Voluntary adults

One way to manage that risk is through a Voluntary Audit Program (VAP). In some states, taxpayers can reach out to their local Department of Revenue (or local taxing authority) or be invited by the agency to participate in a voluntary review of records tied to aircraft purchase and use. Through your cooperation, the state often treats your case more favorably than if it had launched a full audit on its own.

How might this come up? Picture buying an aircraft in Virginia and paying a 2-percent sales tax there. Later, you move to Maryland and continue flying without considering Maryland’s 6-percent use tax. Suddenly, you could face an additional 4-percent liability, plus penalties and interest that build up over time.

Another trigger is something as simple as parking overnight at a ramp. Even if parking is free, the aircraft’s presence in that state may prompt tax collection. Some jurisdictions impose taxes when an aircraft remains beyond a set period, and the rules vary widely. Paying tax in one state doesn’t necessarily exempt you from owing tax in another where the aircraft is kept.

If you discover you owe, or might owe, a state tax, a VAP can be a chance to mitigate tax exposure. By participating, you may reduce taxes, penalties, and interest. For example, if you missed applying for a resale or consumer certificate for an aircraft you lease back to a flight school, some states will permit a late filing when engaged in a VAP and will only impose a minor penalty. In certain cases, interest may even be waived.

Still, there are downsides. The outcome depends on how the transaction was structured, the quality of your records, and your willingness to cooperate. Poor record keeping such as missing information, or an improperly established entity can make mitigation difficult—and sometimes nearly impossible.

For those who have been through an audit cycle before, it’s worth remembering that agencies maintain detailed records. Prior audits often lead to future scrutiny, and these reviews are not limited to tax season. They can happen anytime.

Penalties, interest, and back taxes can escalate quickly, sometimes leading to liens or restrictions on your aircraft until disputes are resolved. Good record keeping and engaging in a VAP can be the difference between smooth ownership and costly disputes.

Erica K. Ramos is an in-house attorney with the AOPA Legal Services Plan. She is currently pursuing her Part 107 certificate.