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House of Representatives
Session of 2013 - 2014 Regular Session

MEMORANDUM

Posted:	February 14, 2013 04:41 PM
From:	Representative Jim Marshall and Rep. William C. Kortz, II
To:	All House members
Subject:	Elimination of Fixed-Wing Aviation Sales and Use Tax (SUT)--Former HB 1100)

In the future, we intend to reintroduce legislation which will eliminate the Sales and Use Tax on Fixed-Wing Aircraft sales, maintenance and repairs. This bill passed the House last session 179 – 19 but unfortunately stalled in the Senate. Background Info: In October 2009, Pennsylvania provided an SUT exemption for rotary-wing aircraft, including sales, parts, maintenance and repair. As a direct result of this change, Sikorsky Global Helicopters, located in Coatesville, Pennsylvania, has created an estimated new 400 jobs. Sadly, we did not extend this exemption to fixed-wing aircraft and over the last four years we’ve paid dearly for it. In that time period, we’ve had the opportunity to land some major aviation manufacturers like Embraer, Eclipse and Honda Jet, the latter of which only recently entered the aviation marketplace. These three corporations decided to locate in other states due to our current fixed- wing tax policy; in the case of Honda Jet, they located in New York. The legislation we are about to reintroduce will eliminate SUT on fixed-wing aircraft parts, maintenance and repairs and it eliminates SUT on aircraft sales as well. This is an important component of the bill in terms of our ability to attract large companies, many of which own 2-3 aircraft originally purchased in a state that provides an exemption from sales tax. When they investigate landing their business in Pennsylvania and learn that they will be subject to a 6% sales tax on their fleet, they do a touch and go. In May of 2010, AeroStragey, LLC reported that Pennsylvania lags behind most states with respect to aviation aircraft maintenance jobs and the economic stimulus they bring. We employ only 2,900 people in this sector, creating about $605 million of economic impact. In contrast, Ohio employs 8,300 people and New York, 9,400; individually, both states clear over $1.2 BILLION in terms of total economic impact. While Pennsylvania is home to about 9,000 aircraft, we have not one major paint/overhaul shop or turbine engine service center in the state, clear evidence that there is no demand for these kinds of services. Why? When aircraft owners require maintenance, they fly their aircraft out of Pennsylvania to service centers that don’t charge sales tax. Even small single engine aircraft owners fly out of state for service. The good news is that Pennsylvania is fertile ground for investment and development. The Aviation Council of Pennsylvania reports that the aviation and aerospace industry has the potential to become one of the top five business clusters in the Commonwealth, creating jobs that, on average, pay a family sustaining $50,000 per year. We have an abundance of underutilized public use airports, 129 to be exact – so the infrastructure is already in place. On the demand side of the equation, all of our aircraft require federally mandated maintenance every 100 hours to stay airworthy. By revising our tax policy on fixed-wing aircraft, Pennsylvania will begin to attract a wide array of aerospace firms, many of which find our geographic location desirable; we’ll make up the revenue shortfall by creating new jobs, all of which will be subject to the personal income tax. Former HB 1100 passed the House last session with a 179-19 vote. Please join us in supporting this vital legislation.

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