June 30--Corporate pilots have had a word to the wise when flying to Indiana: Avoid doing so on an empty tank.
The reason: Indiana's tax on aviation fuel long has been among the highest in the nation. Most out-of-state pilots don't use Indiana as a refueling stop, and they never top off their tanks with Hoosier fuel if they can help it. The additional cost can amount to hundreds of dollars.
But that advice will have to change. Beginning Monday, Indiana will exempt aviation fuel from the 7 percent state sales tax and substitute a flat 10 cents-a-gallon excise tax. Sales tax also no longer will be charged for maintenance and service work on planes.
As a result, Indiana could become a fly-to instead of a fly-over state for aviation fuel sold at the state's 100 public-use airports. And the 68 airplane maintenance shops around the state could see their business take off, as well.
At Metropolitan Airport in Fishers, where three mechanics worked on some of the seven planes parked last week in a maintenance hangar, the tax cuts for general aviation stand to "have significant impact," said Tom McCord, sales manager at Tom Wood Aviation, the airport's fixed-base operator.
"I think we are going to see an increase in aviation activity across the board."
Passed by the last session of the General Assembly after determined lobbying by the aviation industry, the tax change "is going to give us a competitive advantage" in fuel sales, McCord said, while cutting costs of fixing and maintaining planes and operating planes for flight schools.
McCord thinks business at Tom Wood's 20-employee shop might rise enough to allow the hiring of two more flight instructors and add one or more airplane mechanics.
The tax cut comes as the general aviation business, which includes corporate and privately owned small aircraft, has seen a falloff since the recession of 2007-09 and subsequent economic downturn that have crimped the budgets of many companies using planes for business and people flying for pleasure. (The tax change doesn't affect commercial airlines. Their jet fuel already was exempt from the state sales tax.)
"It definitely will be a positive for the state," said Bart Giesler, executive director of Aviation Association of Indiana, which lobbied for the tax cut with the Aircraft Owners and Pilots Association.
Giesler said he is particularly pleased to see the sales tax lifted on work by airplane maintenance and service shops, which compete 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."
Indiana becomes the latest state to try to lure more aviation-related business, which is highly responsive to tax exemptions and other deals, given the high cost of jet fuel, airplane repairs and the ease of flying from one state to another to take advantage of better pricing, said Mark Kimberling, national director of state government affairs for the Aircraft Owners and Pilots Association.
"It's price-related; there's no question," said Martin Ingram, president of Muncie Aviation in Muncie. "They say, 'How much is your fuel?' and we'll tell them, and they say, 'We'll go somewhere else.' You can fly from Muncie to Florida in three hours and get your services down there."
Kimberling thinks Indiana could now see the same boom in aviation-related business that Maine saw 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.
The impact on state government is difficult to estimate. No one knows how much aviation fuel is sold in Indiana because sales aren't tracked.
Tax revenue from fuel sales goes into the state's general fund and isn't accounted for separately, Kimberling said.
For airplane owners, the tax relief amounts to an ongoing daily deal, aviation officials agree.
"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."
Million Air, which sells fuel to general aviation traffic at Indianapolis International Airport, has seen its sales locally slip about 12 percent this year over 2012, excluding business related to the Super Bowl that Indianapolis hosted, General Manager Cherri Gott said.
"It's going to be something we can really advertise," Gott said. She sees the new sales tax exemption "dragging 'em out of the sky to fuel up in Indianapolis."
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