Can I avoid sales tax on my aircraft by registering it in a Delaware Corporation?
By Thomas A. Alston
Many people believe that they can set up an LLC in Delaware or any other location outside California in order to avoid sales or use tax in California. The state where the LLC or corporation is registered has nothing to do with legally avoiding tax in California. In fact, as I have mentioned before many times, don't leave things to chance.
If the State of California decides to, they can charge you with fraud. The following section of law will be their support.
6485.1. 50 percent penalty. Any purchaser of a vehicle, vessel, or aircraft who registers it outside the State of California for the purpose of evading the payment of taxes due under this part shall be liable for a penalty of 50 percent of any tax determined to be due on the sales price of the vehicle, vessel, or aircraft.
Why don't I just become an aircraft dealer so I can buy aircraft without paying tax?
Everyone knows someone who routinely brags about this resale scheme. Well the following sections of law explain the truth.
6094.5. Improper use of certificate. Except as provided in Sections 6012.8 and 6012.9:
(a) Any person, including any officer or employee of a corporation, who gives a resale certificate for property which he or she knows at the time of purchase is not to be resold by him or her or the corporation in the regular course of business for the purpose of evading payment to the seller of the amount of the tax applicable to the transaction is guilty of a misdemeanor punishable as provided in Section 7153.
(b) Any person, including any officer or employee of a corporation, who gives a resale certificate for property which he or she knows at the time of purchase is not to be resold by him or her or the corporation in the regular course of business is liable to the state for the amount of tax that would be due if he or she had not given such resale certificate. In addition to the tax, the person shall be liable to the state for a penalty of 10 percent of the tax or five hundred dollars ($500) whichever is greater, for each purchase made for personal gain or to evade the payment of taxes.
About the Author
Mr. Alston has written California sales tax articles for The Successful Accountant, Inflight USA, San Diego Business & Aviation Journal, Van Nuys Business & Aviation Journal and the Sacramento Business Journal. His newsletter called "TAX MATTERS" is dedicated to keeping California owners of aircraft informed about taxes. http://www.aeromarinetaxpros.com.
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