In FMG Leasing, LLC v. Dep’t of Treasury, FMG Leasing was a limited liability company formed to hold title to an aircraft. No. 312448, 2014 WL 2931938 (Mich. Ct. App. June 26, 2014) (no reported citation available). FMG leased the aircraft to a concrete company that was one of FMG’s forming partners, and to the company’s president. FMG then sought to take advantage of a statutory exception under Michigan law that permits a lessor of tangible personal property to pay use tax on receipts from the rental of the property, instead of paying a sales or use tax on the full cost of the property at the time of purchase.
The Missouri Administrative Hearing Commission has held that a lessor of an aircraft does not qualify for the “common carrier” or the “sale for resale” tax exemptions, even if the lessee of the aircraft would qualify.
A recent ruling by the Missouri Supreme Court considered whether an aircraft ride operator qualified for the “common carrier” exemption from Missouri use taxes on its out-of-state equipment purchases. In Balloons Over the Rainbow, Inc. v. Director of Revenue, the Court denied this exemption to an operator that reserved the right to reject passengers presenting themselves for carriage. Under these circumstances, the Missouri Supreme Court found that it did not qualify for “common carrier” status and was therefore liable for Missouri use taxes.