Aircraft dealers must charge the Minnesota general sales tax rate and any applicable local sales taxes at the time of sale, unless the sale qualifies for an exemption. If the sale is exempt, the purchaser must give you a completed Form ST3, Certificate of Exemption. 

You must inform the Minnesota Department of Transportation, Office of Aeronautics, about the sale and if it was taxable or exempt from sales tax so the aircraft registration can be completed. For more information, see Registration Information.

Buyers may not be charged Minnesota sales tax if they purchase an aircraft from a private party, a business that normally does not sell aircraft, or an out-of-state dealer. But these sales are taxable unless a specific exemption applies.

If you were not charged sales tax, use tax is due when when you register the aircraft with the Office of Aeronautics. For more information, see Registration Information.

Aircraft trades are fully taxable unless they are handled by a licensed aircraft dealer or lessor.

Trades Between Individuals

No trade-in deduction is allowed for direct trades between individuals, with no involvement by an aircraft dealer or lessor. Each buyer must register their aircraft and pay Minnesota use tax on its full value.

Trades With a Dealer or Lessor

When a licensed aircraft dealer or lessor handles the trade, a trade-in deduction is allowed only if both of these conditions are met:

• The invoice or sales document records the trade and the value of each aircraft
• Both aircraft have a federal registration number shown on the invoice or sales document
  Even with the trade-in deduction, the buyer may owe sales or use tax. Whether – and how much – tax is due will depend on the value of the two aircraft, as shown in the table below.

Note: The new owners must complete their own Aircraft Registration, unless a licensed Minnesota aircraft dealer handled the transaction.

The following purchases are subject to sales or use tax.

• Aviation oil
• Repair and replacement parts, and installation labor for aircraft not operating under Federal Aviation Regulations, parts 91 or 135.

If the purchaser picks up the aircraft at the seller’s location, charge the sales tax rate that applies at the seller’s location.

If the seller delivers the aircraft to a different location for the purchaser, charge the sales tax rate that applies to the location where the aircraft was delivered.

Certain types of organizations may buy aircraft and aircraft parts exempt from sales tax. The organization must give the seller a completed Form ST3, Certificate of Exemption. Examples include:

• Federal government
• Schools
• Hospitals or nursing homes
• Qualifying charitable, religious, and educational organizations, see Nonprofit Organizations

Aircraft and aircraft parts bought for resale or leasing are not taxable. Give your vendor a completed Form ST3, Certificate of Exemption. Specify the Resale exemption.

Note: You cannot fly an aircraft that is held for resale in Minnesota except for demonstration purposes.

Airline companies that transport people or property in regular, intermittent, or irregularly scheduled flights, may purchase air flight equipment exempt from sales tax. Give your vendor a completed Form ST3, Certificate of Exemption. Specify the Other exemption and write-in Airflight equipment.

Air flight equipment includes:

• Airplanes
• Flight simulators

• Parts necessary for the repair and maintenance of air flight equipment

Note: This exemption does not apply to:

• Airplanes with a gross weight of less than 30,000 pounds that are used on intermittent or irregularly scheduled flights
•  Aircraft with a maximum takeoff weight of less than 30,000 pounds

Equipment, parts, and installation labor to repair, maintain or upgrade aircraft are not taxable if the aircraft operate under one of these Federal Aviation Regulations:

• Part 91, which governs small non-commercial aircraft
• Part 135, which governs on-demand commercial aircraft such as charter, commuter, or air taxi services

Give your supplier a completed Form ST3, Certificate of Exemption. Specify the air-flight equipment exemption.

Note: The air-flight exemption does not apply to ultralights and sport-planes.

Note: This exemption does not apply to tools or equipment used to perform the repair.

Aircraft designed and used primarily for agricultural spraying are not taxable. They must be registered with the Office of Aeronautics.

Aerial crop spraying is not a taxable service.

The following purchases are not subject to sales or use tax.

• Aviation fuel (subject to petroleum tax)
• Flight transportation charges (cargo or passengers)
• Renting hangar space
• Repair labor, if separately stated on the bill or invoice
• Washing an aircraft

Non-Minnesota buyers who take possession of an aircraft in Minnesota are exempt from Minnesota sales or use tax if they transport the aircraft outside Minnesota and meet all of the following requirements:

• The aircraft returns to Minnesota only for interstate commerce or occasional use
• The aircraft is registered in another state or country
• The aircraft meets the definitions in Minnesota Statutes 360.511 and is approved by the Federal Aviation Administration.

