Maine Business Court Invalidates Use Tax Assessment Against Aircraft Owner

Maine. Massachusetts. New Hampshire.

Friday, June 15, 2012

On the heels of a taxpayer victory last year, another aircraft owner has successfully challenged Maine Revenue Services’ imposition of use tax on private aircraft that land in Maine.  In Mile High Air, LLC v. State Tax Assessor, the State Tax Assessor assessed Maine’s 5% use tax on an aircraft that landed in Maine for brief periods during its first year of ownership, and also received repair work at a Maine location.  The aircraft, however, was outside of Maine entirely for 278 days during its first year of ownership.

Applying two 2011 Maine Supreme Court decisions involving aircraft use tax to the unique facts of this case, the Maine Business Court determined that the aircraft involved in this case was exempt from Maine use tax.  The Court concluded that the imposition of use tax on this aircraft would be an “overbroad application” of the use tax because the usage of the aircraft in Maine was “insufficient to justify use taxation.”  In the words of the Court, “the use of the aircraft outside of Maine was sufficiently substantial to make unjust the imposition of a use tax in Maine.” 

The Maine Legislature passed a limited measure exempting certain aircraft from Maine sales and use tax beginning in 2007.  In 2011, the Legislature passed a broader amendment exempting all aircraft and aircraft repair parts from Maine sales and use tax from July 1, 2011 until June 30, 2015.  Neither the 2007 nor the 2011 legislation was retroactive, and the use of the Mile High Aircraft in Maine occurred prior to the effective dates of these legislative amendments.

Mile High Air was represented by Jon Block and Rob Creamer of Pierce Atwood’s State and Local Tax Group.  If you have questions about how Maine use tax may apply to your aircraft, boat or other property, please contact any member of Pierce Atwood’s State and Local Tax Group.