Taxpayer Did Not Give Up Control Over Aircraft
In Aerogenesis, Inc. v. Department of Treasury, Michigan Court of Appeals, No. 300266, November 10, 2011, a Michigan use tax assessment on an aircraft purchased by a taxpayer was upheld because the taxpayer was not eligible for the exemption as a domestic air carrier and could not take advantage of its subsidiary's exempt status.
The taxpayer purchased the subject aircraft and leased it to its subsidiary for use in its cargo and passenger transport business. From the terms of the lease agreement, the taxpayer retained substantial control over the aircraft. The taxpayer was required to service, maintain, and repair the aircraft, and its subsidiary was barred from making any alterations. The taxpayer did not cede control of the aircraft to the subsidiary, and therefore did not qualify for exemption due to the subsidiary's exempt status.
Furthermore, the taxpayer could not claim that the Michigan Department of Treasury was estopped from making its assessment due to a letter it initially sent advising of the applicability of the exemption. There could be no reliance on the part of the taxpayer because the letter was received in 1997 and the taxpayer purchased the aircraft in November of 1996.