5.01 Duty to File State Income Tax Returns

The decision to base an aircraft in a state will trigger the obligation to file returns and pay state income tax. Except in the case of airlines, merely flying into a state, even on a regular basis will probably not trigger this obligation.1 And, even in the case of airlines, this obligation will not be triggered where the aircraft merely flies over the state.2

Since aircraft are generally based near existing facilities, these rules should not create problems, unless the aircraft is placed in a separate corporation or is based in a state where the company does not already have operations.

One question which has not been fully resolved is whether a lessor has an obligation to file returns and pay state income tax where the lessee uses the property in the state. Several states have taken the position that the lessor is obligated to file returns and pay the tax.2 However, there is some case law which indicates otherwise.3

  1. 49 USC 40116(c). See, e.g., Delta Air Lines, Virginia Cir Ct. Arlington County, No. 93-1238 (1/27/98).
  2. If an aircraft flies into a state on a regular basis, there are probably other things, such as employees or facilities which have already triggered this obligation.
  3. See, e.g., Fla. Rule 12C-1.011(2) ["leasing aircraft to commercial airlines that routinely fly aircraft into Florida will subject the leasing company to the tax"].
  4. See, e.g., Ryder Truck Rental, Inc., 520 So.2d 1333 (Miss. 1987) [a sales tax case which cited several income tax cases].