‘Fuel Fraud’ Tax Could Be Axed

 - May 29, 2012, 4:25 PM

A provision inserted into a 2005 highway bill that has given business and general aviation fuel purveyors a collective headache ever since it was enacted might be repealed in the next highway reauthorization bill. Thirty-two members of the House of Representatives signed a letter to Rep. Dave Camp (R-Mich.), chairman of the House Ways and Means Committee, asking that the provision be deleted from new highway legislation now under consideration.

According to the National Air Transportation Association (NATA), the provision altered the collection of fuel taxes for business and GA fuel providers, which has had a significant financial effect on the aviation industry. Before enactment of the 2005 highway bill, jet fuel intended for noncommercial use was taxed at a rate of 21.9 cents per gallon. However, the 2005 highway bill mandated that all taxes on aviation jet fuel be collected at the same rate as the 24.4-cent-per-gallon tax for highway diesel fuel.

The change was made amid concerns that highway truck drivers were buying aviation jet fuel and mixing it with another substance to make it usable in highway trucks, thus avoiding the higher highway fuel taxes.

The lawmakers pointed out that since Oct. 1, 2005, nearly all taxes collected for nonnommercial jet fuel used in general aviation have been deposited in the Highway Trust Fund instead of the Airport and Airway Trust Fund, “where the funds are desperately needed.”