Which aircraft-related parts and equipment sold by an aviation business are exempt under Kansas's aircraft-parts exemption, and which are taxable?

Plain-English summary

An aviation-management consulting business that also sells airplane parts and equipment listed a number of items and asked whether each is exempt under Kansas's aircraft exemption, K.S.A. 79-3606(g).

The Department explained the exemption and where its line falls. Since January 1, 2005 (2004 Senate Bill 147, explained in Notice 04-06), subsection (g) exempts "sales of aircraft repair, modification and replacement parts and sales of services employed in the remanufacture, modification and repair of aircraft" — and that parts-and-services exemption now applies to all aircraft, not just aircraft used by common carriers in interstate commerce or sold to foreign governments. (Whole aircraft are exempt more narrowly — mainly when sold to certified/licensed common carriers, to a foreign government, or for use outside the United States.)

The dividing line for parts and equipment is whether the item is affixed to and becomes a permanent part of the aircraft (permanent for its service life):

• Exempt — items incorporated into the aircraft: engines and engine components, doors, windshields, windows, hydraulic components, passenger seats, landing gear, permanently mounted controls and instruments, and similar life-limited parts replaced or overhauled per service bulletins. A sun visor installed on the aircraft to shield the pilot is exempt because it is affixed. For common and private carriers, FAR-required equipment secured in the aircraft with the expectation it stays there — life rafts, life preservers and other ditching equipment, fire extinguishers, personal breathing units, and emergency vision assurance systems for the flight crew — is also exempt.
• Taxable — items not permanently affixed, plus disposable and ground items: electronic-flight bags, aircraft chocks, tow bars, step cover protectors, engine covers, wing-protection matting, and ICOM air-band transceivers. Headsets are taxable because they move easily from one aircraft to another. Also taxable: blankets, pillows, carts, serving utensils, aviation calculators, flight maps, baggage-handling and refueling equipment, tractors and other airport ground equipment, repair and maintenance tools, and oxygen equipment required by FARs for ground crews.

In short, if the part stays with the aircraft as a permanent component (or is emergency equipment the FARs require to be secured aboard), it is exempt; if it is removable, disposable, or used on the ground, it is taxable.

What this means for you

Aviation businesses and parts dealers

Charge Kansas sales tax on removable and ground-support items (chocks, tow bars, covers, matting, transceivers, headsets, flight bags, tools) but treat genuine aircraft repair, modification, and replacement parts — and the labor to install them — as exempt under 79-3606(g) for any aircraft. The test is permanence: does the item become part of the aircraft for its service life?

Aircraft owners and operators

Expect an exemption on parts installed in your aircraft and on the repair/modification services to install them, but expect tax on loose gear you can carry between aircraft or use on the ground.

Common carriers and private carriers

Emergency equipment the FARs require you to keep secured in the aircraft (life rafts, preservers, fire extinguishers, personal breathing units, EVAS) is exempt. Oxygen equipment the FARs require for ground crews is taxable, and single-use or disposable items are taxable even if used aboard.

Common questions

Q: Are aircraft repair and replacement parts exempt in Kansas?
A: Yes. Since 2005, sales of aircraft repair, modification, and replacement parts, and the services to install them, are exempt under K.S.A. 79-3606(g) for all aircraft.

Q: Why are headsets taxable when a sun visor is exempt?
A: A sun visor installed on the aircraft is affixed and becomes part of it, so it is exempt. Headsets are easily removed and used on a different aircraft, so they are taxable.

Q: Is FAR-required safety equipment exempt?
A: Equipment the FARs require to be secured in the aircraft for its service life (life rafts, preservers, fire extinguishers, personal breathing units, EVAS) is exempt for carriers. But FAR-required ground-crew oxygen equipment, and disposable or single-use items, are taxable.

Citations and references

• K.S.A. 79-3606(g) — exempts sales of aircraft repair, modification, and replacement parts and the services employed in the remanufacture, modification, and repair of aircraft (extended to all aircraft since January 1, 2005), and exempts sales of aircraft themselves to certified/licensed common carriers, to foreign governments, or for use outside the United States.
• Notice 04-06 / 2004 Senate Bill 147 (2004 Kansas Session Laws 171) — the 2004 amendment that extended the parts-and-services exemption to all aircraft effective January 1, 2005.
• Complete Auto Transit, Inc. v. Brady, 430 U.S. (1977); In re Taylor Crane & Rigging, Inc., 22 Kan. App. 2d 27, 913 P.2d 204 (1995) — cited in support of treating ground-support and non-affixed equipment as outside the exemption.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2009-007

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

September 4, 2009

XXXX
XXXX
XXXX

RE: Your letter dated May 4, 2009

Dear XXXX:

I have been asked to answer your recent letter. You submitted the letter on behalf of XXXX, an aviation-management consulting business. XXXX offers a broad range of aviation-related services including aircraft management, aircraft evaluation, consulting, and professional-pilot services. It also sells airplane parts and aviation equipment. You list a number of items and ask if their sale is exempt under K.S.A. 2008 Supp.79-3606(g).

K.S.A. 2008 Supp. 79-3606(g) was last amended by the 2004 Kansas legislature. The statutory changes enacted in 2004 were discussed Notice 04-06. It instructs:

AMENDED NOTICE 04-06
SALE OF AIRCRAFT REPAIR PARTS AND SERVICES

Beginning January 1, 2005, the sale of aircraft repair, modification and replacement parts and sales of services employed in the remanufacture, modification and repair of all aircraft, will be exempt from Kansas state and local sales and compensating use tax pursuant to 2004 Senate Bill 147.

