SC passes sales tax exemption for owner operator aircraft parts

Supporters anticipate more capital investment and jobs

COLUMBIA, S.C. – South Carolina Governor Nikki Haley has signed a bill into law removing the state’s seven percent sales tax from owner operator aircraft parts referred to as “FAA Part 91.” The change is expected to make South Carolina’s aviation maintenance and repair operations (MROs) more competitive with MROs in tax-exempt states.

“Because aircraft are mobile, owners can easily shop around to different states in search of the best deal for maintenance and repair. Removing the Part 91 tax levels the playing field so that South Carolina’s aviation companies can compete with companies in tax-exempt states such as Georgia, Tennessee and Florida,” said Steve Townes, chairman of the aerospace industry cluster at the South Carolina Council on Competitiveness.

There are approximately 12 MROs in South Carolina. Stevens Aviation, one of the largest MROs in the southeastern United States, has one location in Greenville and two others that are located outside of South Carolina.

“The Part 91 tax put us at a competitive disadvantage,” said Paul Witt, executive vice president of Stevens Aviation. “A very short flight to Augusta saved the customer seven percent. Removing the tax helps us to keep our business in South Carolina.”

The exemption also becomes a selling point for economic developers to recruit aviation businesses to the state.

“The Aerospace Task Force’s Strategic Plan identified the Part 91 tax as an obstacle to growth of South Carolina’s aerospace industry,” said Secretary of Commerce Bobby Hitt.  “South Carolina is a leading state for global business recruitment, and the Part 91 exemption will only bolster our ability to compete on the global stage. I would like to thank the Governor and the legislature for responding to the needs of industry and their continued efforts to keep South Carolina ‘Just right’ for business.”

Owner operator aircraft were the only type of aircraft subject to Part 91 tax. Commercially owned aircraft and courier service aircraft were already exempt under state law. Supporters of the exemption say its positive impact will carry over into non-aviation businesses.

“Not only does the exemption benefit MRO companies in South Carolina, it also benefits those companies and individuals that own and operate aircraft in our State,” said James Stephens, executive director of the South Carolina Aeronautics Commission.  “Many owners and operators will realize cost savings related to non-aviation business because of the savings in the operation of their aircraft.”

Supporters of the exemption also say the loss of any tax revenue is regained by the payroll taxes from jobs created in MROs.

“The state was only collecting about $500,000 in Part 91 tax revenue, and we know of at least two opportunities totaling $1.8 million that South Carolina lost because of the tax,” said Don Purcell, president of the South Carolina Aviation Association. “Removing the tax means more business revenue in the state and ultimately, more capital investment and jobs.”