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Van's is collecting sales tax in Colorado despite exemption for aircraft parts

mackd

mackd

Active Member
Just an FYI that I was notified in September by Van's that per their tax software vendor, they are now required to collect sales tax on purchases shipped to Colorado. As you may be aware, Colorado specifically exempts aircraft parts from sales tax (see references below). I'm trying to work through this with Van's, but we haven't gotten there yet. This is a sizeable chunk of change on my engine purchase...

Anybody else run into this?

https://tax.colorado.gov/sites/tax/files/documents/SUTT_Aircraft_December_2022.pdf
https://tax.colorado.gov/sites/tax/files/Sales%2085.pdf
https://codes.findlaw.com/co/title-39-taxation/co-rev-st-sect-39-26-711/
 
mackd said:
Just an FYI that I was notified in September by Van's that per their tax software vendor, they are now required to collect sales tax on purchases shipped to Colorado. As you may be aware, Colorado specifically exempts aircraft parts from sales tax (see references below). I'm trying to work through this with Van's, but we haven't gotten there yet. This is a sizeable chunk of change on my engine purchase...

Anybody else run into this?
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I live in New York where aircraft parts are also exempt from sales tax. I got an email notice as well in September and immediately responded with the legal backup from my state. They modified the order to remove the sales tax.

If you can't get a similar result, you can always apply for a sale tax refund: https://tax.colorado.gov/sales-tax-refund#:~:text=You%20can%20file%20a%20claim,or%20by%20using%20Revenue%20Online.&text=To%20make%20a%20claim%20for,directly%20to%20obtain%20refund%20information.
 
I brought up these concerns about a year ago regarding tax exempt Wisconsin. While Van’s did recognize the collection of sales tax wasn’t required, their computer system wasn’t set up to discriminate on a state by state basis.

Kinda makes sense looking back at it now.
 
Most states are similar. In Ohio you’ll automatically get a tax invoice on what the state perceives is the value of you aircraft, which is usually much greater than the sum of the parts, when you register it.

I built mine before Van’s started taxing sales. However, I declared and paid tax on the materials I purchased every year. There are several benefits to this approach. The biggest is paying taxes in much smaller annual chunks. It fit my budget better. When they sent me the invoice, I just simply reminded them that I had already paid taxes on everything. They couldn’t argue trying to tax on the potential value since I paid taxes on all the kits purchased. The difference was significant between the two values since they used tea-a-plane or barnstormers ads to substantiate what the potential value.

Fortunately private aircraft sales aren’t taxable in Ohio, so I don’t have to worry about what the kits cost versus the current value of the aircraft.
 
I’ve had the same email exchanges with Vans and supplied the state laws and handouts on the topic. It’s clear as day.
 
Had a similar discussion with Mitch Lock at Van's about similar laws in Maryland but he wouldn't budge. Aircraft Spruce howeever has made the change ad does not charge tax.
 
Ordered a bunch of parts today and had to call in as one part could not be ordered online. Customer Service was great - answered immediately and helpfully added the part to my current shopping cart. Yes they added a $100 of Colroado sales tax.

I think they use Shopify which is easy to configure and override - given 99% of their business is aviation parts shame the CFO won't move of this. I guess I can claim it back from the state.


Robert
 
fr0gpil0t said:
Ordered a bunch of parts today and had to call in as one part could not be ordered online. Customer Service was great - answered immediately and helpfully added the part to my current shopping cart. Yes they added a $100 of Colroado sales tax.

I think they use Shopify which is easy to configure and override - given 99% of their business is aviation parts shame the CFO won't move of this. I guess I can claim it back from the state.
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We actually use Magento for the web store. Shopify can't handle the inventory size that well, and can't be as customized. :)

We will (and do) review. When a state notifies us and requires us to withhold, it can take some effort to get an official "okay" to make a change. And the state may hold Van's responsible for failing to collect (even when the state's own code says it should be fine to not withhold).

We have a lot going on, but this will be on our list of tax-related items to review. Thx.
 
Thanks Greg for taking this on-board.

Yes Magneto allows tax classes so hopefully can support states that don't charge sales tax on aviation parts.
 
fr0gpil0t said:
Thanks Greg for taking this on-board.

Yes Magneto allows tax classes so hopefully can support states that don't charge sales tax on aviation parts.
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We actually use a tax service that classifies right down to the actual physical address. However, it doesn’t have aviation specific classes. That said, we do review. Can’t promise anything since the state tells us what we have to do but we will take a look when we can find time to do so.
 
Thanks for looking into this for us, Greg. Appreciate it very much. I know y'all are very busy and stressed right now.
 
Just an update that I pushed Van's hard on this issue with my engine order since it seems perfectly clear to me in the statute that this purchase should be exempt. They worked on it for a while and reported to me that both the state of Colorado and their tax vendor told them they are required to collect the sales tax. There was no reported justification for why the statute wouldn't apply given the written guidance from the state and I don't really understand it. However, I don't know what more I can do other than cancel the order, so I will proceed and pay the tax.

