The Supreme Court of Missouri recently determined a taxpayer's aircraft purchase qualified for a resale exemption and was exempt from use tax. The taxpayer purchased an aircraft outside of Missouri and transferred the right to use the aircraft to a common carrier.
Under sales tax law, Missouri exempts sales for resale when the subsequent sale is exempt. Missouri also exempts sales of aircraft to common carriers for use in interstate commerce.
Missouri provides a use tax exemption for sales that are exempt from sales tax. So, to qualify for an exemption from use tax for resale of an aircraft to a common carrier, the taxpayer had to prove that its transaction met the use tax and sales tax definitions of "sale" by showing that the right to use the aircraft was transferred for "valuable consideration paid or to be paid."
The court found that there was valuable consideration despite the fact that the plane was leased for a reduce rate resulting in no profit in certain transactions. The court found that the taxpayer's lease agreement met the definition of a sale under both statutes. So, the taxpayer's purchase of the aircraft qualified for a resale exemption and was exempt from use tax.