Aviation tax changes making Indiana skies friendlier

A change in state law could make Indiana a friendlier stop for corporate pilots who've long avoided stopping for fuel here because of high taxes.

Indiana began exempting aviation fuel and maintenance and service work on planes from its 7-percent state sales tax effective Monday. It has substituted a flat 10 cents-per-gallon excise tax for fuel purchases.

Tom McCord, sales manager at Tom Wood Aviation, which operates Metropolitan Airport in Fishers, said the changes could save pilots hundreds of dollars and bring in business for the 68 airplane maintenance shops around the state.

"I think we are going to see an increase in aviation activity across the board," he told The Indianapolis Star.

The tax cut, approved by the General Assembly this spring after intense lobbying by the aviation industry, comes as general aviation businesses continue to struggle since the recession crimped the budgets of many companies using planes for business and people flying for pleasure.

McCord said the tax change "is going to give us a competitive advantage" in fuel sales while cutting the costs of fixing and maintaining planes and operating planes for flight schools.

Bart Giesler, executive director of Aviation Association of Indiana, agreed, noting that Indiana airplane maintenance and service shops had been competing for work with some neighboring states that eliminated their sales tax on airplane work years ago.

Indiana repair shops "knew they were at a 7-percent disadvantage before they even started," Giesler said. "Now the playing field is leveled."

Mark Kimberling, national director of state government affairs for the Aircraft Owners and Pilots Association, said Indiana's changes could bring it an aviation boom similar to one Maine experienced after it granted its aviation businesses sales and use-tax relief in 2011. Eleven of 12 aviation service providers surveyed by the state said business increased, and six said they added employees and expanded facilities.

Though tax revenue from fuel sales goes into Indiana's general fund, it's hard to estimate how much the state could reap from the changes. Aviation fuel sales aren't tracked.

Airplane owners say they welcome the tax relief.

"It's great. Our customers are thrilled they are not going to have to pay sales taxes," said Andrea Montgomery, co-owner of Montgomery Aviation, which runs airports in Zionsville, Frankfort and Peru.

"We were losing a lot of business" to out-of-state airports, Montgomery said. "Now I can advertise that we are (selling aviation fuel for) much less than the national average."