Federal Excise Tax Update
Congress has not yet acted to reauthorize the FAA. As a result, the excise taxes remain expired. The IRS has posted several questions and answers related to the expired taxes on their Web site. NATA encourages operators and FBOs to review this information. Click here to view the IRS information.
NATA offers the following additional guidance for air charter operators and FBOs.
Charter Operators
For any transportation that occurs between July 23 and the eventual reauthorization of the FAA’s taxing authority, charter operators may not charge their customers for the following items:
• 7.5% passenger tax
• Segment fees
• International Facilities Fees
• Alaska/Hawaii Fees
• 6.25% cargo tax
Some operators have expressed concern that the taxes could be retroactively imposed. Based upon historical precedent (from when aviation excise taxes have previously expired) it is highly unlikely that the taxes could be applied retroactively. NATA cautions operators that they may not charge a tax that doesn’t exist.
When quoting trips for future dates, operators may wish to consider a statement that the quote does not include federal excises taxes, which may or may not be imposed on the trip depending on when it occurs and when it is paid.
Charter operators should inquire with FBOs as to whether fuel that they purchase is taxed and retain records so they may be able to document potential future refund requests for fuel used in commercial operations. Operators should also note when/if they are purchasing untaxed fuel.
FBOs
Most fuel currently in FBO tanks has already been taxed. FBOs need not alter their pricing for fuel they currently hold. Noncommercial operators and FBOs would not be entitled to refunds on fuel that was properly taxed prior to July 23, 2011.1
Not all components of the federal taxes on fuel have expired. According to IRS information, the deficit reduction tax as well as the Leaking Underground Storage Tank fund tax are still in effect. The tax rates on aviation gasoline and kerosene used in noncommercial aviation, during the FAA authorization lapse, are 4.4 cents per gallon.
Going Forward
The IRS is expected to provide additional specific guidance on how the industry should handle specific circumstances; however that guidance is not yet available.
As soon as further information becomes available, NATA will alert the membership.
Please contact Jacqueline Rosser at jrosser@nata.aero with any questions.
1Due to the so-called fuel fraud tax, FBOs holding an ultimate vendor registration from the IRS would still be eligible for the 2.5 cent per gallon refund that they currently obtain on any jet fuel taxed at the highway rate.