Our hats are off to all those who supported and legislated the Florida Sales Tax Exemption for aircraft maintenance. If promoted properly, it can bring a lot of important business to the state.
Let’s look at the Florida law and how it has changed this year.
Effective May 20, 2013, the sales and use tax exemption for replacement engines, parts, equipment, and labor used in or for the maintenance or repair of rotary wing aircraft (i.e. helicopters) was expanded to include aircraft that exceed 2,000 pounds in maximum certified takeoff weight. Previously, the exemption for labor charges was limited to rotary wing aircraft that exceed 10,000 pounds in maximum certified takeoff weight. The exemption for replacement engines, parts, and equipment was limited to rotary wing aircraft that exceed 10,300 pounds in maximum certified takeoff weight.
Dealers who make tax-exempt charges for replacement engines, parts, equipment, and labor used in or for the maintenance or repair of aircraft over 2,000 pounds are required to document the Federal Aviation Administration registration number (N-number) and the maximum certified takeoff weight of the eligible aircraft on the bill of sale, invoice, or other tangible evidence of sale.
Current exemptions for qualified and fixed-wing aircraft are unchanged. Replacement engines, parts, equipment, and labor used in or for the maintenance or repair of fixed wing aircraft with a maximum certified takeoff weight of more than 2,000 pounds remain exempt.
Georgia and Alabama Aviation Repair Tax Status
Both our nearby states, Georgia and Alabama, have exemptions for maintenance on aircraft, but are not as comprehensive as Florida. In Georgia, labor for the repair of aircraft is sales-tax exempt, but parts are not. So if you are bidding a job for an engine overhaul or other large parts orders, you may have a significant advantage on price. In Georgia, the sales tax rate is six percent, but many counties have an additional one-percent local rate. For example, if the engine and propeller overhaul cost is $40,000, you can save the customer $2,800. This is more than enough to offset some ferry costs to your location.
In 2012, Alabama modified their tax exemption for aircraft maintenance. They now waive the four-percent state sales tax on aircraft parts that are brought to Alabama from other states for maintenance and renovation. However, local municipalities and counties can add sales tax, up to a maximum of 10-percent total tax. For example, Birmingham has a 10-percent total sales tax rate, but labor is not included in the tax-exempt status.
The Market Place
There is no doubt that the aviation business in Florida is very strong. According to some of the latest statistics from the General Aviation Manufacturers Association (GAMA) and the FAA, Florida has an active general aviation fleet of 16,126 aircraft, which ranks third in size compared to California and Texas with 22,830 and 17,595 aircraft, respectfully. This compares to Georgia with 5,843 aircraft and Alabama with 5,095 active general aviation aircraft.
If we drill down on the numbers a little more, we can see the positive effect of the changed tax law in Florida. The law reduced the weight of aircraft that qualify for the exemption to those that exceed 2,000 pounds takeoff weight. That covers the vast majority of active general aviation aircraft.
In Florida there is an active general aviation fleet of 16,126 aircraft, which includes 15,750 piston-powered aircraft that now qualify for the sales tax exemption. The remaining aircraft are the heavier jets and turboprops, which were already tax exempt. As far as the maintenance market for Florida MROs, we can now expand our potential customer base to include Georgia and Alabama based aircraft giving us the potential of more than 26,645 new customers.
The tax law also includes an exemption for helicopters. In May of this year, helicopters with a takeoff weight of more than 2,000 pounds were included in the exemption. However, some helicopters weigh much less than the 2000 pound threshold. The most popular helicopter, the Robinson R22, weighs just 1,370 pounds, so it is not included. The popular Bell Jet Ranger has a takeoff weight of 3,200 pounds, so it is now tax-exempt.
Granted the market place is small, with only 3,588 piston helicopters and 6,514