I will then submit the sales tax refund form to the state and see where that gets me. If the state rejects it, I can consider consulting a lawyer at that time. I'll let y'all know what happens.
 
I'm battling the State of Colorado at the moment, they place claims under the "USE TAX" and not sales tax. Yours is a part, which maybe you could argue is except but I'm guessing they will argue it isn't a plane without an engine and thus the Use tax is due.

Here is the webpage with information (https://tax.colorado.gov/aviation-taxes) and here is the important section:
Use Tax on Airplanes
When purchasing personal property, including airplanes, the buyer needs to file a Consumer Use Tax Return (DR 0252(opens in new window)) if the seller did not collect and remit sales tax for the purchase. The Consumer Use Tax Return can also be filed using Revenue Online(opens in new window). For airplane purchases, the return and the use tax payment are due on or before the 20th of the month following the purchase. For more information, visit the Consumer Use Tax(opens in new window) section of this website.
 
I tried to buy a prop for a completed plane and the manager I spoke to was unwilling to budge on charging the full sales tax. I quoted the exact language in CO law that exempts airplane parts from sales tax and she insisted that a kit is not a plane. I told her it's a completed, registered, operating airplane with an N-number, and she still refused to consider it. Extremely frustrating, and it will cost me more money to get it shipped from a tax-free state, since I didn't want to go the route of claiming a tax abatement.
 
skirting_virga said:
I tried to buy a prop for a completed plane and the manager I spoke to was unwilling to budge on charging the full sales tax. I quoted the exact language in CO law that exempts airplane parts from sales tax and she insisted that a kit is not a plane. I told her it's a completed, registered, operating airplane with an N-number, and she still refused to consider it. Extremely frustrating, and it will cost me more money to get it shipped from a tax-free state, since I didn't want to go the route of claiming a tax abatement.
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Since CO has a ‘use tax’, there are no tax free states, they’ll charge use tax instead of sales tax, and you’ll still have to argue the ‘airplane parts’ exemption. Seems straight forward to me, but you’re dealing with bureaucrats . Good luck.
 
BobTurner said:
Since CO has a ‘use tax’, there are no tax free states, they’ll charge use tax instead of sales tax, and you’ll still have to argue the ‘airplane parts’ exemption. Seems straight forward to me, but you’re dealing with bureaucrats . Good luck.
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I agree that use tax will come up on the whole plane for whatever the assessed (or sale) value is, the tax publication I was able to find states:
In general, the sale of tangible personal property that is to be permanently affixed or attached as a component part of an aircraft is exempt from sales and use taxes. Exempt aircraft parts may include, but are not limited to fuselage parts, parts for the aircraft’s engine(s), and seats permanently affixed to the aircraft.
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It seems unambiguous that parts are not subject to tax and indeed Aircraft Spruce, for example, considers them tax exempt as well. It makes absolutely no sense to me that Vans would charge sales tax on those parts.
 
Not CO, but in FL we just need to fill out form DR-26S, scan the receipts and sign the affidavit. The money is credited in 3-4 weeks. You have 3 years to submit. I just now save the stack of receipts for vendors that are unaware or are not able to sell without sales tax Once a year, I pull them together and submit. I usually see about $100 back in Jan.
 
Cth6 said:
Not CO, but in FL we just need to fill out form DR-26S, scan the receipts and sign the affidavit. The money is credited in 3-4 weeks. You have 3 years to submit. I just now save the stack of receipts for vendors that are unaware or are not able to sell without sales tax Once a year, I pull them together and submit. I usually see about $100 back in Jan.
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My accountant (FL) told me as long as I can state the following, good to go. As yet very little replacement parts needed.

"Repairs, Maintenance, Parts, and Labor - Replacement engines, parts, equipment, and labor used in or for the maintenance or repair of fixed wing or rotary wing aircraft (helicopters) with a certified maximum takeoff weight of more than 2,000 pounds are exempt from sales and use tax. Dealers who make tax-exempt charges for replacement engines, parts, equipment, and labor used in or for the maintenance or repair of aircraft over 2,000 pounds are required to document the Federal Aviation Administration registration number (“N-number”) and the maximum certified takeoff weight of the eligible aircraft on the bill of sale, invoice, or other tangible evidence of sale."
 
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I’ve written to Van‘s multiple times that parts for my flying RV-14A with a gross weight of 2050 lbs are exempt from FL sales tax. I’ve even put it in the notes of the order. I’ve included the specific law on taxation. Absolutely zero luck getting it resolved.

Aircraft Spruce has it figured out. I just enter my N number and gross weight and tax is removed.

Very disappointed.
 
1949MGTC said:
I’ve written to Van‘s multiple times that parts for my flying RV-14A with a gross weight of 2050 lbs are exempt from FL sales tax. I’ve even put it in the notes of the order. I’ve included the specific law on taxation. Absolutely zero luck getting it resolved.

