State Taxation and Registration of Part 91 Aircraft: A Legal Overreach?

State Taxation and Registration of Part 91 Aircraft: A Legal Overreach?

Aircraft ownership has long been subject to a complex web of regulations, but one ongoing point of contention is whether states have the authority to tax and require registration of personally owned and small business aircraft operating under Part 91. Unlike commercial airlines, which are clearly engaged in interstate commerce, private aircraft owners often find themselves caught between state tax collectors and federal aviation law. This article examines whether such state-level regulations are legally justified or if they conflict with federal authority, particularly under the FAA’s exclusive jurisdiction over aviation.

The Federal Government’s Exclusive Role in Aviation Regulation

The Federal Aviation Administration (FAA) has long asserted control over civil aviation in the United States. Under 49 U.S.C. § 40103, the federal government has “exclusive sovereignty of airspace” over the U.S., reinforcing that aviation regulation is largely a federal matter. Furthermore, the FAA is responsible for aircraft registration through its Aircraft Registry in Oklahoma City, leading many to argue that state-level registration and taxation of aircraft is both redundant and legally dubious.

This federal preemption is a key argument against state attempts to tax and regulate aircraft. Courts have repeatedly upheld the FAA’s authority over aviation matters, making a strong case that aircraft should not be subject to state-by-state registration schemes.

The Interstate Commerce Argument: Are States Overstepping?

The Commerce Clause of the U.S. Constitution (Article I, Section 8) prohibits states from enacting laws that unduly burden interstate commerce. Personal and small business aircraft are inherently mobile, often crossing state lines in a way that makes them fundamentally different from other types of taxable property. Many states, however, attempt to impose taxes and fees on aircraft merely because they land or are hangared within state borders.

For example, some states levy “use taxes” on aircraft that spend a certain amount of time in the state, even if they are registered elsewhere. Others, like California, impose “possessory interest” taxes on aircraft hangared at public airports. These taxation attempts raise serious constitutional concerns, particularly when they apply to aircraft that are not permanently based in the state.

A key legal precedent is Northwest Airlines, Inc. v. State of Minnesota, 322 U.S. 292 (1944), in which the Supreme Court ruled that states could not impose taxes that interfere with interstate commerce. While this case focused on airlines, its principles apply to private aircraft as well—if states tax aircraft owners for simply passing through, they may be unlawfully restricting interstate commerce.

State Aircraft Taxes and Registration Fees: A Patchwork of Legal Gray Areas

State taxation of aircraft varies widely across the country. Some states, such as Delaware, attract aircraft owners because they impose little to no tax on aircraft ownership. Other states, such as California, Texas, and New York, aggressively tax aircraft as personal property, regardless of whether they are used primarily for business or personal purposes.

Common state taxation and registration schemes include:

1. Aircraft Property Taxes – Applied to the assessed value of an aircraft, similar to real estate taxes.

2. Use Taxes – Levied when an aircraft is brought into a state, even temporarily, based on its value.

3. Registration Fees – Some states require separate aircraft registration, despite the FAA’s national registry.

4. Transient Aircraft Taxes – Imposed when an aircraft spends a certain amount of time in a state, leading to potential double taxation.

Many aircraft owners, particularly small business operators, argue that these taxes and registration requirements amount to double taxation, as they already pay federal registration fees and, in some cases, sales or use taxes in their home state.

A notable legal challenge was Braden v. County of Los Angeles, 216 Cal. App. 3d 176 (1989), in which an aircraft owner challenged California’s aggressive taxation of personal aircraft. While the court ruled in favor of the state, the case highlighted how local taxation policies create financial burdens for aircraft owners that may not align with federal law.

Is There a Case for Federal Preemption?

Federal preemption occurs when federal law overrides conflicting state laws. The argument that aircraft taxation and registration should fall solely under federal jurisdiction is strong for several reasons:

• The FAA already regulates aircraft registration nationwide, reducing the need for separate state-level registration.

• States taxing aircraft based on presence within their borders interfere with the mobility of aviation, an inherently interstate activity.

• Past Supreme Court rulings have restricted states from imposing undue burdens on interstate commerce, which private and small business aircraft inherently engage in.

A similar situation exists in marine law, where the federal government controls vessel registration and states have limited authority to impose additional requirements. Applying this principle to aviation would simplify compliance for aircraft owners and prevent states from imposing excessive taxes on aircraft that are already federally registered and regulated.

What This Means for Aircraft Owners

For aircraft owners—especially those who operate under Part 91 for personal or business use—state taxation and registration requirements create financial and legal uncertainty. Owners of small aircraft used for business often face an unfair burden when states attempt to impose taxes that conflict with federal law.

To protect themselves, aircraft owners should:

1. Research state tax laws before basing an aircraft in a particular location to avoid unexpected taxation.

2. Consider registering their aircraft in a tax-friendly state, as many large corporations do to avoid excessive fees.

3. Be aware of potential legal challenges to state taxation of aircraft, as cases challenging these laws could establish new legal precedents.

Ultimately, there is a compelling argument that personal and small business aircraft should fall under federal jurisdiction, not state taxation and registration laws. While states have the right to tax many types of property, aviation is a unique industry where federal preemption should apply. The FAA’s role as the sole regulator of airspace and aircraft registration suggests that state-level taxation and regulation could be an overreach—one that may face further legal challenges in the years ahead.

Conclusion: Time for Clarity in Aviation Taxation

The current patchwork of state taxation and registration laws creates unnecessary complications for private aircraft owners. Given the federal government’s clear role in aviation regulation, there is a strong case for challenging state attempts to tax and regulate Part 91 aircraft. Unless states can justify their taxation within the bounds of federal law and the Commerce Clause, these policies may ultimately face greater scrutiny—and potential legal challenges—in the near future.

For now, aircraft owners must navigate these laws carefully, but the conversation about federal preemption is far from over.