Pennsylvania lawmakers crafting new tax loophole for private aircraft

April 25, 2013

By Melissa Daniels | PA Independent

HARRISBURG – Pennsylvania’s state sales tax code – already full of carve-outs for niche industries and special interests – is about to get a little more complicated.

The state General Assembly appears to be on the way to passing a new sales tax exemption for airplane parts and maintenance, meaning private plane sales and repair expenses would go untaxed. The change would mean a loss of $12 million dollars in tax revenue for the state General Fund.

The proposal is good news for plane owners, who might be paying thousands in 6 percent sales tax on a $50,000 repair. But some say the bill is further complicating a tax code that already gives plenty of specialized tax exemptions.

Proponents of the measure, like bill sponsor Rep. Bill Kortz, D-Allegheny, said plane owners in Pennsylvania are flying their jets to other states in order to avoid paying sales tax on costly maintenance.

States like New York, Massachusetts, Ohio and Connecticut all have a partial or full sales and use tax exemption for aircraft. If Pennsylvania follows suit, it will boost a stagnant industry, Kortz said.

“The bottom line is I want people to work, make money, expand the business, and pay taxes,” Kortz said. “This will do just that in the aviation industry.”

There’s about 8,000 planes in Pennsylvania, and about 130 airports. The Federal Aviation Administration mandates planes must be inspected on a routine basis after certain numbers of hours of flying, and Kortz said this creates a built-in market for services.

Kortz faced some opposition on his proposal even within the Democratic caucus, as some felt it was favoring special interests with another tax break. The bill passed the state House with bipartisan support, though it saw 23 negative votes.

Bipartisan support also exists in the state Senate. The Democratic caucus has the exemption listed on their 2013-2014 budget plan, Sen. Dave Argall, R-Schuylkill, has a similar proposal in the works, and Kortz said he’s met with the governor’s staff to discuss the proposal.

To Kortz, the measure isn’t a tax break but a tax shift, as aviation industry jobs will balance out the lost sales tax dollars.

“If we get more tax dollars, I don’t care how we get it,” he said. “We’re stagnating in this industry.”

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