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HB 1997

Taxes, Sales - As introduced, expands sales tax exemptions on repair and refurbishment of aircraft and aircraft components, including equipment and parts used, performed by Tennessee-based aircraft repair companies from only large or transport category aircraft to include all aircraft, including helicopters, that will be removed outside the state following repair. - Amends TCA Title 67, Chapter 6, Part 3.

114th Regular Session (2025-2026)

HB 1997 expands Tennessee’s aircraft repair tax exemption to all aircraft (including helicopters and under 12,500 lb), for in-state repairs with removal after service.

Taken off notice for cal in s/c Finance, Ways, and Means Subcommittee of Finance, Ways, and Means Committee
#sales #taxes
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Bill Summary · HB 1997

Summary of HB 1997 (Session 114, Tennessee) — Taxes, Sales – Aircraft Repair Exemption Expansion

Purpose and intent

HB 1997 expands Tennessee’s sales and use tax exemption for repairs, refurbishments, and related services and parts used in aircraft maintenance. Specifically, it broadens the current exemption from applying only to large aircraft to applying to all aircraft, including helicopters and general aviation under 12,500 pounds, when repairs or refurbishment services occur in Tennessee and the aircraft will be removed from the state after work is completed. The bill also revises definitions and terminology to reflect the broader scope and to align with federal aviation categories.

Key provisions and changes

  • Section 1 – Scope of exemption (67-6-302(c)(1)): Removes the term “large aircraft” and replaces it with “aircraft” in the exemption language.
  • Section 2 – Definitions (67-6-302(c)(3)):
    • Replaces prior definitions to cover:
    • “Aircraft” as helicopters or airplanes.
    • “Aircraft accessories,” “aircraft engine equipment,” and “aircraft mainframes.”
    • “Authorized aircraft service facility” (FAA-approved repair station in Tennessee).
    • “Repair and refurbishment services” includes testing, inspections, refurbishments, installations, painting, maintenance, overhaul, etc., of mainframes, engine equipment, and accessories.
    • Adds a broader, standardized set of terms aligned with the tax exemption.
  • Sections 3 and 5 – Related definitions and cross-references (67-6-313):
    • Updates cross-referenced language so exemptions apply to all aircraft, not just large/transport-category aircraft.
    • Consolidates definitions for consistency with the expanded scope.
  • Section 6 – Effective date: Takes effect July 1, 2026.

What is affected

  • Aircraft households and operations in Tennessee: Aircraft owners and operators with aircraft under 12,500 pounds (general aviation) and helicopters will be eligible for the exemption when services are performed by Tennessee-based authorized repair facilities.
  • Repair facilities and labor: Tennessee-based FAA-authorized repair stations performing repair and refurbishment services on eligible aircraft will provide this tax-exempt labor and parts.
  • Sales and local government revenue: The exemption reduces state and local sales tax collections previously generated from parts, equipment, and labor used in aircraft repair and refurbishment.

Fiscal and timeline details

  • Estimated fiscal impact (based on the Fiscal Review Committee):
    • State revenue decline: about $3.94 million annually starting FY26-27.
    • Local government revenue decline: about $1.61 million annually starting FY26-27.
    • Substantial portion of tax savings (50%) is assumed to be spent on sales-taxable goods/services, producing some offset in state and local revenues through subsequent tax receipts.
  • Effective date: July 1, 2026.
  • Policy context: The bill follows Tennessee’s 2015 framework for large aircraft exemptions and responds to neighboring states that offer broader aviation-related exemptions.

Potential impacts and considerations

  • May encourage growth of Tennessee-based aircraft maintenance facilities by enlarging the eligible customer base to include general aviation and helicopters.
  • Narrowly targeted to services within Tennessee for aircraft destined to be removed from the state after repairs.
  • Economic effects are uncertain in magnitude; the fiscal note indicates significant revenue losses but acknowledges difficulty quantifying broader economic activity.

Overall, HB 1997 moves Tennessee toward a more comprehensive sales tax exemption for aircraft repair and refurbishment across all aircraft, potentially improving competitiveness with surrounding states for general aviation and helicopter maintenance.

Compiled from official sources — confirm details with the bill’s official record.

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