Sales and Use Tax Ruling – Michigan

The Michigan Court of Appeals rules in favor of lessor in use tax issue originally levied on business jet. At stake was over a million dollar assessment in taxes , interest and penalties.

The court ruled that the lessor had properly made a timely election by obtaining a use tax registration by the earlier of the date set forth for the first payment of use tax under the lease agreement or 90 days after the lessor first brought the aircraft into the state.

The court also noted that the lease agreement and payment was structures to have all of the elements for a lease as required by Michigan law ( MCL 205.92b(k)). Mainly “the transfer of possession or control of the aircraft and for a fixed term and for consideration”.

This is just another example for using qualified professionals when structuring these types of aviation transactions as significant dollars are usually at stake.

 Source: CCH State Tax review October 24, 2012 CCXLS, LLC v. Department of Treasury, Michigan Court of Appeals No. 297902 October 11, 2012.


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