Bills › 88th General Assembly
Modifying the sales and use tax exemption for the sale of certain component parts attached to or services performed on aircraft
Sponsored by the House Ways and Means Committee
Topics:Taxes
Where it is now
- Done: IntroducedMarch 4, 2019
- Done: SubcommitteeJanuary 28, 2020
- Done: House committeeFebruary 24, 2020
- Done: Passes the HouseMarch 5, 202089–7
- Stopped: Senate committeeDied when the General Assembly ended
- Next: Passes the Senate
- Next: To the Governor
- Next: Signed into law
Died when the session ended The 2020 session adjourned on June 14, 2020, the General Assembly’s last regular session. Bills that didn’t pass both chambers died. What’s a funnel?
What’s in it
Current law exempts from the Iowa sales and use tax the sale, rental, or use of aircraft component parts permanently attached to an aircraft, including repair or replacement materials or parts, and repair, remodeling, and maintenance services used on an aircraft, aircraft engine, or aircraft component materials or parts, provided the aircraft is used in either a scheduled or nonscheduled interstate federal aviation administration (FAA) certified air carrier operation (scheduled or nonscheduled FAA operation).
Read the full explanation
This bill removes the requirement that the aircraft be used in a scheduled or nonscheduled FAA operation to qualify for the exemption. The sale, rental, or use of the component parts and services described above will be exempt from the sales and use tax when permanently attached to or performed on any aircraft. The bill defines “aircraft” to mean the same as it does for purposes of Code chapter 328 (aeronautics), which includes any contrivance now known, or hereafter invented, used or designed for navigation of or flight in the air, for the purpose of transporting persons or property, or both.3(75) to strike or move similar language relating to the sales and use tax exemption described in the bill and to the sales and use tax exemption for the sale or rental of aircraft used in a scheduled FAA operation.
House subcommittee
Named January 28, 2020. On February 6, 2020 it recommended passage.
- Rep. David E. Maxwell R
- Rep. Gaskill
- Rep. Joe Mitchell R
Three legislators hear a bill first and recommend what the committee should do; it’s the best time to weigh in. How to take part
Fiscal note
AI summary This bill expands the sales and use tax exemption for aircraft repair and maintenance to include aircraft not used in certified air carrier operations. It is estimated to decrease revenues for the state's General Fund, the Secure an Advanced Vision for Education (SAVE) Fund, and local option sales tax (LOST) revenues. The estimated decreases for fiscal year 2021 are -$542,000 for the General Fund, -$108,000 for the SAVE Fund, and -$83,000 for LOST revenues.2
Read the fiscal note
Description
House File 2573 expands the existing aircraft repair and maintenance sales and use tax exemption to include aircraft that are not used in scheduled or nonscheduled interstate Federal Aviation Administration certified air carrier operations.
Background
Iowa Code section 328.20 requires all civilian aircraft owned or operated within the State for more than 30 days to be registered with the Department of Transportation. Fees for registration established in Iowa Code section 328.21 vary based on age and value of the aircraft and range between $35 and $5,000. These fees are deposited into the State Aviation Fund. Nationally, state sales tax laws relating to aircraft maintenance can be broken down into four basic categories:
- States with no sales tax.
- States exempting all aircraft maintenance from sales tax.
- States with a limited sales tax exemption for aircraft maintenance.
- States with a sales tax and no exemption for aircraft maintenance.
Assumptions
- In 2019, there were approximately 2,500 airworthy civilian aircraft registered with the Department of Transportation that had Iowa ownership or likely Iowa ownership. Of these aircraft, 150 (6.0%) had annual registration fees ranging from $3,000 to $5,000; 465 (18.6%) had annual registration fees ranging from $101 to $2,999; and 1,885 (75.4%) had annual registration fees ranging from $35 to $100.
- More expensive aircraft have a higher likelihood of higher maintenance costs. Aircraft in the highest tier of registration fees have estimated annual maintenance costs of $20,000. Aircraft with mid-tier registration fees have annual estimated maintenance costs of $8,000, and those with lowest-tier registration fees have annual estimated maintenance costs of $3,000.
- An unknown number of aircraft owners take the aircraft for scheduled repairs to states that have no sales tax or already have an aircraft maintenance sales tax exemption enacted. Taking repairs out of state is more likely to be cost-effective for owners of aircraft with higher maintenance costs. Therefore, scheduled repairs on an estimated 20.0% of the highest maintenance cost aircraft, and on an estimated 10.0% of the mid-tier and lowest-tier maintenance cost aircraft, are assumed to not take place in Iowa.
Fiscal Impact
House File 2573 is estimated to decrease sales and use tax revenues to the General Fund, the Secure an Advanced Vision for Education (SAVE) Fund, and local option sales tax (LOST) revenues, as presented in the following table.
Sources
- Department of Transportation
- Department of Revenue
- Iowa Public Airports Association
- Aircraft Owners and Pilots Association
- LSA analysis and calculations
- Sales Tax Exemption, Aircraft Parts and Service · March 3, 2020
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- SF 109 Modifying the sales and use tax exemption for the sale of certain component parts attached…89th General Assembly · In committeeNearly identical
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