
How the State of Alabama extorts tax from RV builders
This is a reprint of emails dealing with the sales tax issue concerning RV builders
and the State of Alabama. Other states will have similar laws and builders should
investigate tax laws early in the building process.
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Dave Stafford ok'ed me cc'ing the following correspondence between us to
the RV group in the hope that it will inform new builders of an issue we
have to deal with in Alabama.
This is really a "gotcha" since there is no mechanism in place to inform
aircraft builders of pending sales tax until the plane is registered,
and then we are in a position to have late penalties levied against us!
All out-of-state purchases are subject to taxation (yep, the CDs you
ordered from Amazon, the doodads your wife ordered from those catalogs)
but our aircraft are the only ones the state can track due to the
assistance from the FAA.
I suggest you find the local sales and use tax office very early in your
project and procure the forms necessary to pay applicable taxes. Waiting
until the state finds you following registration with the FAA will
expose you to late penalties.
This is a great example of "tax extortion" but is an issue we have to
face (people with airplanes are rich and won't miss the money.....).
Don't hesitate to query RV pilots on how to deal with the tax issue.
Sam
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"Stafford, David" wrote:
>
> Sam,
>
> I've heard that a new RV will stimulate sales taxes with the state of
> Alabama.
It most definitely will!
> What was your experience with this ?
You will get a letter from the State of Alabama inquiring as to whether
you have paid sales tax on the stuff you have purchased, and also
wanting to know the value of things you have purchased but not paid
taxes against. The letter is triggered by your n-number appearing in the
FAA's records.
>
> I was about to apply for FAA registration but am looking for tax
> consequences if any before doing so.
This situation probably is responsible for a lot of honest builders
"stretching" the truth. It will be up to you to declare whatever portion
of your project you think ought to be taxable. Some folks declare it
all, some just the kit, others as little as they think they can get by
with. In addition, you may get socked with a penalty for not paying the
taxes at the time of purchase.
Expect to get the letter, then you will have to decide how you are going
to respond. This is extortion of the highest order since aircraft
builders are the only people the State can track with taxable
out-of-state purchases.
I suggest you apply for the n-number as soon as possible. :-(
Sam
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