Were Company A's aircraft sale to a nonresident foreign lessor and the aircraft's leaseback to Company A subject to Texas sales tax?

Plain-English summary

Company A planned to sell an aircraft to a foreign lessor and lease it back. The Comptroller concluded that the arrangement was not a financing lease but that neither transaction was taxable on the stated facts.

The sale qualified under Tax Code Section 151.328(a)(3) because the buyer was a nonresident whose only Texas contact was the aircraft's presence in the state. Company A was instructed to obtain an exemption certificate from the foreign lessor.

The leaseback qualified under Section 151.328(a)(1) because Company A would operate the aircraft as a licensed and certificated carrier.

What this means for you

The exemptions rested on both parties' particular status and use of the aircraft. A seller using the nonresident-aircraft exemption also needed documentation from the buyer.

Common questions

Was the arrangement treated as a financing lease? No.

Was Company A's aircraft sale taxable? No. The Comptroller applied the nonresident-aircraft exemption.

What documentation did Company A need for the sale? An exemption certificate from the foreign lessor.

Was the leaseback taxable? No, because Company A would operate the aircraft as a licensed and certificated carrier.

Citations and references

• Tex. Tax Code § 151.328(a)(3) — aircraft sale to a nonresident.
• Tex. Tax Code § 151.328(a)(1) — aircraft operation by a licensed and certificated 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/8707L0823A07

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller July 9, 1987

Dear ***:

Thank you for your letter requesting a ruling on the taxability of a
lease
transaction involving your client, Company A, and a Foreign Lessor.

Based on the facts presented, we have determined that the lease does not
qualify as a financing lease. The sale and subsequent lease between
Company
A and the Foreign Lessor are not, however, taxable transactions.

In our telephone conversation, you stated that the Foreign Lessor does
not
have any contract with Texas. None of the investors are Texas residents,
and the Lessor is not engaged in business in Texas. Its only contact
with
Texas is the presence of the leased aircraft in Texas. The sale by
Company
A to the Foreign Lessor is, therefore, exempt under Tex. Tax Code sec.
151.328 (a)(3) as a sale of an aircraft to a nonresident. Company A
should
obtain an exemption certificate from the Foreign Lessor as proof of that
exemption.

The subsequent lease of the aircraft to Company A is exempt under Tex.
Tax
Code sec. 151.328 (a)(1) as Company A will operate the aircraft as a
licensed
and certificated carrier.

This opinion is based upon the facts you presented. If there are
additional
or different facts, this opinion may change.

Please feel free to contact me if you have additional questions. You may
write me, call toll free 1-800-252-5555 from anywhere in Texas or phone
512/463-4600.

Sincerely,
Mona Ezell Shoemate
Tax Policy Division