Utah Sales and Use Tax Exemptions for Aircraft

Utah imposes sales and use tax on the purchase and use of aircraft in Utah at a rate combetween 4.85% and 9.05%, depending on the specific county/city of purchase or use. That means for an aircraft costing $1M, a purchaser could be subject to an almost $100K tax bill, and for an aircraft costing $50M, a purchaser could be subject to an almost $5M tax bill. With appropriate tax planning, these tax bills can either be wiped out completely or at least significantly mitigated. Below are the common exemptions available to aircraft purchasers who purchase and/or hangar their aircraft in Utah.

Utah’s Isolated Sale (or Veiled Fly Away) Exemption

“Fly away” exemptions are frequently utilized to avoid the imposition of sales tax on aircraft. Depending on the state, the exemption ordinarily allows the aircraft purchaser a specific time frame to remove the aircraft to another jurisdiction. When the purchaser removes the aircraft from the taxing authority’s jurisdiction within the allowable window, the sale of the aircraft will be exempt from sales tax. While Utah does not have a per se “fly away” exemption, Utah does have an “isolated sale” exemption that is in many respects substantially similar to a “fly away” exemption.

Generally, for an aircraft purchase transaction to qualify for Utah’s “isolated sale” exemption and therefore not trigger sales and use tax liability in Utah:

  1. The seller cannot be regularly engaged in the sale of aircraft; and
  2. The buyer must promptly remove the aircraft from Utah and keep the aircraft located in a jurisdiction outside of Utah.


The unique facts of each transaction should be analyzed, however, as Utah’s isolated sale exemption may be limited under certain circumstances, such as when the aircraft regularly re-enters Utah or if the seller previously utilized a purchase for resale exemption in order to acquire the aircraft in the first instance.

Utah’s Purchase for Resale (or Lease) Exemption

The purchase for resale exemption typically applies to aircraft purchased for subsequent resale (or lease, which is also considered a “resale” under Utah law). In this type of transaction, the purchase of an aircraft followed by the subsequent sale or lease of the aircraft to a third party can significantly mitigate sales and use tax. In many states, this tax exemption presents a planning opportunity for aircraft owners to establish a special purpose entity (SPE) to hold title to the aircraft and lease the aircraft back to a separate individual, entity, or entities at arms-length. Under this exemption scenario, the SPE would not be liable to pay sales or use tax on the aircraft’s purchase but instead may collect and remit sales taxes from lessees on aircraft lease payments which are subject to sales tax.

Effectively, the tax benefit from this exemption comes from the ability to pay tax annually on lease payments over several years rather than up front in lump sum based on the entire aircraft purchase price. Break-even analyses we’ve conducted for clients show it can take greater than 10 to 15 years to pay the same amount of tax annually on lease payments as the amount of tax paid up front in lump sum. Thus, if aircraft owners believe they will be holding an aircraft for less than this amount of time, or if they simply believe the time-value and opportunity cost of retaining that money and putting it to work elsewhere would be greater than paying sales or use tax up front (as many of our clients do), this is a strong exemption that can lead to significant savings.

In Utah, to purchase an aircraft exempt from sales and use tax for the purpose of reselling it, a party must be engaged in the business of manufacturing, distributing, or selling aircraft, and be licensed with Utah to collect sales tax. If the aircraft was purchased with the intent to lease it to another party, the purchase is exempt under the resale exemption so long as the aircraft is actually leased. Although the purchase of the aircraft is exempt, the purchaser must collect sales tax on the lease payments if the lessee stores or uses the aircraft in Utah, unless the lessee provides an exemption certificate (for example, as an “Authorized Carrier”). If the aircraft was purchased first to be used, and is only leased at a later time, the exemption does not apply.

While taking advantage of this exemption can prove lucrative, when done incorrectly, it can lead to significant negative legal consequences. A common trap (commonly known as the “Flight Department Company Trap”) can arise if the new SPE, whose sole purpose is to own and operate the aircraft, purchases the aircraft, obtains insurance, hires the pilots, and operates the business flights under FAR Part 91 – the FAA considers these types of flights to be “wet leases” (or illegal charter flights) without the required air carrier certificate, subjecting the operator to fines up to $11,000 for each illegal flight, potentially triggering tax obligations, and potential loss of insurance coverage. Accordingly, special care should be taken to avoid each of the Flight Department Company Trap.

Utah’s Authorized Carrier Exemption

Utah’s authorized carrier exemption exempts sales and leases of an aircraft to an authorized carrier. Under Utah law, an “authorized carrier” in the case of aircraft means the holder of a Federal Aviation Administration operating certificate or air carrier’s operating certificate. In Utah, this tax exemption presents a planning opportunity for aircraft owners and may encourage aircraft owners to lease their aircraft to a Part 135 charter certificate holder in order to make supplemental income as such lease payments between the two parties would be exempt from Utah sales and use tax.


While Utah’s isolated sale exemption, purchase for resale exemption, and authorized carrier exemption are the three most commonly utilized exemptions to mitigate sales and use taxes applicable to aircraft in Utah, other less commonly used exemptions may be applicable under certain circumstances. While inadequate planning can lead to significant tax exposure and legal liability, proper structuring and planning will lead to significant certainty related to limitation of liability and can save aircraft purchasers hundreds of thousands if not millions of dollars. Need help analyzing available tax exemptions in Utah and structuring to avoid potential pitfalls? Bizjet Law assists aircraft buyers in Utah and across the United States and would be glad to assist in your decision.

If you would like us to analyze tax saving opportunities for you, please call us at the number below or email us at Counsel@BizjetLaw.com.

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