The story is more complicated than this, of course: it turns out that Massachusetts sales tax doesn't apply to sales of airplanes. So when Kahn showed up in Maine with a tax-free plane, the state told Kahn he had to pay the state's 5 percent "use tax" on his plane.
The use tax is supposed to prevent residents of sales-tax states from buying things tax-free in states that don't have sales taxes. It's meant to be a backup to the regular sales tax. It applies to basically the same things a sales tax applies to, but only comes into play when a state's resident avoids the state sales tax by buying something tax-free in another state. So if Kahn had bought his plane in New Hampshire, which doesn't have a sales tax, then his home state of Massachusetts could very plausibly have claimed that he'd bought the plane there to avoid Massachusetts sales tax, and could have charged him a use tax instead-- if, of course, Massachusetts sales tax rules applied to planes.
But it's less clear why the same thing should happen when a guy who clearly lives in Massachusetts buys a plane tax-free because his state's elected officials have decided it should be tax free.
The answer given by Maine tax administrators (as best I can make out from the AP article) is that they think, in fact, that Kahn lives in Maine too. He's got a vacation home there, and in the year he bought his plane, the plane spent more than 20 days (excluding travel days) in Maine. And that makes him a resident in their eyes.
According to the AP story, some states go even further with their use tax on planes:
Florida assesses a 6 percent use tax on plane owners who didn't pay sales tax on their planes and bring them to Florida even once within six months of the purchase date.The story doesn't say whether Florida has a residency requirement, or whether any untaxed plane passing through the state is subject to tax.
Leaving aside the question of whether we should feel sorry for a guy who had to pay a 5% sales tax when he bought a plane (at $26,000 in tax, Kahn's plan must have cost him over $500,000), are these states doing the right thing when they apply the use tax laws in this way?
The spirit of the use tax law is that it's designed to prevent tax-avoiding behavior by a state's residents. Kahn is at least a part-time resident of Maine, and may well have bought his plane in Massachusetts to avoid owing sales tax in Maine, but you certainly couldn't prove it either way. And you can construct a very simple explanation of why he bought his plane in Massachusetts that has nothing to do with tax avoidance: Massachusetts is his primary state of residence.
On the other hand, Maine and Massachusetts each have their rules about who can be counted as a resident of their state. Maine can make a decent case that Kahn "lives" in Maine, and should be subject to the state's tax rules. And the folks in Maine would presumably make a fairness argument by contrasting the tax treatment of this guy with a full-time Maine resident who lives next door to Kahn's vacation home. If Kahn's purchase of the $500,000 plane is tax-free, how can we justify taxing the neighbor's purchase of the same plane?
But (I think) they would be wrong in making this argument. Or, at least not as right as Massachusetts folks would be in making the same sort of comparison. That is, if Kahn's neighbor in Mass. buys the same plane (and doesn't have the misfortune of owning a Maine vacation home), the sale is tax free. So, how can we justify imposing a higher tax on Kahn than on his Massachusetts neighbor?
More generally, it seems to me that (assuming this all boils down to whether Maine can treat part-time residents as subject to the same use tax requirements as full-time residents) the real effect of letting Maine's actions stand is to deny multi-state residents the potential sales tax benefits of either of the states they live in.
That is, every state chooses to exempt certain things from each of its taxes. Massachusetts exempts groceries, clothing and, yes, planes. Maine's action basically says that any Massachusetts resident who also happens to own a vacation home in Maine should be denied the benefits of these Massachusetts tax breaks.
And, abstracting from the fact that this sort of multi-state residency is a really enviable problem to have, it's hard to defend that on fairness grounds.