to minimize personal risk, you can be reasonably certain that he knows his area of expertise. However, if you believe someone that possession of your personal property in a State of Corporation or LLC is to avoid legally or use your sales tax in the state where you can store and use the property, you are led into the path of financial destruction.

There are many people who believe that by registering their aircraft in the name of Oregon, Montana, Alaska, New Hampshire or Delaware Corporation or LLC, they have legally avoided Sales and Use Tax. The truth is, they believe, because they have not been caught. Your ignorance of the law is not a valid argument, if you Case before the state taxing authority must be argued. The fact that they had been told by 50 people in its Aviation Club, like "Joe and Jane" is not pay sales tax does not change the brutal truth for John. Any person who has a register of state corporation or address, their property is juggling a hand grenade drawn using the stylus. In fact, the longer they juggle, the more dangerous it becomes.

The following hypothetical story is intended to cover the risks to explain.

In January of 2000, John Doe from San Diego, California, was planning to buy a King Air 350 to fly around the United States, Canada and Mexico for pleasure. Life was good for John so he could afford a $ 8,000,000.00 plane. to buy After finding several potential aircraft, John began the ultimate Cost of Ownership research, fuel consumption, maintenance, hangar fees insurance, etc. In discussions with the seller, John was the reality for pay to have taken an 8% sales tax, which would on an 8 million dollar aircraft amount to $ 640,000.00.

John began the attention on the ads over the purchase of the aircraft in Montana or other pay taxes competitive state. In March, he was willing to undertake the aircraft purchase. John contacted a lawyer from an ad that said he saved that would be a Delaware Corporation / LLC had the sales and use tax on the purchase. The lawyer took care of legally establishing the Delaware Corporation and John bought the plane on the name of XYZ, Inc., the Delaware address listed on the FAA Bill of Sale and FAA registry. John flew on commercial airlines, Oregon to take delivery of its new King Air 350 and he immediately flew to California, where he was based in San Diego, CA.

seemed the next few years John literally fly under the California Sales and Use Tax radar. In May 2006, John decided he wanted to re-register the aircraft his California address. Soon after the re-registration, a letter from the Consumer Use Tax Section (cuts) of the California State Board of Equalization (Board) concluded in his mailbox, requesting the details of the purchase. The grenade exploded, but they all had.

John's lawyer filed a tax return for the plane said that the company was another resident and the purchase was made in Oregon. In addition, the lawyer showed the limitation period had expired and therefore the transaction fell outside the scope of the Board.

The Board Reply was that it does not matter who owned the aircraft. It launched a letter, extracts from the California sales and use tax code, Regulation 1620 sets out States in relevant part:

"Property purchased outside of California, which is brought in California, as it had for the use in this state been purchased when the first functional use of the property is in California. If the property is functional first, outside of California, the property shall be presumed, however, that they have acquired, for use in this state when they are in California brought within 90 days of purchase, unless the property is used stored or outside the State of California half or more of the time during the six-month period immediately after his entrance into this state. "

The countdown to the explosion had begun.

The expert submitted a declaration and documentation of the aircraft was claimed for from the government use be purchased. It included flight logs and fuel receipts for numerous flights between California, Texas, Florida, Washington, New York, Arizona, Oklahoma, Kansas, Canada and Mexico in the first six months of ownership.

The board responded that although the property was acquired outside the state, California, it came within 90 Days, not the 50% out-of-state memory and / or use requirements. Therefore, it was believed the aircraft was purchased for use in California. The Board issued a statement of purpose (Bill), 20 August 2006, in the amount of $ 1,203,200.00, ($ 640,000.00 in tax, a $ 64,000.00 non-payment of 10% file and $ 499,200.00 in interest at 12% per year to 6.5 years). Included in the statement was a warning that the interest of an additional $ 6,400.00 per month incurred that the tax remained unpaid.

John Doe has his lawyer in the case with their accountant to file petition for re-determination to have her case reheard. Six held months later an appeals conference, and representatives of the taxpayers used to help the previously submitted documents that the aircraft for the State was obtained from the use. They claimed that had the majority of the use of aircraft since the date of purchase in travel to places outside of California. The Board staff responded that since the aircraft entered the State on the same day it was purchased, the only time that was evaluated would be the six-month period from the date of first entry in California.

The representatives responded that reads in Regulation 1620, "unless the property is used or stored outside the State of California half or more of the time during the six month period immediately following its entry into this state. "She claims that John's flights to Texas, Florida, Washington, New York, Arizona, Oklahoma, Kansas, Canada and Mexico, introduced during the six-month testing period more than 70% of the total flight time traveled. It was her Assertion that because of the regulation states that the property be used "need or" stored for more than half the time the aircraft was to liberate.

The Board staff has responded to the allegations that in recent years, the board of the interpretation was that the property must be used "And" saved for more than half the time. Therefore, the percentage of flight hours flown in the interior of California versus outside of California meant nothing in this case.

The representative replied that, if you consider the time, the plane in from governments, exceeded the actual total was the 50 percent requirement in the Regulation. The Board responded that fuel receipts only show where the plane was located at the moment of purchase, and made less than 15 receipts were. Often there were periods of more than 10 days if no receipt was provided. The reps responded that they referred to two months of rental income a hangar rates Airport in Canada for the months of February and May 2000. The employees reply that, although the taxpayer had the receipts for the months, provided they do not prove that the plane Never again in California during that time.

The lawyer and accountant moved to the flight logs serve as a proof of the whereabouts of the aircraft the period of six months, but had the board examiners have to know different online flight tracking sources that although a majority of the flights were the protocols documented, there was a material discrepancy documented more than 20 United Nations flights logged.

The representative then claimed that the period has been expired from the date of purchase in more than six years and it was impossible to create a new document section that the taxpayer had supported its claim to an exemption. The staff simply remembered the repetitions that the taxpayer the burden of proof, not the employee burden of proving the exemption was not supported.

In addition, determined set the Board that the auditors Delaware Corporation was simply to register the aircraft to avoid the tax and recommended a 50% penalty for knowingly registering the aircraft out of California with the intention of avoiding the tax to be added. The board came to this conclusion by determining there was no business of the Company was carried out, the company's situation was a mailbox and a freight forwarder was the incoming mail.

On 7 June 2007 John was awarded a decision and recommendation from the Board. The appeal was denied because the aircraft is not properly stored and used outside the state of California more than 50% of the time during the first six months immediately after the first entry in that state. In July 2007, John received Notice of re-determining the amount of $ 1,607,680.00 in tax matters ($ 640,000.00), interest ($ 583,680.00), 10% non-compliance penalty ($ 64,000.00) and a 50% intention penalty ($ 320,000.00) withdraw file.

On 4th April 2008 John wrote a check to the Board for over $ 1,607,680.00, after exhausting a settlement offer with the Board and a hearing before the elected members of the Board of Equalization, which found the employee's position within the laws and regulations. After the addition, the bill for $ 35,000.00 in legal and accounting Fees charged for the preparation of the Corporation arising out of state, their application for registration, and representation before the California State Board of Equalization, It was finally run to zero and the grenade exploded, nearly all of John's breathing cash. John is currently trying to sell his King Air 350, the justice in his Home, which he had to replace borrowed against to pay off his debts.

The sad truth is that John was able to avoid legal, tax in California. He did not have the Delaware Corporation, and he could have registered the plane to his California address. Instead of hiding in a bunker, waiting for an explosion, all that he had to do, it was even wrapped in the arms of a specialized program, prepared by Sales and Use Tax experts who understand the way the Board works from the inside.

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