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TITLE 34PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER OSTATE AND LOCAL SALES AND USE TAXES
RULE §3.280Aircraft

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

  (1) Affiliate--A member of a group of entities in which a controlling interest is owned by a common owner or owners, either corporate or noncorporate, or by one or more of the member entities.

  (2) Agricultural aircraft operation--The operation of an aircraft licensed by the FAA under 14 Code of Federal Regulations, Part 137. Agricultural aircraft operations include crop dusting, pollination, and seeding.

  (3) Agricultural use--This term includes, but is not limited to, the following activities: cultivating the soil, producing crops for human food, animal feed, or planting seed or for the production of fibers; floriculture, viticulture, and horticulture; raising or keeping livestock; raising or keeping exotic animals for the production of human food or of fiber, leather, pelts, or other tangible products having a commercial value; planting cover crops or leaving land idle for the purpose of participating in a governmental program, provided the land is not used for residential purposes or a purpose inconsistent with agricultural use; and planting cover crops or leaving land idle in conjunction with normal crop or livestock rotation procedure. The term also includes the use of land to produce or harvest logs and posts for the use in constructing or repairing fences, pens, barns, or other agricultural improvements on adjacent qualified open-space land having the same owner and devoted to a different agricultural use. The term also includes the use of land for wildlife management. The term also includes the use of land to raise or keep bees for pollination or for the production of human food or other tangible products having a commercial value, provided that the land used is not less than 5 or more than 20 acres.

  (4) Aircraft--A fixed-wing, heavier-than-air craft that is operated by a pilot from within the craft, is driven by propeller or jet and is supported by the dynamic reaction of the air against its wings; a helicopter; or an airplane flight simulation training device approved by the FAA under Appendices A and B, 14 Code of Federal Regulations, Part 60. The term does not include balloons, gliders, rockets, missiles, or unmanned aerial vehicles.

  (5) Certificated or licensed carrier--A person authorized by the FAA to operate an aircraft to transport persons or property in compliance with the certification and operations specifications requirements of 14 Code of Federal Regulations, Part 121, 125, 133, or 135. Letters of authorization, certificates of inspection, and airworthiness certificates are not appropriate evidence of authority to operate as a certificated or licensed carrier.

  (6) Component part--Tangible personal property that is intended to be permanently affixed to, and become a part of, an aircraft; is necessary to the normal operations of the aircraft, or is required by FAA regulations; and is secured or attached to the aircraft. The term includes tangible personal property necessary to the normal operations of the aircraft that can be removed temporarily from the aircraft for servicing, such as engines, seats, radar equipment, and other electronic devices used for navigational or communications purposes, and air cargo containers, food carts, fire extinguishers, survival rafts, and emergency evacuation slides. Items such as pillows, blankets, trays, ice for drinks, kitchenware, and toilet articles are not component parts.

  (7) Consumable supplies--Tangible personal property that is used by a service provider to repair, remodel, maintain, or restore tangible personal property belonging to another; is not transferred into the care, custody, or control of the purchaser of the service; and, having been used once for its intended purpose, is completely used up or destroyed. Examples of consumable supplies include, but are not limited to, canned air used to remove dust from equipment and solvents used to clean equipment parts.

  (8) Exotic animals--Livestock and fowl that are not indigenous to Texas and are defined as exotic livestock or exotic fowl by Agriculture Code, §161.001(a) (Definitions). Examples include, but are not limited to, nilgai antelope, blackbuck antelope, axis deer, fallow deer, sika deer, aoudad, ostriches, and emus.

  (9) Extended warranty or service policy--A contract sold to the purchaser of tangible personal property for an amount in addition to the charge for the tangible personal property, or sold to an owner of tangible personal property, to extend the terms of the manufacture's written warranty or provide a warranty in addition to or in place of the manufacture's written warranty.

  (10) FAA--Federal Aviation Administration, an agency of the United States Department of Transportation.

  (11) Incorporated materials--Tangible personal property that is attached or affixed to, and becomes a part of, an aircraft, aircraft engine, or component part in such a manner that the property loses its distinct identity as separate tangible personal property.

  (12) Livestock--Horses, mules, donkeys, llamas, alpacas, and animal life of a kind that ordinarily constitutes food for human consumption. The term livestock does not include wildlife or pets.

  (13) Lump-sum contract--A written agreement in which the agreed price is one lump-sum amount and in which the charge for incorporated materials is not separated from the charge for skill and labor. Separated invoices or billings issued to the customer will not change a written lump-sum contract into a separated contract unless the terms of the contract require separated invoices or billings.

  (14) Maintain--To perform maintenance.

  (15) Maintenance--Work performed on operational and functioning tangible personal property that is necessary to sustain or support safe, efficient, and continuous operation of the tangible personal property, or is necessary to keep the tangible personal property in good working order by preventing decline, failure, lapse, or deterioration.

  (16) Manufacturer's written warranty--A manufacturer's guarantee made for no additional charge to the purchaser of an item of tangible personal property that the item is operable and will remain operable for a specified period of time.

  (17) Operational control--This term has the meaning assigned by FAA regulations and includes the exercise of authority over initiating, conducting, or terminating a flight.

  (18) Predator control--A form of wildlife and exotic animal management regulated by the Texas Department of Parks and Wildlife under Parks and Wildlife Code, Chapter 43, Subchapter G (Permits to Manage Wildlife and Exotic Animals from Aircraft) used to protect or aid in the administration or protection of land, water, wildlife, livestock, domesticated animals, human life, or crops. Feral hog eradication using an aircraft is one form of predator control.

