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Aircraft Excise Tax

The State of North Dakota imposes an excise tax on all aircraft purchases. Excise tax must be paid at a 5% rate on the purchase price for all non‐agricultural aircraft and a 3% rate on the purchase price on all agricultural aircraft. The excise taxes should be paid along with the aircraft registration. Aircraft owners must complete the Application for Registration of Aircraft/Ultralight and Remittance of Excise Tax form. For more information about North Dakota’s excise tax regulations view North Dakota Century code 57‐40.5.

A common excise tax question posed to the agency is whether or not an aircraft excise tax can be paid over time based on the lease or rental cost of the aircraft.  On March 1st, 2019 - a new Attorney General's Opinion was released that further clarifies the state's excise tax law.  The opinion states that "it is clear that the law does not authorize the aircraft excise tax to be paid quarterly on a usage basis."  Furthermore - "if a purchase requiring registration under the laws of the state of North Dakota occurs, the aircraft excise tax must be calculated based on the purchase price, not the subsequent lease or rental cost."  The full excise tax on the aircraft purchase must be paid to the Aeronautics Commission prior to the issuance of a registration certificate.
 

Key Points On Excise Tax Due On Aircraft

All excise tax due on an aircraft is to be paid to:

North Dakota Aeronautics Commission
PO Box 5020
Bismarck, North Dakota 58502‐5020 

When the sale of an aircraft is handled between two private individuals, the buyer is responsible for the excise tax. When the sale takes place between an aircraft dealer and an individual, the dealer notifies the N.D. Aeronautics Commission of the sale and commission collects the tax from the individual at the time of registration.

There is a 30 day grace period for aircraft excise tax and registration payment from time of transaction.

Excise tax is levied on every purchase transaction, with trade‐in allowance of another aircraft or licensed motor vehicle allowed. Non‐residents who bring to the state aircraft for commercial use which have not been previously registered in North Dakota may be subject to the excise tax on the value of the aircraft. North Dakota has reciprocity with all States on sales or excise taxes except Alaska, Delaware, Montana, New Hampshire, Oregon, Texas and West Virginia.

A purchaser of an aircraft who is licensed as an Aircraft Dealer within North Dakota, and who uses such property solely for demonstration or display and for which no charge is made while holding it for sale in the regular course of business, is not subject to the excise tax.

 

Exemptions from aircraft excise tax are as follows:

1. Aircraft acquired by disabled veterans as defined by the provisions of Public LawNo.79-663 [38 U.S.C.1901]. This exemption shall be allowed only with respect to one aircraft owned by any disabled veteran.

2. Any aircraft owned by or in possession of the federal or state government or any of thepolitical subdivisions, departments, agencies, or institutions thereof.

3. Aircraft which were previously titled or registered in the names of two or more jointtenants and subsequently transferred without monetary consideration to one or moreof the joint tenants; the transfer of aircraft by gift, inheritance, or devise between ahusband and wife, parent and child, or brothers and sisters; and the transfer of aircraftto reflect a new name of the owner caused by a business reorganization, if theownership of the business organization remains in the same person or persons asprior to the reorganization.

4. Aircraft transferred between a lessee and lessor, if the lessee has been in continuouspossession of the aircraft for a period of one year or longer, and if the lessor has paideither the tax imposed under this chapter at the time of registering the aircraft in thisstate or the use tax imposed by chapter 57-40.2.

5. Aircraft acquired by any parochial or private nonprofit school. To qualify, a school mustnormally maintain a regular faculty and curriculum and must have a regularlyorganized body of students in attendance. The aircraft is not to be used for commercial activities.

6. Aircraft for use as an air ambulance, when purchased by the operator of anemergency medical services operation licensed under chapter 23-27.

7. Aircraft acquired by an aviation museum located in this state that is exempt fromfederal income taxation under section 501(c)(3) of the United States Internal RevenueCode [26U.S.C. 501(c)(3)]. For purposes of this subsection, the term "acquired" hasthe meaning as provided in section 57-40.5-01. Any aviation museum acquiring anaircraft under this subsection shall comply with sections 57-40.5-04 and 57-40.5-05.The aircraft may not be used for commercial activities. For purposes of thissubsection, commercial activities do not include activities for which a fee is chargedwhen the proceeds are used for the benefit of the aviation museum.

 

Penalties: Failure to pay the excise tax is a criminal offense and is punishable by up to thirty days’ imprisonment, a fine of $1,000, or both. Additionally, the Aeronautics Commission can impose significant civil monetary penalties, enlist the help of law enforcement officers to enforce aeronautics laws, and subpoena delinquent aircraft owners to appear before the Commission during a public meeting to explain the failure to pay the required fees.

Please contact the North Dakota Aeronautics Commission for additional questions regarding the excise tax.