IRS Memo Contradicts Congress’ Intent on Ticket Taxes

 - April 24, 2012, 6:00 PM

A 1996 document issued by the House Committee on Ways and Means appears to underscore the intent of Congress regarding application of the so-called “ticket tax” (federal excise tax) to airline passengers. The document contradicts a March 9 Internal Revenue Service memo that seeks to apply the 7.5-percent excise tax to fees charged by aircraft management companies to aircraft owners flying in their own aircraft for their own business or personal reasons.

The IRS memo claims, “The monthly management fees, as well as the separately reimbursed amounts, paid to Management…are ‘amounts paid for taxable air transportation’ of persons, and thus are taxable…”

The Congressional Committee, however, distinguishes between commercial and non-commercial operations on page 11: “General aviation (e.g. corporate aircraft) is subject to…taxes on the fuels it uses rather than to the commercial aviation passenger and ticket and freight excise taxes.”

Footnote 8 on page 11 expands on this and gives guidance on how to determine when the ticket tax should be applied. NBAA met with the IRS chief counsel last week regarding the improper application of the ticket tax.

Meanwhile, Dave Weil of Flight Department Solutions offered advice on how to deal with managed aircraft excise tax issues.