Aircraft Spruce has it figured out. I just enter my N number and gross weight and tax is removed.

Very disappointed.
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I was going to go through the FL refund process but after reading the rule very little of my parts fit the "replacement" description clause of the statute. ACS assumes parts you buy that qualify are replacement and that cannot be assumed for VANS. If you have any success with Vans let me know.
 
From another thread it seems Van's uses Avalara.

I know from personal experience implementing ERP systems for over 25 years AND implementing Avalara a handful of times that it is EASY to do it correctly. Heck, Avalara sells themselves as the pride of their niche. They really do calculate down to the GEOCODE to get every state, county, local, STA, all calculated. per item They can certainly handle sales of homogeneous parts coded nontaxable by state.

Sheesh. This is an unforced error.
 
rolivi said:
From another thread it seems Van's uses Avalara.

I know from personal experience implementing ERP systems for over 25 years AND implementing Avalara a handful of times that it is EASY to do it correctly. Heck, Avalara sells themselves as the pride of their niche. They really do calculate down to the GEOCODE to get every state, county, local, STA, all calculated. per item They can certainly handle sales of homogeneous parts coded nontaxable by state.

Sheesh. This is an unforced error.
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I believe the way I read Greg's previous response, it is a state issue and not a software issue. Sheesh.

In Florida, unless it has changed. You may be able to get out of paying the tax up front. But when you register the aircraft, you will get a letter from the state asking for the sales tax on the value of the build. Save the receipts as these are you proof on the value. If they don't like the value your receipts add up to, they will assess there own value.
 
MarkW said:
I believe the way I read Greg's previous response, it is a state issue and not a software issue. Sheesh.
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There was mention of some "ambiguity" and some letters from the named vendor. They are not primarily a software vendor, they are primarily a tax advisory and surety service. Walling through various tax authorities to assure proper tax calcs is Job One for them.
 
rleffler said:
Most states are similar. In Ohio you’ll automatically get a tax invoice on what the state perceives is the value of you aircraft, which is usually much greater than the sum of the parts, when you register it.
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“Dear Mr. Tax Clerk - I built this plane out of loose parts. Some of the parts and the radio were used and aren’t even made anymore. In fact, the FAA won’t even let me fly this plane much beyond the airport it’s based at. No way is it worth what you think it is.”
 
There’s no ambiguity in the Colorado law and the best example of this is that aircraft spruce doesn’t charge any tax on any aircraft parts. I now buy everything I can from them rather than Vans. Whirlwind charged me no sales tax on my prop. But Vans would not budge on my engine. I still need to try and submit it for refund from the state.
 
dmattmul said:
My accountant (FL) told me as long as I can state the following, good to go. As yet very little replacement parts needed.

"Repairs, Maintenance, Parts, and Labor - Replacement engines, parts, equipment, and labor used in or for the maintenance or repair of fixed wing or rotary wing aircraft (helicopters) with a certified maximum takeoff weight of more than 2,000 pounds are exempt from sales and use tax. Dealers who make tax-exempt charges for replacement engines, parts, equipment, and labor used in or for the maintenance or repair of aircraft over 2,000 pounds are required to document the Federal Aviation Administration registration number (“N-number”) and the maximum certified takeoff weight of the eligible aircraft on the bill of sale, invoice, or other tangible evidence of sale."
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Actually in Florida when you buy exempt parts (over 2000 lbs GW) the dealer should note the weight and aircraft number on the invoice and not charge sales tax at the time of purchase. This is what Spruce does.
 
howardtlcc said:
Actually in Florida when you buy exempt parts (over 2000 lbs GW) the dealer should note the weight and aircraft number on the invoice and not charge sales tax at the time of purchase. This is what Spruce does.
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ACS assumes it's a REPLACEMENT part per FL statute. The statute uses this wording. (Must be used as a Replacement) Vans software company cannot assume this, with reason.
 
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Tlrguy said:
I brought up these concerns about a year ago regarding tax exempt Wisconsin. While Van’s did recognize the collection of sales tax wasn’t required, their computer system wasn’t set up to discriminate on a state by state basis.

Kinda makes sense looking back at it now.
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Not sure what software they're using, but since each state/county have different sales taxes, they must have a way to set it. Since they do a tax lookup by address, If the whole state exempts the tax, just set it to zero. They would just have to run a script to do it in the tax db. Very easy to do by any programmer.
 
Interesting. I successfully argued against the use tax inquiry Colorado sent me when I registered the completed -7 on the basis that it was constructed from parts, quoting statute 39-26-711 to support my position. I went back and reviewed my invoices from Van's on the -10 kits, and the only one where I was charged tax was the Finishing kit shipped this Spring (a not-insignificant $1127). This feels like a fairly simple thing that Van's could remedy, no? Something changed recently, and it isn't the tax law in Colorado...
 
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