However, sales of aircraft not being used as certified or licensed common carriers in interstate or foreign commerce, not sold to a foreign government, or not sold for use outside the United States will remain subject to Kansas state and local sales tax, unless the aircraft is sold and delivered in this state to a resident of another state, the aircraft is not to be registered or based in this state, and the aircraft does not remain in this state more than 10 days.

The following subsection of the applicable Kansas session law shows the changes that the 2004 legislature made to the previous exemption:

(g) sales of aircraft including remanufactured and modified aircraft, sales of aircraft repair, modification and replacement parts and sales of services employed in the remanufacture, modification and repair of aircraft sold to persons using directly or through an authorized agent such aircraft and aircraft repair, modification and replacement parts as certified or licensed carriers of persons or property in interstate or foreign commerce under authority of the laws of the United States or any foreign government or sold to any foreign government or agency or instrumentality of such foreign government and all sales of aircraft, aircraft parts, replacement parts and services employed in the remanufacture, modification and repair of aircraft for use outside of the United States and sales of aircraft repair, modification and replacement parts and sales of services employed in the remanufacture, modification and repair of aircraft. . . . 2004 Kansas Session Laws 171.

As the notice explains, K.S.A. 2008 Supp. 79-3606(g) continues to exempt sales of aircraft to airlines and other common carriers that use the aircraft to haul passengers and freight in interstate commerce. The subsection's treatment of parts and services was changed. K.S.A. 2008 Supp. 79-3606(g) now exempts "sales of aircraft repair, modification and replacement parts and sales of services employed in the remanufacture, modification and repair of aircraft." This language exempts sales of aircraft parts that are sold and used to: (1) repair an aircraft: (2) replace existing parts of an aircraft, or (3) modify an aircraft. The services done to repair or modify an aircraft, or to replace parts on an aircraft, are also exempt. Since 2005, the exemption of aircraft parts and services has extended to all aircraft, not just aircraft that are used by common carriers in interstate or foreign commerce, or that are sold to foreign governments.

The use of the words "aircraft repair, modification and replacement parts," shows that K.S.A. 2008 Supp. 79-3606(g) is intended to extend to items that are affixed to an aircraft and that, by being affixed, are incorporated into and become a permanent part of the aircraft or at least a "permanent" part for the part's service life. Examples of these parts are engines, engine components, doors, windshields, windows, hydraulic components, passenger seats, landing gear, controls and non-removable instruments that are permanently mounted in the cockpit, similar parts that are replaced, repaired, or overhauled according to manufacturer service bulletins, and other similar life-limited parts. Exempt parts do not include disposable items or items that are attached to the aircraft during servicing or flight but removed once the servicing or flight is complete.

K.S.A. 2008 Supp. 79-3606(g) does not extend to goods like blankets, pillows, carts, or serving utensils that are purchased for use on an aircraft or to equipment that is not affixed to the aircraft with any permanency and that can be easily removed for use on another aircraft. Examples of these items are headsets, aviation calculators, electronic-flight bags, and flight maps. Other items that are not exempt under K.S.A. 2008 Supp. 79-3606(g) include baggage hauling and loading equipment, refueling equipment, tractors that are used to move aircraft prior to takeoff, or to other ground equipment that is used at an airport to move or service private or commercial aircraft. Complete Auto Transit, Inc. v. Brady, 430 U.S. (1977); see e.g. In re Taylor Crane & Rigging, Inc. 22 Kan. App. 2nd 27, 913 P.2d 204 (1995). Repair and maintenance tools, equipment, and disposable items used to service or repair aircrafts are also not exempt under this provision. None of these things become a "part" of the aircraft.

For common and private carriers, the exemption extends to items that Federal Aviation Regulations (FARs) require the carrier to secure in an aircraft with the expectation that the item will remain secured there throughout the item's service life or until it is used. These thing can include life rafts, life preservers, and other ditching equipment required to be secured in an aircraft under FARs 23.1415, 91-509, 121.1415, etc., fire extinguishers, and similar items. Sales of personal breathing units and emergency vision assurance systems that are required by FARs to be secured in aircraft so that they are available for emergency use in the air by the flight crew are also be exempt. Sales of oxygen equipment required by FARs for ground crews are not exempt. Items that are secured in an aircraft pursuant to FARs with the expectation that the item will remain in the aircraft throughout the items service life are typically purchased on the account of a common carrier or private carrier to use to equip their aircraft. The exemption does not extend to disposable items or to single-use items such as stencils that are affixed to an aircraft and then removed after use.

With these things in mind, I will identify the items in your list that are not exempt under K.S.A. 2008 Supp. 79-3606(g), assuming your limited description of the items and their intended use is accurate. Taxable items are: electronic-flight bags, aircraft chocks, tow bars, step cover protectors, engine covers, wing protection matting, and ICOM air-band transceivers. Sales of items such as engine covers and wing matting, that are used when an aircraft is being serviced or stored, are not exempt even if its use is required by an FAR during the servicing or storage or the aircraft. These items are not attached or secured to the aircraft with the intention that the item remains with the aircraft beyond the servicing being performed or storage period. Sun visors, which you describe as being ". . . installed on the aircraft to protect a pilot from sun glare and heat" are exempt because they are affixed to the aircraft. Headsets sold to pilots, commercial carriers, and private carriers are taxable. Headsets can be easily removed from one aircraft and used in a different aircraft.

This is a private letter ruling pursuant to K.A.R. 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This ruling will be revoked in the future by the operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or published revenue ruling, that materially effects this private letter ruling.

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Date Composed: 09/15/2009 Date Modified: 09/15/2009

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