Aircraft Purchased For Lease to Common Carrier Exempt As Purchase For Resale

Thursday, March 5th, 2015

An parked aircraft.

The Missouri Supreme Court recently held that when an aircraft is purchased for lease to a common carrier, the purchase is an exempt purchase for resale.

The taxpayer purchased an aircraft in Kansas and then leased the aircraft to a common carrier, which moved the aircraft to Missouri. The Missouri Department of Revenue assessed the taxpayer for use tax, which the taxpayer paid under protest. This eventually came to the Missouri Supreme Court ("Court").

Missouri exempts purchases made for resale from sales and use tax. "Purchase" is defined as the acquisition of tangible personal property through a sale for the purpose of storage, use, or consumption in Missouri. "Sale" is defined as any transfer of tangible personal property, including a lease where the right of use is fully transferred.

The Court ruled that the lease qualified as a sale. Leases qualify as sales where the right of use is fully transferred, even if title or ownership is not transferred. In this case, the lessee had full right of use. Because the lease to the common carrier was a sale, the taxpayer's purchase of the aircraft was a purchase for resale. Therefore, the purchase was exempt.

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