This exemption also applies if the buyer uses the aircraft in Minnesota only for a training period of up to 10 days before removing it from the state. 

Flight instruction fees are not taxable. But tax is due on aircraft rentals or leases, and on other related products (books, manuals) unless an exemption applies.

You must collect sales tax on these items if they are separately stated from the flight instruction fee. If the items are included in the flight instruction fee, the instructor is responsible for reporting and paying any use tax due on these items.

Transfers of aircraft ownership are not taxable in the following situations:

• Transfers on death of the owner through revocable trusts, wills, or inheritance. (You must provide court documents when you register the aircraft.)
• Transfers under Internal Revenue Code, section 351 or 721. (For details, of the Internal Revenue Code, see Isolated and Occasional Sales.)

Leases and rentals of aircraft that do not provide a pilot are taxable.

If you are a business registered in Minnesota and lease or rent an aircraft without providing a pilot, you may purchase the aircraft exempt from tax by providing Form ST3, Certificate of Exemption. If you later use the aircraft for taxable activities, you must self-assess use tax.

Leases or rentals of aircraft that provide a pilot to operate the aircraft are not taxable.

Note: If you are a licensed lessor and lease or rent of an aircraft that provides a pilot, you must pay sales tax when you purchase the aircraft. No resale exemption applies.

If you buy an aircraft solely to lease it back to a fixed-base operator (FBO), both you and the FBO must register for sales tax with the Minnesota Department of Revenue.

Collecting Sales or Use Tax on Lease-Backs

The owner and the FBO must keep detailed documentation on the lease-back transactions. The FBO must:

• Collect and report sales tax on amounts received from leasing the aircraft to others.
• Report and pay use tax on amounts paid to the owner for the FBO’s own taxable use of the aircraft (such as for flight instruction or personal use).

If the FBO leases an aircraft to the owner, tax may be handled in either of the following ways:

• The FBO collects sales tax from the owner and reports the tax on their sales and use tax return. Base the lease price on amounts charged to other lessees or the fair market rental value.
• The owner reports use tax directly to the state on the owner’s own return. It is important that the FBO has documentation that the owner is paying tax.

Note: Because the owner and the FBO have an ongoing relationship, they should have a legal contract detailing each party’s responsibilities, liabilities, and understandings. This ensures that each party is aware of their sales and use tax responsibilities.

Charter services (providing an operator with an aircraft) are not taxable. The charter operator owes tax on the purchase or lease of the aircraft used to provide charter service.

Aircraft leased to out-of-state residents are exempt if the aircraft is based and used outside of Minnesota.

For aircraft leases or rentals, the source of the transaction for sales tax purposes depends on whether the customer pays all at once or over time:

• Single payment – sourced to the location where the customer receives the aircraft being leased.
• Multiple payments – sourced to the primary location of the aircraft. The primary location is the address the customer provides for the aircraft and does not change by occasional use at different locations.

The club or association must charge sales tax on all member or shareholder fees.

Examples of taxable charges include:

• Buy-in fees
• Dues
• Joining fees
• Membership fees
• Rental fees
• Other fees charged to members or shareholders:
  • Aircraft usage
  • Bundled costs, including insurance, fuel, hangar fees, and maintenance 
  • Regularly scheduled dues

Aviation fuel is subject to petroleum tax, not sales or use tax. If the flying club itemizes the aviation fuel on the membership fees and separately states the fuel charges, then they are not subject to sales tax.

The flying club must register the aircraft with the Office of Aeronautics. For more information, see Registration Information.

You owe use tax if you own and use an aircraft in Minnesota but did not pay Minnesota sales tax. If you purchase, hangar, or store the aircraft in an area that has a local tax, you also owe local use tax.

To pay any tax that is due or to claim an exemption from the tax, you must complete Section 3 of the Aircraft Registration Application and Sales/Use Tax Return form (Aircraft Registration). To get the form go to  the Minnesota Department of Transportation website at http://www.dot.state.mn.us/ and type aircraft registration into the Search box

Instructions for completing Section 3 and information on allowable exemptions are on page two of the Aircraft Registration.

The sections below explain how use tax applies in specific situations that occur in the aircraft industry.

