The Michigan House of Representatives will soon vote on two sales and use tax bills related to aircraft parts and maintenance services.
According to officials with the Michigan Business Aviation Association (MBAA) and the National Business Aviation Association, while aircraft parts used in the repair of general aviation aircraft not based or registered in Michigan are exempt from the 6% state sales tax, the sales tax is applied to aircraft based or registered in the state.
House Bills 4350 and 4351 would extend that exemption to aircraft based or registered in Michigan.
States surrounding Michigan, including Indiana, Ohio and Wisconsin, have similar sales tax exemptions for aircraft parts and maintenance, NBAA officials note.
“A lot of operators in Michigan have a big incentive to go out of state for big maintenance work, particularly for high-dollar parts projects,” said Bill White, president of Aerospace Services and Products, Inc., a maintenance provider in southeastern Michigan. “We see a lot of Michigan maintenance organizations lose business to out of state maintenance facilities.”
The House of Representatives is expected to vote on the bills soon. If they pass, they will progress to a Senate committee and then to a full Senate vote.
“Changing the sales and use tax structure will help us be more competitive and keep more aircraft maintenance work in the state of Michigan,” said White. “The current cost to us isn’t just in lost sales of parts – there’s also lost labor revenue and so some jobs have left the state.”
NBAA has advocated with state aviation advocacy groups for similar tax exemptions in other states, including Virginia, which recently passed a measure to exempt aircraft parts and maintenance from sales and use tax.
“Passage and implementation of these two bills would level the playing field for Michigan parts and maintenance providers,” said Scott O’Brien, NBAA’s senior manager of finance and tax policy. “We urge Michigan-based companies and aircraft operators impacted by the current tax structure to contact their state representatives and encourage passage of these bills and to do so quickly. The bills are expected to be up for vote very soon.”