USA Michigan USE tax after 38 years?

[Theogaster]

I am the treasurer of a small 5 member airplane flying club organized as a non-profit corporation in Ohio, with assets of a single engine aircraft (1972, 2 seat Citabria) and a small checking account that we have had in Michigan for about 38 years (we think) On Dec 1, I got a letter from the Michigan department of taxation demanding that we show proof of having paid 6% Michigan sales/use tax, or it implied we will be assessed 6% plus interest and penalties. I was given two forms to fill out (#1989 and #4281)

The airplane has been registered to the club (as shown on the FAA registry since 1980 and has been kept in a hanger just inside Michigan, near Toledo Ohio. It has had Michigan registration for as long as anyone can remember, probably also since 1980. The Forefathers of the club that purchased the airplane are now buried, and we have no records of sale price, proof of taxes paid (or reason to think they weren't paid), or where the sale was made. Probably unrelated, but relevant to our overall situation is that this October 2019, the airplane suffered a prop strike, with damages approaching its value. It may therefore soon be in a state of "salvage", although there is some limited insurance coverage. Prior to that, it was worth about $25,000.

When I became treasurer in 2016, I sent in the federal aircraft registration renewal. I used my home address, which is in Michigan, vs the prior treasurer being in Ohio. I suspect that that is what triggered the attention from Michigan, since it is the only change in the last couple decades. The aircraft was registered as an aircraft in Michigan (MDOT registration) all along, so why should it matter?? Stupid on my part, I guess, but the horse is out of the barn.

Any intelligence on how to fill out the Michigan Aircraft Transfer Questionaire (form 4281) or otherwise respond to the Michigan Dept of Treasury would be much appreciated. Are they likely to take the airplane?

Thanks for any Assistance.

Ted

 

[Theogaster]

Well, no reply here after 2 months.... Not sure what that means, but I guess this either isn't a very active forum, no profit potential, or nobody has any insight on this issue. But for what it's worth to anybody that might be in pickle and read this thread, this is how it played out. I managed to find a tax lawyer who told me that the expense of his services could easily exceed any value he could provide considering the sums of money involved. (That might not be the case for a higher dollar case). Anyway, he suggested I put together what I could, file it with Michigan, and get back with him only after seeing what might be assessed--if it looked worthwhile based on the tax assessment vs his hourly rate. I got records from the FAA and it turned out to be 40 years, not 38, found the airplane was purchased from a Michigan dealer, a loan was taken out to finance it, and I added other anecdotal reasons we THINK taxes were probably paid 40 years ago. I think I presented a reasonable story, though not quite hitting the nail on the head with 40 year old "proof". I got a response a couple days ago that they were assessing no tax and not going further. They didn't say exactly why, but it appeared to be as I thought. That is, the change in the contact addesss on the federal FAA record led them to think the airplane was recently moved to Michigan (although registered in Michigan all along). Guess it just depends what they use for inputs.

But for anybody involved with needing to pay sales/use tax, I think you can learn that it is best to pay the use tax per whatever your state law requires, and KEEP RECORDS FOREVER. In Michigan, as in many states, the interpretation of the law is that if you file your taxes (for aircraft), there is a statute of limitations for the state to come after you (4 years here). However, If you don't file (or effectively the same thing--you don't have proof) the statute of limitations never starts running and they can technically come after you forever.

 

[Steve-LevelUp]

I find that generally if there is no response, it is not that we are not reading it, but rather the individual has nothing to add. So, writing "I don't know" is not very common here. Although this makes it appear that we are not paying attention. Perhaps that is something we can change. If we do not know, then we should just say something.