Most Canadian aircraft exempt from Maine Use Tax

By John Quarterman

Last month we explained that just after COPA Flight’s submission deadline, we had received an email from the Maine Revenue Service (MRS) and a call from the office of the Governor of Maine, announcing the GST and HST taxes paid in Canada on Canadian aircraft would be accepted as evidence that taxes were paid.

Therefore, those aircraft would no longer be susceptible to the Maine Use Tax.

We further explained that since the GST was recognized as a valid sales tax, the derivative taxes such as HST and QST were also recognized. We went on to explain that aircraft sales which had not caused a tax to be paid would still be at risk of being susceptible to the Maine Use Tax, and this indicated that used aircraft purchased in the province of Quebec (which does not charge QST on such transactions), might well be targeted by the MRS.

Further to our publishing that short notice, we received a formal letter from Mr. David Bauer, Tax Policy Analyst of the Maine Revenue Service in response to our request for a letter in writing. This letter echoes our earlier understanding of the decision made in our favour. This letter by David E. Bauer, Esq. Tax Policy Analyst is reproduced below:

In my letter to you of Jan. 16, 2008, I said that I would let you know when I had anything further to report on the question of whether, and under what circumstances, Canadian aircraft are potentially subject to the Maine use tax.

I am now writing to inform you that it is the position of the State Tax Assessor that as regards “end consumers” of items of tangible personal property (including aircraft), the Canadian GST, HST, PST and QST all qualify as “sales taxes” for purposes of the use tax credit allowed by Title 36 MRSA §1862.

“End consumers” are those who purchased the property as the final retail customer and who were not eligible for a Canadian credit for or refund of the tax paid under those tax provisions. Therefore, if such an individual who is the owner of an aircraft has paid any of those taxes, or any combination of them, with respect to the aircraft and subsequently makes a taxable use of the aircraft in Maine, and the cumulative rate of that tax or those taxes is equal to or greater than 5% of the purchase price, no Maine tax would actually be owed because of the operation of §1862.

Keep in mind that no taxable use would occur in Maine in the first place unless the aircraft is present in Maine for more than 20 days during the 12 months following its purchase, exclusive of days during which the aircraft is here for the purpose of undergoing “major alterations,” “major repairs” or “preventive maintenance” as those terms are described U.S. federal regulations, and exclusive of days during which the aircraft is used in Maine for so-called “angel flights.”

I hope this is helpful. Please let me know if I may be of further assistance.

The Maine Use Tax is a regressive and repressive tax invoked on aircraft owners who bring their aircraft into Maine. The tax, invoked by a badly-crafted piece of legislation that fails to distinguish visitors from residents, compounds its shortcomings by failing to recognize sovereignty and international trade and tourism industries and singles out simple-aircraft owners while exempting high-priced luxury automobiles and other items.

COPA was first alerted to the existence of the Maine Use Tax by media reports which reported several American aircraft owners being charged tax bills by the State of Maine. One of these owners reported a figure of $26,000 USD being levied against his aircraft. Some of those reporting being charged had reportedly only vacationed in the State for a short period, returning to their home-state thereafter, but had nevertheless been charged.

On concern for our members and Canadian aircraft owners in general, COPA sought out answers to several questions which we had regarding the tax. With the principle in mind, that rumours become exaggerated more in relation to the distance from the source, we endeavoured to obtain our answers from the Maine Revenue Service directly.

What we asked were simple questions, but the answers greatly surprised us.

1. Were foreign aircraft (Canadian for example), susceptible to the tax?

2. Assuming that Canadian aircraft were implicated, what exemptions were in place for vacationing owners simply visiting as any tourist would do, but with their personal Canadian aircraft as transportation?

3. What exemptions were in place for “Technical Stop” aircraft (as according to the ICAO conventions including the Chicago convention)?

4. Supposing that Canadian aircraft were susceptible to the Maine Use Tax, what recognition and exemptions were in place for the myriad and larger tax load paid by Canadians such as the GST, PST, HST and QST.

First of all we were told Canadians and Canadian aircraft were susceptible to the tax. Apparently the State of Maine had never considered foreign aircraft in the creation of the legislation, and had not considered that visitors in foreign aircraft might be visiting Maine airports.

As I said, the answers greatly surprised us:

Background

Re: Maine Use Tax on Canadian-Registered Aircraft