Aircraft Sales Tax by State: Complete 2025 Guide

Understanding aircraft sales tax by state helps buyers save thousands through strategic planning. State airplane sales tax rates range from 0% to 9%+, with numerous exemptions available.

States with No Aircraft Sales Tax

Best States for Aircraft Purchase:

• Alaska: No sales tax (local taxes may apply)
• Delaware: No sales tax, popular registration state
• Montana: No sales tax, LLC strategy available
• New Hampshire: No sales tax
• Oregon: No sales tax

Low Sales Tax States (Under 4%)

• Hawaii: 0.5% (aircraft exempt from general 4% tax)
• Colorado: 2.9% (some counties additional)
• Wyoming: 3% (aircraft specific rate)
• Wisconsin: 0.5% (reduced aircraft rate)
• South Dakota: 3% (aircraft specific)

High Sales Tax States (7%+)

• California: 7.25-10% depending on county
• Texas: 6.25% state + local (up to 8.25%)
• Illinois: 6.25% state + local
• New York: 4% state + local (up to 8.875%)
• Washington: 6.5% state + local (up to 10.4%)

Common Exemptions

Interstate Commerce Exemption:

• Aircraft used primarily for interstate transport
• Qualify if 50%+ use crossing state lines
• Common carrier and charter operations
• Documentation requirements vary by state

Casual Sale Exemption:

• Private party to private party sales
• Not dealer or business sales
• Some states limit frequency
• May still owe use tax

Fly-Away Exemption:

• Purchase and immediately fly out of state
• Never based in purchase state
• Time limits apply (24-48 hours typical)
• Proof of departure required

Use Tax Obligations

What is Use Tax:

• Tax on aircraft brought into state for use
• Applies even if no sales tax paid elsewhere
• Rate typically equals state sales tax rate
• Credit for taxes paid in other states

Use Tax Examples:

• Buy in Oregon (no tax), base in California (owe 7.25%+)
• Buy in Montana (no tax), base in Texas (owe 6.25%)
• Buy in Florida (6%), base in Texas (6.25% - credit 6% = pay 0.25%)

Montana LLC Strategy

How It Works:

• Form Montana LLC to purchase aircraft
• Montana has no sales tax
• LLC "owns" aircraft, you manage LLC
• Controversial and scrutinized by states

Risks and Challenges:

• Many states now challenging this strategy
• Audits and use tax assessments
• Penalties for tax avoidance
• Must prove substantial Montana presence
• Legal costs defending audits
• Not recommended without expert advice

Tax on $200,000 Aircraft Purchase

State-by-State Comparison:

• Delaware: $0 (no tax)
• Montana: $0 (no tax)
• Colorado: $5,800 (2.9%)
• Texas: $12,500 (6.25%)
• California: $14,500-$20,000 (7.25-10%)
• Potential savings: $14,500-$20,000 with strategic planning

Registration vs Sales Tax

Important Distinction:

• Sales tax: One-time at purchase
• Registration: Annual fee (varies widely)
• Personal property tax: Annual (some states)
• Low sales tax state may have high annual fees

Strategies to Minimize Tax

Legal Strategies:

• Purchase in no-tax state if relocating anyway
• Qualify for interstate commerce exemption
• Trade-in credit reduces taxable amount
• Document business use for exemptions
• Use fly-away provision if available

What NOT to Do:

• False claims of interstate commerce
• Fraudulent Montana LLC schemes
• Hiding aircraft location from state
• Falsifying documents
• Tax evasion has severe penalties

Frequently Asked Questions

Which state has lowest aircraft sales tax?

Five states have no sales tax: Alaska, Delaware, Montana, New Hampshire, Oregon. Best options for aircraft purchase. Other low-tax states: Hawaii 0.5%, Wisconsin 0.5%, Colorado 2.9%, Wyoming 3%. On $200K aircraft, save $14,500-$20,000 vs high-tax states.

Do I pay sales tax if I buy aircraft out of state?

Depends. If base aircraft in your home state, typically owe use tax (equals your state's sales tax rate). Get credit for taxes paid in purchase state. Example: Buy in Texas (6.25%), base in California (7.25%), owe California 1% difference.

What is Montana LLC aircraft tax strategy?

Form Montana LLC to purchase aircraft, avoiding sales tax since Montana has none. However, many states now challenge this as tax avoidance. Risk audits, use tax assessments, penalties. Must prove legitimate Montana business presence. Legal costs defending audits often exceed tax savings.

Can I avoid aircraft sales tax legally?

Yes, through legitimate exemptions: Interstate commerce use (50%+ crossing state lines), casual sale exemption (private party), fly-away provision (immediate departure), business use exemptions. Purchase in no-tax state if relocating there. Consult tax attorney—illegal avoidance has severe penalties.

What aircraft sales tax in California?

7.25% state rate plus local district taxes (up to 2.5%+), total 7.25-10% depending on county. On $200K aircraft: $14,500-$20,000 tax. Some exemptions available: Common carrier, interstate commerce, qualified use. Trade-in credit reduces taxable amount.