SALT Report 2051 – The Illinois Department of Revenue issued a general information letter regarding aircraft use tax liability. The guidance was requested by four individuals who are the registered owners of a small single-engine aircraft, which they use recreationally. At this time, the four men would like to set up a corporation and transfer the title of the aircraft to the corporation. The men believe that this would constitute a transfer rather than a sale and requested guidance regarding use tax liabilities.
In their decision, the Department noted that this type of transfer would fall under the occasional sale category. Generally, in this type of sale a purchaser would not incur a use tax liability on its purchase of tangible personal property. However, the purchaser of specific types of tangible personal property may incur a tax liability under 35 ILCS 157/10-1 the aircraft use tax law.
Under the aircraft use tax law, a tax is imposed on the privilege of using any aircraft acquired by gift, transfer, or purchase. Therefore, the transfer of an aircraft from individual owners to a newly formed corporation is a taxable event even though the actual ownership of the aircraft will not change after the transfer.
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