Virginia – Airline Exemption

SALT Report 1741 – The Virginia Tax Commissioner issued a ruling regarding a Taxpayer’s purchases of tangible personal property. The Taxpayer is authorized by the Federal Aviation Administration to operate an integrated transportation system that uses aircraft and highway vehicles to transport and handle customer cargo and packages. This transportation system performs several common carrier duties, such as receipt of goods; pickup; over-the-road transport; cargo loading, unloading and handling at airports; air transport, sorting, delivery and protection of property.

In 2008 the Taxpayer was audited and assessed tax on purchases of assets and other tangible personal property. The Taxpayer appealed the assessment based on the following:

  • Many of the purchases held in the audit were exempt pursuant to the retail sales and use tax exemption for airlines as provided in Va. Code § 58.1-609.3 6
  • There was a miscalculation and understatement of tax payments, and
  •  Many items were first used outside Virginia

Virginia Code § 58.1-609.3 6 provides 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.”

Upon review of the audit, the Commissioner determined that the Taxpayer’s purchases of tangible personal property fell within the exemption guidelines and qualified for the airline exemption. Specifically, the Commissioner found that the airline exemption applied to the following purchases:

  • Aircraft wheel changers used in the removal and installation of aircraft wheels,
  • Belt loaders used to load and unload baggage and freight to and from aircraft, or to and from highway freight vehicles at the airport,
  • Conveyor units used to move and sort packages to the proper aircraft through a hub/sort system that ensured the packages were loaded to the proper aircraft from highway freight vehicles at the airport,
  • Forklifts used by aircraft personnel to lift containers to and from aircraft and from freight trucks at the airport,
  • Ground power units used to generate electricity for aircraft being prepared for flight or for performing repairs or maintenance to aircraft,
  • Nitrogen carts used to service aircraft tires and hydraulic systems of aircraft,
  • Machinery, equipment and repair parts used to repair and maintain non-highway vehicles and equipment used at the airport to support ground operations,
  • Drop boxes used in the receipt of cargo or packages from customers,
  • Vehicle maintenance equipment used to repair or lubricate trucks and vans licensed for highway use and used to transport cargo and packages, and
  • Vehicle maintenance parts used to repair trucks and vans that were part of the integrated transportation system

For Further Information:

Virginia Department of Taxation – Ruling of Commissioner P.D. 12-111