Last week, the Third Court of Appeals in Texas made a decision regarding the tax exemption for aircraft that may impact applicable Texas businesses. As a result, companies authorized to carry passengers under part 91 of the FAA regulations that do not hold certificates issued under Part 121, 125 or 135 of the FAA regulations should consider filing claims for refunds.
Cirrus Exploration Company purchased helicopters under the Texas sales and use tax exemption for aircraft used by a licensed and certified carrier in the regular course of business of transporting persons or property for hire. The company used the helicopters to provide aerial sightseeing tours and photography and surveying flights to customers. Cirrus held a letter of authorization under part 91 of the FAA regulations allowing the company to conduct passenger-carrying flights for compensation. However, it did not hold a commercial operating certificate issued under Part 121, 125 or 135 of the FAA regulations and was not required to do so by FAA regulations.
The Comptroller argued that Cirrus did not qualify for the Texas sales and use tax exemption because it only applied to those carriers who held certificates issued under Part 121, 125 or 135 of the FAA regulations. The Comptroller previously stated in hearings that the exemption only applied to taxpayers who held these particular certificates, not to taxpayers only authorized to transport passengers under part 91 of the FAA regulations.
The Third Court of Appeals found that Cirrus was a “licensed and certified carrier” under the plain meaning of the definition found in the Comptroller’s rules. The Court held that because the definition in the Comptroller’s rules was ambiguous, it could not follow the contradictory policy. As a result, the Court ruled that the Texas law exempted company’s helicopters from Texas sales and use tax.
For more information on this case and how it may apply to your business, please contact:
Director-in-Charge of Sales Tax