Two Florida based airplane manufacturers say that of the 1,033 planes the two companies built last year, just 15 of them were sold in Florida. The remaining 1,018 – about 98.6 percent – flew out of state to avoid paying Florida’s uncompetitive sales tax. And Florida likely lost out on other tangential revenue as well. Flight crews from the manufacturer and new owners have to book transportation, meals, hotel stays and other incidentals when they travel to pick up the new airplanes, but those dollars aren’t getting spent in Florida, either.
It’s enough of a problem that state lawmakers have been considering ways to fix the problem and make Florida more competitive. Senate Bill 786 and House Bill 6051 were introduced to create economic benefits for Florida by doing away with the state’s sales and lease tax on any aircraft under 15,000 pounds. Aircraft over that weight are already exempt from the tax.
“Florida’s current tax on aircraft sales makes us less competitive and incentivizes people to take their business to nearby states,” said Lisa Waters, President and CEO of the Florida Airports Council. “Florida is a recognized leader in the aviation space and we have an opportunity in front of us that will take the industry to new heights. By eliminating this burdensome tax, we will create hundreds of jobs, generate millions of dollars in economic activity, and send a strong signal that Florida is open for business.”
The Senate bill has cleared two committees, but the House bill has stalled so far. The Senate is expected to release their annual tax package in the coming days. According to a 2015 study from the Florida Aviation Business Association (FABA), eliminating the sales tax would result in the sale of an estimated 354 additional aircraft worth a total of $246 million each year.
The state’s current tax is 6%, which is much higher than other Southeastern states, especially when applied to the high price of business jets. Even the most affordable business jets start at around $5 million dollars, while top-of-the-line models have sticker prices that are considerably more. The tax is only 4% in Georgia and 2% in both Alabama and Virginia. Meanwhile, South Carolina has a low, flat fee of $500, and North Carolina’s flat fee is $2,500. Paying the sales tax in Florida on a $5 million business jet would cost $300,000. A flight to South Carolina to register the sale might cost a bit extra in fuel and pilot compensation, but the flight is a no-brainer when the new owner is saving a quarter of a million dollars in sales tax payments.
“Despite the economic benefit of manufacturing in the State, only four customers have opted to take delivery of their aircraft in the State, due to Florida’s 6% sales and use tax,” said Mark Schramek, Embraer North America Vice President of Government Relations. “Most customers have either opted to take delivery in neighboring South Carolina, which charges a flat fee of $500, or used Florida’s 10-day fly-away option. In both cases, the State of Florida continues to lose long-term revenue from the general aviation industry.”
Industry observers say other states have seen other financial benefits from eliminating similar taxes. New York passed legislation eliminating the sales and use tax for general aviation in 2015. Since then, hundreds of new aircraft have based at New York airports, and those airports have received hundreds of millions of dollars in investments. The state’s three largest general aviation airports saw a 38% increase in business aircraft arrivals following the elimination of the aviation sales tax.
Aviation is big business in the Sunshine State. The industry generates $175 billion in economic impact and creates jobs for 1.4 million Floridians. And Florida’s airports welcome in over half of all state visitors and accommodate more than 176 million passengers annually.
“By eliminating the sales and use tax, Florida will make itself more competitive against its neighboring states that charge either a flat fee or as low as 2% sales and use tax,” said Schramek. “With passage of Senate Bill 786 and House Bill 6051, the elimination of the sales and use tax will make Florida the epicenter for general aviation and drive business growth within the State.”