July 17, 1981

Mr. Eugene Rowen
Secretary 
Department of Transportation 
Pierre, South Dakota 57501

Official Opinion No. 81-23

Applicability of Airline Flight Property Tax to South Dakota Based Aircraft Operating in Interstate Commerce

Dear Secretary Rowen:

You have requested an official opinion from this office in regard to the following factual situation:

FACTS:

A commuter airline based in South Dakota registers its aircraft in accordance with SDCL 50-11-10.  It operates said aircraft in interstate commerce on regularly scheduled flights with a minimum of 50 percent of its operation occurring within the state of South Dakota.

Based on the above facts you have asked the following question:

QUESTION: 

Is the aircraft registered in accordance with SDCL Chapter 50-11 subject to taxation as airline property as required by SDCL Chapter 10-29?

SDCL 50-11-18 provides: 

The registration fees provided in §  50-11-12 [this sets forth an annual registration fee based on the weight of the aircraft] shall be in lieu of all personal property taxes, general or local, on aircraft authorized by any law or ordinance of this state or any of its political subdivisions, . . .

On the first registration there is an additional tax which is payable on the purchase price or fair market value at the same rate as the sales tax, SDCL 10-45-2.  This is a one-time tax as contrasted with the annual registration  fee.  These sections, however, do not apply to any aircraft which is engaged principally in commercial flying constituting an act of interstate or foreign commerce.  SDCL 50-11-28.

SDCL 10-29 was enacted in 1961 to impose a central assessment for local ad valorem purposes on airline flight property of airline companies engaged in air commerce.  Flight property is defined as 'all aircraft fully equipped ready for flight used in air commerce, [which] means the transportation by aircraft of persons or property for hire in interstate or international transportation on regularly scheduled flights.'  SDCL 10-29-1(4) and (5). (Underscoring supplied.)

The Department of Revenue under this section values the flight property of the airline company and applies a use ratio to such total based upon total tonnage of passengers, express and freight in South Dakota to that within and without the state plus the ratio of flight time on flights serving the state to all flight time plus the revenue ton miles of passengers, mail, express and freight serving the state to all miles flown within and without the state during the preceding calendar year.  The taxable value of such airline flight property is computed at the same percentage as determined by §  10-6-33 (§  10- 29-9).  An average mill rate is then applied which is obtained by dividing the total taxable valuation of all property for the preceding year within the state into the total of all state and local taxes levied within the state on the  millage basis for the present year.  SDCL 10-29-14.

The Federal Aviation Act, 49 U.S.C. 1401, requiring registration of aircraft does not prohibit registration by a state where it is for the limited purposes of revenue or the state regulatory apparatus and it relates only to the operation of aircraft based in the state.  The same does not stand as an obstacle to the accomplishment and execution of the full purpose and object of Congress in enacting the federal registration program.  Jones v. Rath Packing Company, 430 U.S. 519, 526, 97 S.Ct. 1305, 1309, 51 L.Ed.2d 604, 614 (1977).  Nor does the coexistence of both registration statutes impair federal superintendence in the federal sphere.  City of Philadelphia v. State Department of Environmental Protection, 73 N.J. 562, 376 A.2d 888 (1977).  

Because of the facts you have presented, i.e. this aircraft will operate in interstate commerce, it is my opinion that SDCL 50‑11-28 is applicable; therefore, state registration is not required even though the aircraft is based in South Dakota.  With this conclusion, then, the inescapable answer to your question is that the proportionate share of the flight property of this airline company which is operating in air commerce, applicable to South Dakota, is subject to assessment and taxation under SDCL 10-29.

Respectfully submitted,

Mark V. Meierhenry
Attorney General