The Tax Man

Almost all of us are scofflaws.

A scofflaw is defined as “a person who flouts the law, especially by failing to comply with a law that is difficult to enforce effectively.”. Your state’s’ sales and use tax is one of those laws that is difficult to enforce, but be assured that a tax is due nonetheless.

If your state collects a sales tax and you purchase something on Amazon or eBay, then a tax is due to your state. If you didn’t pay it, then you are a scofflaw. And in good company since the taxing states estimate that only 1% of consumers in their states report out of state purchases.

So, what does this have to do with personal drones, specifically?

If you fly a drone for business under a section 333 exemption, your aircraft has to be registered with the FAA, meaning that it has a “N” number affixed to it. Some drone operators in California and Florida are surprised to receive a letter from their state’s taxing authority asking questions about your aircraft and did you pay a sales or use tax on it.

The FAA doesn’t tell the Dept of Revenue about aircraft in the state, the state simply searches the FAA Aircraft Registration database, usually once a month.  An N-number registration simply means there is a new aircraft in the state, and that is all the taxing authority knows about the aircraft. The Model name means nothing. If you search for “Phantom” you will find many DJI Phantoms as well as some light-sport aircraft from, for example, Phantom Aeronautics LLC. There’s a type-certified Phantom from Luscombe Airplane Corp and quite a few amateur built experimental aircraft with two to four seats named “Phantom”.

Use Tax means if you buy something outside of the state and bring it into the state, you owe a use tax on that item. The value of the item is irrelevant whether it’s a pair of shoes or a multi-million dollar airplane, if it’s taxable in your state – you owe the tax. In the case of boats, airplanes and other high-value items, there is an incentive for the state to pursue the taxes. Not so much if you buy a used TV on eBay, but the tax is still due.

So, yes, the letter from your state’s’ Department of Revenue is not a joke or an aberration. By registering your aircraft, your purchase just became “visible” to them.

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