  (19) Qualified flight instruction--Training recognized by the FAA that is designed to lead to a pilot certificate or rating issued by the FAA, or is otherwise required by rule or regulation of the FAA, and that is conducted under the direct or general supervision of a flight instructor certified by the FAA. Qualified flight instruction includes FAA-required check flights, maintenance flights, and test flights, but does not include demonstration flights for marketing purposes or training in aerobatic maneuvers.

  (20) Remodel--To modify or remake tangible personal property belonging to another in a similar but different manner, or to change the style, shape, or form of tangible personal property belonging to another, without causing a loss of its identity or without causing it to operate in a new or different manner. Remodeling does not include processing.

  (21) Repair--To mend or restore to working order or operating condition tangible personal property that was broken, damaged, worn, defective, or malfunctioning.

  (22) Restore--To return tangible personal property that is still operational and functional, but that has faded, declined, or deteriorated, to its former or original state.

  (23) Sale for resale--The sale, lease, or rental of an aircraft to a person who acquires the aircraft for the purpose of leasing, renting, or reselling the aircraft to another person, or for the purpose of transferring operational control of the aircraft to one or more persons pursuant to one or more written lease agreements, in exchange for a fixed, variable, or periodic consideration, whether or not the consideration is in the form of a cash payment, in the United States of America or a possession or territory of the United States of America or in the United Mexican States in the form or condition in which the aircraft is acquired.

  (24) Separated contract--A written agreement in which the agreed price is divided into a separately stated charge for incorporated materials and a separately stated charge for skill and labor. An agreement is a separated contract if the charge for incorporated materials and the charge for labor are separately stated on an invoice or billing that, according to the terms of the contract, is deemed to be a part of the contract. Adding the separated charge for incorporated materials and the separated charge for labor together to give a lump-sum total does not transform a separated contract into a lump-sum contract. An aircraft completion, repair, remodeling, maintenance, or restoration contract that separates the charge for incorporated materials from the charge for labor is a separated contract even if the charge for labor is zero.

  (25) Service provider--A person who repairs, remodels, maintains, or restores tangible personal property belonging to another.

  (26) Wildlife--Animals, other than insects, that normally live in a state of nature and are not ordinarily domesticated.

(b) Sales tax.

  (1) The sale, lease, or rental of an aircraft, aircraft engine, or component part in Texas is the sale, lease, or rental of tangible personal property, and is subject to sales tax, unless otherwise exempt under Tax Code, Chapter 151 (Limited Sales, Excise, and Use Tax) or Chapter 163 (Sales and Use Taxation of Aircraft). The lease or rental of an aircraft complete with pilot or crew for a single charge is a nontaxable transportation service, rather than the lease or rental of an aircraft, even when the charges for the aircraft and the pilot or crew are separately stated. For more information about leases and rentals, refer to §3.294 of this title (relating to Rental and Lease of Tangible Personal Property).

  (2) Sales tax is due on the total sales, lease, or rental price of the aircraft, aircraft engine, or component part. The total sales, lease, or rental price includes separately stated charges for any service or expense connected with the sale, lease, or rental, including transportation or delivery charges. The total sales, lease, or rental price does not include separately stated cash discounts or the value of any tangible personal property taken as a trade-in by the seller in the regular course of business in lieu of all or part of the price of the aircraft. For more information on determining the taxable sales price of an item of tangible personal property, refer to Tax Code, §151.007 ("Sales Price" or "Receipts") and §3.294 of this title.

(c) Use tax.

  (1) General rule. Use tax is due on the use, storage, or other consumption in this state of an aircraft purchased, leased, or rented outside of Texas and brought into Texas to be used in Texas. For more information about the application of the use tax to aircraft engines and component parts, refer to §3.346 of this title (relating to Use Tax).

  (2) Presumption of purchase for use in Texas. An aircraft purchased, leased, or rented outside of Texas and then brought into Texas by a purchaser is presumed to have been purchased from a seller for use in Texas and is subject to Texas use tax. An aircraft that is brought into Texas by a person who did not purchase the aircraft directly from a seller is not presumed to have been purchased for use in Texas.

  (3) Predominant use outside of Texas.

    (A) An aircraft purchased, leased, or rented outside of Texas and then brought into Texas is not subject to Texas use tax if the aircraft is predominantly used outside of Texas for a period of one year beginning on the later of:

      (i) the date the aircraft was acquired, by purchase, lease, rental, or otherwise, by the person bringing the aircraft into Texas; or

      (ii) the date the aircraft was substantially complete in the condition for its intended use and conducted its first flight for the carriage of persons or property.

    (B) For purposes of this subsection, an aircraft is predominantly used outside of this state if more than 50% of its total departures are from locations outside of Texas.

    (C) The owner or operator of the aircraft must maintain records sufficient to show each of the aircraft's departures. The comptroller may examine all records maintained on any aircraft brought into Texas, including logs, to determine the percentage of the aircraft's total departures that were made from locations in Texas.

  (4) Completing, repairing, remodeling, or restoring aircraft in Texas. An aircraft purchased, leased, or rented outside of Texas and then brought into Texas for the sole purpose of completing, repairing, remodeling, or restoring the aircraft is not subject to Texas use tax.

    (A) Completion, repair, remodeling, or restoration includes flights solely for troubleshooting, testing, or training, and flights between service locations under an FAA-issued ferry permit.

Cont'd...

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