New law designed to boost Arkansas’ aviation sector

A law passed in the most recent legislative session is meant to help the state attract aviation business that was flying away because of a sales tax Arkansas levied that other states didn’t.

Act 1182 by Rep. Joe Jett, D-Success, enacts a “fly away” provision exempting from taxes aircraft sales where neither the seller nor the buyer are located here.

Cheri McKelvey, vice president and co-owner of Air Resource Group, a Little Rock-based aviation company with an office in Springdale, said all of the planes she has brokered between out-of-state customers have flown to another state that did not charge the sales tax, often Kansas, to finalize the deal.

McKelvey said the absence of those planes means Arkansas companies have been missing out on performing the upgrades that follow. Moreover, the existence of the tax has made Arkansas less likely to attract aircraft transactions between out-of-state clients despite its desirable central location.

Companies and individuals often do business based on an individual state’s tax laws. Aviation is different because of the ease with which the product can be moved to take advantage of those laws, she said.

“It kind of levels the playing field for us, actually, to be able to do more for an airplane buyer or seller,” she said.

Chad Causey, executive director of the Arkansas Aerospace and Defense Alliance, said of the law, “We’re excited about it. We think it’s a big win that will have a big impact on the aerospace industry here in Arkansas.”

The aerospace industry employs about 5,400 Arkansans at 45 repair stations and 80 fixed base operations, according to the National Business Aviation Association. Arkansas aviation companies include Dassault Falcon Jet, Lockheed Martin, Triumph Group and Rose Aircraft Services.

Jett, a certified flying instructor, said the provision is revenue neutral because Arkansas wasn’t earning any sales tax revenue beforehand on the lost sales. He said the added business will raise funds for the state’s Department of Aeronautics that can be leveraged with federal grants to raise money for safety and economic development around airports.

The law also clarifies that taxes on repair parts and labor will not be levied for work done on airplanes rated with a gross takeoff weight of 12,500 pounds “or more.” The previous law covered planes that were “more than” 12,500 pounds, which meant a number of popular aircraft models were being taxed for maintenance, repair and overhaul work.

Jett said he hoped the revenue from the additional aircraft business could lead to reduced aircraft fuel taxes in the future.