Taxation; certain aircraft and aircraft parts are exempt from sales, use, and lease taxes
Summary
HB253 revises Alabama’s tax treatment of certain aircraft-related transactions. The bill creates a state sales and use tax exemption for gross receipts from the sale of specified aircraft parts, components, systems, sundries, and supplies when those items are used on aircraft brought into Alabama for conversion, reconfiguration, or maintenance by certified or licensed air carriers. It also exempts the sale of certain aircraft delivered in Alabama and used by air carriers, so long as the aircraft will not be hubbed in Alabama, and it sets out definitions for when an aircraft is considered not permanently domiciled in the state.
The bill also amends Alabama’s lease and rental tax statutes to add special sourcing rules for commercial aircraft leases and to exempt the leasing of certain aircraft parts under similar conditions. For commercial aircraft used by certificated or licensed air carriers, the lease tax is determined based on the location where the aircraft is first placed into revenue service. The bill retains the general lease tax structure but adds a new aircraft-specific exemption and clarifies that local county and municipal taxes are not affected unless a local governing body adopts its own resolution or ordinance. The exemptions generally run from September 1, 2025, through August 31, 2030, and the act becomes effective June 1, 2025.
Impact
HB253 amends Sections 40-12-222 and 40-12-223 of the Code of Alabama 1975 and creates new temporary exemptions from Alabama state sales, use, and lease taxes for qualifying aircraft, aircraft parts, and related transactions. It narrows the tax base for aviation-related purchases and leases involving air carriers, while preserving local taxing authority unless a county or municipality affirmatively opts in. The bill is likely to affect airlines, aircraft lessors, maintenance providers, and suppliers that handle aircraft temporarily in Alabama or operate aircraft used in interstate, foreign, or intrastate commerce.
Sentiment
The bill appears to have been broadly supported and noncontroversial in the Legislature. It passed the House and Senate unanimously, with no recorded dissenting votes in any of the listed roll calls. The absence of committee transcript material also suggests there was little publicized debate or opposition during consideration.
Contention
No significant contention is reflected in the available record. The main policy issue embedded in the bill is the targeted tax exemption for aviation businesses, especially the distinction between state tax relief and the continued applicability of local taxes unless locally approved. Any potential concern would likely center on the revenue impact of exempting aircraft sales, parts, and leases, and on whether the tax benefits are sufficiently limited to non-Alabama hub operations and temporary in-state maintenance activity, but no formal opposition is shown in the vote history.
AN ACT to amend Tennessee Code Annotated, Title 67, Chapter 6, Part 3, relative to exemption from sales and use tax on aircraft repair services and parts.