Alert
Alert
08.09.11
On Friday, August 5, 2011, the U.S. Senate completed passage of legislation reinstating the air transportation excise taxes imposed on airline passengers, and President Obama signed the bill (the “Extension Act”) over the weekend. The Extension Act creates problems in dealing with the two-week period during which the tax had expired, but fortunately the Internal Revenue Service has provided some helpful guidance and relief.
As background, air carriers and other providers of domestic air transportation for passengers (“air carriers”) have long been required to collect a “ticket tax” of 7.5 percent of the ticket amount plus a fixed per-segment charge. International travelers have had to pay a fixed international travel facilities tax in lieu of the domestic ticket tax. The ticket tax must be collected at time of payment if the tax is in effect at that time, although the tax paid is refundable if the tax has expired on the actual date of travel.
The ticket tax was scheduled to expire on July 22, 2011, and congressional disputes resulted in the deadline passing without Congress enacting an extension.1 As a result, air carriers were no longer authorized to collect ticket taxes after July 22.
Unfortunately, despite prior congressional assurances that any reinstatement of the ticket tax would not be retroactive, the Extension Act reinstated ticket taxes retroactively and under its terms, air carriers were required to have collected tax without interruption after July 22. This presents problems for the air carriers that could not and did not collect tax during this period.
Fortunately, at the request of congressional leaders, the IRS quickly posted interim guidance on certain retroactivity issues on its website (https://www.treasury.gov/about/history/Pages/irs.aspx). Based on these recent developments, air carriers should take note of the following:
Download: Congress Reinstates Air Carrier Ticket Taxes, But Implementation Problems May Remain