Fractional Ownership Interest

If you fractionally own an aircraft in Minnesota, you owe use tax on your share of the ownership interest if all the following conditions are met:

• You use the aircraft in Minnesota.
• The aircraft was not purchased for resale.
• No sales tax was paid on the aircraft, or sales tax was paid to another state with a lower tax rate than Minnesota.

For more information, see Revenue Notice 06-05, Fractional Ownership Interests

Parts for Rebuilding an Aircraft

If you buy repair and replacement parts to rebuild an aircraft, the parts are taxable unless the aircraft operates under one of these Federal Aviation Regulations Part 91 or Part 135.

If you buy parts to rebuild an aircraft that you will resell, the parts are not taxable. Give your vendor a completed Form ST3, Certificate of Exemption. Specify the Resale exemption.

Tax Paid to Another State

If you paid legally required sales taxes to another state on an aircraft purchase, it will reduce your Minnesota use tax.

• If the other state has a lower sales tax rate, you owe the difference to Minnesota as use tax.
• If the other state has a higher sales tax rate, you do not owe Minnesota use tax. (You cannot get a refund for the difference.)

To get credit for sales tax you paid elsewhere, you must attach a copy of the receipt when you register the aircraft in Minnesota. (The receipt must show the amount of tax paid.)

To qualify for the resale exemption, the aircraft must be used only for demonstration purposes. You must show you are a licensed Minnesota aircraft dealer or otherwise in the business of selling aircraft. Include a copy of your Minnesota dealer’s license to your Aircraft Registration. If you do not have one, include a description of your business.

To qualify for the resale exemption on a leased aircraft, include a copy of the lease to your Aircraft Registration. If a formal lease agreement does not exist, you must include a description of the leasing or rental activity.

Also, include a statement describing the owner’s use of the aircraft. If the aircraft is owned by a nonprofit flying club or association, attach a copy of the club’s charter and by-laws.

You must report taxes on the sale or purchase of an aircraft (including leases and rentals) on a the Aircraft Sales and Aircraft Use line of your sales and use tax return. You must report your aircraft sales and use taxes on these tax lines so that the money is correctly the deposited into the State Airports Fund.

To report sales or use tax on aircraft:

• Report Minnesota sales tax you collect on the sale or lease of aircraft on the Aircraft Sales line
• Report Minnesota use tax you owe on the purchase or lease of aircraft on the Aircraft Use line
• Report local sales or use taxes on aircraft on the appropriate Local Tax lines.

Note: You may need to add Aircraft Sales (line 712) and Aircraft Use (line 713) to your return. For instructions, see Add Local Tax and Other Taxes to a Sales and Use Tax Account.

Note: If you are an annual filer, report any sales or use tax on aircraft for the calendar year (January 1 – December 31) on the aircraft tax lines.

When reporting aircraft sales or purchases, you may get an error message when you submit your sales and use tax return in our e-Services system. This can happen when you have nothing reported on the General Rate Sales Tax line.

If you get an error message, provide details in the Explanation field, such as “I reported taxable sales or purchases on the Aircraft tax lines.”

When filing your return, you must report all sales tax collected and use tax you owe.

If you are not registered for sales and use tax, you must contact the Minnesota Department of Revenue and register to collect and report taxes. Call Business Registration at 651-282-5225 or 1-800-657-3605 (toll-free).

It is important to keep good records to determine the correct amount of state and local tax you owe.

Your records should include:

• Bills, receipts, invoices, and any other documents that support the entries in your books
• Exemption certificates
• Shipping documents
• Worksheets used to prepare your tax returns
• Aircraft log books
• Lease agreements

• 297A. 668, Subd. 4. Sourcing rules for the lease or rental aircraft
• 297A. 72, Exemption Certificates
• 297A. 82, Aircraft; flight equipment; payment of taxes; exemptions
• 360.511, Aeronautics Definitions

• 8130.3200, Nonexempt use of purchase obtained with exemption certificate, Subp.2. Temporary use.
• 8130.6000, Air-flight Equipment
• 8800.4100, Definitions – Flying club

• 06-05: Fractional Ownership Interests
• 96-05, Sales of Ultralight Planes

• Health Care Facilities
• Isolated and Occasional Sales
• Use Tax for Businesses
• Schools – Sales and Purchases

• Government – Federal Government
• Government – Local Governments
• Government – State Agencies
• Local Sales and Use Tax
• Nonprofit Organizations