Is the sale and delivery of an aircraft in Kansas to a nonresident buyer exempt from Kansas sales tax if the plane is flown out of the state within ten days?

Plain-English summary

A Delaware LLC — a bona-fide California resident whose business is owning an aircraft — asked whether it would owe Kansas sales tax on an aircraft it planned to take delivery of in Kansas. The transaction ran through a chain: the manufacturer/dealer had an Aircraft Purchase Agreement with an unrelated "3rd Party" (also a California resident, the original contract purchaser). When the dealer would not assign that contract to the LLC, the LLC instead agreed to buy the plane from the 3rd Party. So the dealer transferred the aircraft to the 3rd Party, who simultaneously transferred it to the LLC, each transfer documented by a bill of sale. The plane would be based and registered outside Kansas and flown out within ten days.

The Department agreed the sale is exempt — but only on two conditions. In its words: "the simultaneous sale and delivery of the airplane in Kansas is exempt from Kansas retailers' sales tax, if the following conditions occur. Each entity with the exception of [the dealer], in the chain of ownership is a nonresident of Kansas and the airplane is removed from the State of Kansas within ten days from the date of sale from 3rd Party to Taxpayer."

Bottom line: delivery physically happening in Kansas did not, by itself, make the sale taxable. Because every buyer in the ownership chain was a Kansas nonresident and the aircraft left the state within ten days of the final sale, the transaction qualified as exempt.

What this means for you

Nonresident aircraft buyers taking delivery in Kansas

Taking possession of a plane in Kansas does not automatically trigger Kansas sales tax. On these facts the exemption turned on two things together: no Kansas resident anywhere in the buying chain, and the aircraft physically removed from Kansas within ten days of the sale to the final purchaser. Miss either condition and the analysis changes.

Document the chain and the departure

The ruling rested on a clear paper trail — a bill of sale for each transfer and facts showing out-of-state residency, out-of-state basing, and out-of-state registration. Keep the bills of sale, registration records, and evidence of the departure date so you can show the plane left within the ten-day window.

This is fact-specific, not a blanket aircraft exemption

The Department expressly conditioned the result on these facts. A different structure — a Kansas resident in the chain, or a plane that lingers in the state beyond ten days — would not be covered by this ruling.

Common questions

Q: Does taking delivery of an aircraft in Kansas make the sale taxable?
A: Not necessarily. Here the sale was exempt even though delivery occurred in Kansas, because every buyer in the ownership chain was a nonresident and the plane was removed from Kansas within ten days of the final sale.

Q: What were the two conditions for exemption?
A: (1) Each entity in the chain of ownership, other than the selling dealer, is a nonresident of Kansas; and (2) the airplane is removed from Kansas within ten days from the date of sale to the final buyer.

Q: Does it matter that the plane passed through a third party first?
A: The Department treated the simultaneous transfers (dealer to third party, third party to the LLC) as a single sale-and-delivery event and applied the nonresident/ten-day conditions to it.

Citations and references

• The Department did not cite a specific statute; it conditioned the exemption on all buyers in the ownership chain being Kansas nonresidents and the aircraft being removed from Kansas within ten days of the sale to the final buyer. Because no statute is quoted in the ruling itself, none is listed above.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2000-007

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

February 28, 2000

XXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXX
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Dear XXXXXXXX:

The purpose of this letter is to respond to your letter dated January 26, 2000. In your letter you stated that your firm represents XXXXXXXXXXXXX, (the "Taxpayer"), with respect to the purchase of an aircraft in the State of Kansas.

You supplied the following information:

Taxpayer is a Limited Liability Company (“LLC”) formed in the State of Delaware. Taxpayer is engaged in the business of owning an aircraft. Taxpayer plans to purchase a XXXXXXXXXXXXX (“hereinafter referred to as “Aircraft”). Delivery of the Aircraft is contemplated to occur in the state of Kansas in March 2000. The contemplated facts of the transaction are as follows.

A non-related 3rd Party Buyer (“hereinafter referred to as “3rd Party”) entered into an Aircraft Purchase Agreement with XXXX (“hereinafter referred to as “XXXXXXXXX”). Consequently, this 3rd Party wished to cancel their purchase of the Aircraft. Taxpayer, who wished to purchase the same model aircraft learned of this cancellation request, and asked that XXXXXXXXXX assign the sales contract with all related obligations in their name. However, XXX was unwilling to assign the Aircraft Purchase Agreement to the Taxpayer. Therefore, Taxpayer entered into an agreement with the 3rd Party to purchase the Aircraft from them.

As a result XXXX will transfer the Aircraft to the 3rd Party, the original contract purchaser, in accordance with their Aircraft Purchase Agreement. The 3rd Party will simultaneously transfer the Aircraft to Taxpayer. Each transfer of the Aircraft will be evidenced by a bill of sale from the transferor to the transferee.

Taxpayer intends to base the Aircraft outside of Kansas. The Aircraft will not be registered in Kansas. Within ten days of taking delivery of the Aircraft, Taxpayer will transport the Aircraft outside of Kansas and register the Aircraft outside of Kansas. The Taxpayer is a bona-fide resident of California. To the best knowledge of Taxpayer, the 3rd Party is also a resident of California.

After reviewing the facts of your letter, the Department is in agreement that the simultaneous sale and delivery of the airplane in Kansas is exempt from Kansas retailers’ sales tax, if the following conditions occur. Each entity with the exception of XXXXXXXX, in the chain of ownership is a nonresident of Kansas and the airplane is removed from the State of Kansas within ten days from the date of sale from 3rd Party to Taxpayer.

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 03/21/2000 Date Modified: 10/11/2001

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