Homebuilt aircraft could be protected from double taxation

January 29, 2014

The South Dakota Senate introduced Senate Bill 80 on Jan. 24, created to help protect the state’s aircraft homebuilders from double taxation.

Under current law, all aircraft, both conventional built and homebuilt, pay a one-time ‘original aircraft registration’ tax equal to 4 percent of the value of their aircraft to the state Department of Transportation Office of Aeronautics.  The tax is collected in lieu of a sales or use tax on an aircraft purchased in or brought into South Dakota.

But homebuilt aircraft owners, who currently pay the 4 percent registration fee, have been pursued by the South Dakota Department of Revenue for back sales tax on the individual components of their aircraft, including engines, avionics, and other parts. This has caused them to be taxed at double the rate of conventional aircraft owners.

Senate Bill 80 would provide a tax credit for the sales and/or use tax assessed on individual components of a homebuilt aircraft when the state’s original aircraft registration fee is paid.

“With homebuilt aircraft making up a significant portion of South Dakota’s general aviation aircraft fleet, AOPA is committed to working with local allies and legislative leaders to see this problem addressed quickly and to provide relief to the aircraft owners across the State being unfairly targeted for both taxes,” said AOPA Great Lakes Regional Manager Bryan Budds. “This important legislation was created to protect aircraft homebuilders from excessive taxation.”

Senate Bill 80 would rectify the double taxation by providing homebuilders with a tax credit equal to the amount of sales tax paid on the individual aircraft components on the condition that they have paid the 4 percent original aircraft registration fee to the state. “Further, Senate Bill 80 presents the legislature with an opportunity to ensure the State's 2,300 general aviation aircraft owners, which contribute more than $300 million to the South Dakota economy annually, are presented with a fair, equitable, and transparent aircraft tax structure,” wrote Budds in a Jan. 27 letter to State Sen. Ernie Otten (R-District 6), chair of the Taxation Committee currently reviewing the bill.

AOPA also expressed its appreciation to Otten and the other sponsors of Senate Bill 80. AOPA has written letters to other state Senate leaders urging them to support the proposal; AOPA staff members also plan to visit Pierre to support the provision in person during upcoming hearings.

Benét Wilson

Benét J. Wilson | AOPA eNewsletter and Social Media Editor

AOPA eNewsletter and Social Media Editor Benét J. Wilson joined AOPA in 2011. She is working on her private pilot certificate.