The Oklahoma Bar Journal October 2024

A viation L aw

Oklahoma Aircraft Excise Tax and State Aircraft Registration By Chad Gilson O NE OF THE MANY ELEMENTS A CLIENT NEEDS to prepare for early in the process of acquiring a new aircraft is the imposition of state taxes. While not nearly as much fun as selecting the interior configuration or preparing for the first trip, careful planning on the front end of a transaction can help avoid surprise tax bills and added fines and penalties. It will also help ensure the aircraft is available to the new owner as expected. In Oklahoma, aircraft owners pay an excise tax and must register the aircraft with the state.

costs from the fly-away exemp tion closing location. This can be helpful if the parties are consider ing closing the sale in a state that otherwise has no connection to the transaction. If an aircraft is at an inspection facility as part of the prepurchase acceptance and the inspection facility is in a state with a fly-away exemption, this can be a convenient delivery loca tion before moving the aircraft to Oklahoma after closing, where the new owner will pay the excise tax. Beginning July 1, Oklahoma aircraft owners are now required to submit aircraft excise tax payments to Service Oklahoma through their online portal, 6 by mail 7 or at an in-person appoint ment. 8 Prior to this date, the excise tax was submitted directly to the Oklahoma Tax Commission. While there may be compelling tax planning, business or liability

a period of 30 days or more. 4 So that nonresident aircraft owners who choose to have maintenance performed in Oklahoma are not assessed the excise tax, periods of time when an aircraft is retained in the state solely for maintenance are not considered “use.” 5 It is a common practice in the industry to close an aircraft trans action in a state with a “fly-away exemption” to aircraft sales tax. Fly-away exemptions are available in many states, and the brokers, dealers and advisors who work with aircraft purchasers often prefer to close in these states for a predictable and sales-tax free closing day. But because the Oklahoma excise tax will be due upon bringing the aircraft into the state after closing, an Oklahoma aircraft owner may close their transaction in Oklahoma, pay the excise tax and avoid movement

EXCISE TAX Unlike most states, Oklahoma does not charge a sales tax on aircraft transactions. Instead, the state levies an excise tax of 3.25% of the purchase price of any aircraft when the transfer of legal ownership occurs in the state or the aircraft is used in the state. 1 This excise tax is in lieu of all other taxes on the transfer of ownership and is due at the time of initial registration of the aircraft in Oklahoma. 2 The state excise tax is also collected in lieu of county ad valorem property taxes. 3 It is important to note that the excise tax is applicable to both transactions that close while the aircraft is physically in Oklahoma as well as an aircraft brought into Oklahoma for use after being purchased by an owner. For eval uation purposes, “use” includes basing an aircraft in Oklahoma for

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

24 | OCTOBER 2024

THE OKLAHOMA BAR JOURNAL