Aircraft First Used Outside Nevada Not Subject to Nevada Use Tax

Thursday, March 27th, 2014


The Nevada Supreme Court recently ruled that a taxpayer's purchases of two aircraft were not subject to Nevada use tax because the aircraft's first flights were outside Nevada.

Nevada's use tax applies to purchases of tangible personal property for storage, use, or consumption in Nevada. The law presumes that property delivered outside Nevada for use in interstate commerce is not for storage, use, or consumption in Nevada if two requirements are met. First, the property's first use in interstate commerce must be outside Nevada. Second, the property must be continuously used in interstate or foreign commerce for at least twelve months after that first use.

The taxpayer purchased four aircraft to carry employees and guests to and from its business locations. It purchased two aircraft in Arkansas and flew them to Nevada. It purchased another two aircraft in Oregon and flew one to Arkansas and one to California. The taxpayer used the aircraft in interstate commerce from these flights onward. Each of the aircraft flew to and from Nevada on a regular basis.

The Supreme Court decided that the relevant "first use" of an aircraft was its first flight. To be "outside" Nevada for its first flight, an aircraft could neither depart from nor arrive in Nevada. The two aircraft purchased in Arkansas were therefore first used in Nevada and did not qualify for the presumption against use tax. The two aircraft purchased in Oregon, however, were first used outside Nevada. The presumption against use tax did apply to these two aircraft. Because the state did not overcome the presumption, the Court decided that the taxpayer did not owe use tax on the two aircraft purchased in Oregon.

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