Retail Sales and Use Tax Exemption on Aviation Parts, Engines, and Supplies

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House Bill 1738 (Chapter 714) was passed during the 2017 session of the Virginia General Assembly and became effective this past weekend. The new law provides a sales and use tax exemption for the sale of aviation parts and supplies in Virginia. In detail the exemption:

1. Provides an exemption from the Retail Sales and Use Tax for parts, engines, and supplies used for maintaining, repairing, or reconditioning aircraft or any aircraft’s avionics system, engine, or component parts. 

2. This Act provides an exemption for both manned and unmanned systems. 

3. This exemption does not cover tools or equipment. 

4. This Act also clarifies that the exemption does not restrict the sales tax exemption available to scheduled common carriers under current law.

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Under current law, there is an exemption from the Retail Sales and Use Tax for tangible personal property sold or leased to an airline operating in intrastate, interstate or foreign commerce as a common carrier providing scheduled air service on a continuing basis to one or more Virginia airports at least one day per week, for use or consumption by such airline directly in the rendition of its common carrier service.  This Act has a sunset date of July 1, 2022. 

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Effective:         July 1, 2018
Amended:        §§ 58.1-609.3, 58.1-609.10

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Your aviation business should discuss with your accountant the tax exemption to fully understand how you should treat the elimination of charging this tax in your Virginia business.  Secondly you should assure that you are not collecting this tax from your customers on related aviation parts and supplies.  Finally, please consider how your business promotes to your customers that this tax is no longer being added to their bill thus reducing the cost for maintenance and care of aircraft maintained within your business.