Can someone buy an aircraft tax-free with a resale certificate if they plan to lease it to both a certificated carrier and, occasionally, private individuals?

Plain-English summary

Someone planning to buy an aircraft to lease it primarily to a certificated carrier — but occasionally also to private individuals — asked the Comptroller to confirm their understanding of the tax treatment: buy the aircraft tax-free via resale certificate, treat leases to the certificated carrier as exempt under Tex. Tax Code § 151.328, and treat leases to private individuals as taxable.

The Comptroller confirmed all three points. The buyer may issue a resale certificate on the aircraft purchase. A certificated or licensed carrier of persons or property may then lease the aircraft tax-free by issuing an exemption certificate claiming the § 151.328(a) exemption. But sales or use tax is due on any lease or rental of the aircraft to persons who aren't eligible to claim that (or another valid) exemption — meaning leases to private individuals are taxable.

What this means for you

Aircraft owners leasing to a mix of carriers and individuals

You can buy your aircraft tax-free with a resale certificate regardless of your eventual mix of exempt and taxable lessees. Just make sure you collect a proper exemption certificate from any certificated/licensed carrier claiming the § 151.328(a) exemption, and collect sales tax on rentals to anyone who doesn't qualify — including private individuals.

Certificated and licensed carriers

You can lease aircraft tax-free from an owner/lessor by issuing a properly completed exemption certificate under Tex. Tax Code § 151.328(a) — confirm your carrier certification status supports the claim before issuing it.

Accountants and tax professionals

This is a straightforward illustration of the general "resale certificate on purchase, tax collection tracks the lessee's eligibility" pattern applied to aircraft under § 151.328 — the exemption travels with the lessee's status (certificated carrier), not with the aircraft or the lessor.

Common questions

Q: Can I buy an aircraft tax-free if I plan to lease it out?
A: Yes, via resale certificate, as long as you're properly collecting or exempting tax on the subsequent lease income based on each lessee's status.

Q: Is leasing an aircraft to a certificated carrier tax-exempt?
A: Yes, under Tex. Tax Code § 151.328(a), if the carrier issues a proper exemption certificate.

Q: Is leasing the same aircraft to a private individual taxable?
A: Yes. Sales or use tax is due on the lease or rental of the aircraft to persons not eligible to claim a valid exemption.

Q: Can I rely on this letter for my own aircraft leasing arrangement?
A: No. This opinion is based on the facts presented; other facts, though similar, may provide a different result.

Citations and references

Statutes:

• Tex. Tax Code § 151.328, including subsection (a) (exemption for aircraft leased to a certificated/licensed carrier)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200005242L

Original ruling text

May 2, 2000

** <**>

Subject: Taxability Question

Dear **:

Thank you for your recent email inquiry.

You have a client who intends on purchasing an aircraft for the purposes of
leasing to a certificated carrier, and on some occasions, to individuals. You
asked for verification of your understanding that your client could issue a
resale certificate on the purchase of the aircraft, subsequent leases to the
certificated carrier would be tax exempt pursuant to the Tax Code Section
151.328 and leases to private individuals would be taxable.

Response: Your client may issue a resale certificate on the purchase of the
aircraft. A certificated or licensed carrier of persons or property may lease
the aircraft from your client tax free by issuing an exemption certificate
claiming the exemption Texas Tax Code Section 151.328(a).

Sales or use tax is due on the lease or rental of the aircraft to persons not
eligible to claim a valid exemption.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please call me toll-free at 1-800-531-5441, extension 3-4502. The
direct line is 512/463-4502. You may also write to Tax Policy Division,
Comptroller of Public Accounts. You may also e-mail our tax help section at:

Sincerely,

Gilbert Zamora
Tax Policy Division