High taxes are causing aviation revenue to literally fly out of Florida. There’s an easy fix.

by | Feb 6, 2020

Most Floridians don’t own their own airplane, but are still hurt by Florida’s tax on small aircraft sales because airplane owners are flying out of state to close deals. Not only is our state government not collecting the sales tax when airplanes are bought and sold, but Florida is also missing out on economic activity generated when aircraft sellers and buyers meet to conduct business. Often, that means revenue flowing to aviation industry employees, fixed based operators (FBO’s) – airport service centers that sell fuel and offer maintenance and services pilots – and the hotels, restaurants, and other benefactors of economic activity generated when prospective buyers kick the tires, test fly an airplane and ultimately agree to a deal.

“Florida’s 129 public airports do more than just bring tourists here, they create jobs and serve as economic engines that power communities across our state,” says Lisa Waters, CEO of the Florida Airports Council. “We now have an opportunity to create an even better business climate that will encourage buyers and sellers to engage in more transactions here in Florida – rather than travel to a nearby state.”

Given our Republican-controlled state government, lowering taxes on aircraft sales should be a no-brainer.

“We need to send a strong message that Florida is ready to soar by eliminating the counterproductive tax on aircraft sales and leases,” said State Representative Heather Fitzenhagen, who is sponsoring House Bill 6067 to repeal the aircraft sales tax. “Florida’s current tax structure needlessly pushes away economic opportunities by imposing a sales tax that’s higher than any other state in the Southeast and easy for buyers to avoid. Instead, we should be keeping the jobs associated with such a transaction here in Florida by eliminating this burdensome tax.”

Last year, state lawmakers considered legislation that would have eliminated or reduced Florida’s aircraft sales tax, but the bill failed. Fitzenhagen’s new bill is being considering during the 2020 legislative session.

Florida law already exempts larger commercial aircraft from sales tax, but the state is home to 21 million people, many of which own or operate their own aircraft. Smaller planes are easily moveable, and airplane owners aren’t dumb. They can easily just fly to a neighboring state to complete a sale and avoid paying higher sales tax.

Imagine you’re the owner of a Pilatus PC-12, or a Beechcraft King Air C-90, both of which are too light to qualify for Florida’s sales tax exemption. Depending on how those airplanes are configured, the sale price could run anywhere from $1 million to $5 million or more. Would you be willing to spend the money to fly the airplane to Alabama, with its dirt-cheap sales tax of just 2%, if it meant you could save $40,000 to $200,000 in taxes? Of course you would.

Aircraft sales tax rates in the Southeast United States

As the map shows, every neighboring state, and nearly the entire Southeast region, has a sales tax rate that is lower and more attractive than Florida’s own. Yet somehow we bill ourselves as the low tax state that is “open for business.”  The good news is that Fitzenhagen’s bill would correct this problem and make Florida much more competitive.

Studies have shown that cutting the tax could actually increase revenue. Several years ago, Florida lawmakers capped the sales tax on yachts, which on the surface would seem to decrease tax revenue. But the opposite happened. According to the Sun Sentinel:

“The Florida Legislature’s revenue estimating committee projected that the tax cut would cost the state as much as $1.4 million the first year. But instead, state tax collections on yacht sales rose more than $13 million the first year.” (Source: Jeff Erdmann, chair of the public affairs committee for the Florida Yacht Brokers Association)

Some experts say lowering or eliminating the aircraft sales tax not only generates economic activity related to aircraft sales, such as more in-state aviation jobs and related economic activity, including maintenance inspections, fuel purchases, and even travel expenditures for hotels and restaurants, but would actually spark aircraft sales that might not have happened at all, making Florida even more of an aviation hotbed in the region.

According to a 2015 study, our state could gain almost 300 high-paying jobs and some $38 million in economic growth by reducing or eliminating the sales tax on aircraft. Florida’s aviation industry already generates about $175 billion in economic activity every year, supports 1.4 million jobs, and boasts the highest number of student pilots, sport pilots and flight instructors in the nation, all of whom rely on smaller aircraft for their aviation activity.

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