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IRS Looks To Airlines To Refund Ticket Taxes

by Leroy Baker, Tax-News.com, Washington

01 August 2011


Following the failure of the United States Congress to renew the laws authorizing the airline ticket tax and other aviation-related taxes on July 22, the Internal Revenue Service (IRS) has asked the airlines to provide refunds, when requested, to eligible passengers.

Until they may be reinstated by Congress, the following federal air transportation excise taxes do not apply to transportation beginning on or after July 23, 2011: the 7.5% tax on the passenger ticket price; the domestic segment tax of USD3.70 per person per segment (a single take-off and single landing); the international travel facilities tax of USD16.30 per person for flights that begin or end in the US (or USD8.20 per person for a flight that begins or ends in Alaska or Hawaii); and the 6.25% tax on the amount paid for transporting property by air.

Passengers who paid for tickets on or before July 22, 2011, for travel beginning on or after July 23, 2011, may therefore be entitled to a refund of the tax. The airline would have collected the federal passenger air transportation excise taxes from the purchaser, and airlines are permitted to refund the tax to the passenger, just as they do in the ordinary course of business when issuing refunds for unused refundable tickets (including the associated taxes).

Because the airlines and travel service providers already have the information about passenger ticket purchases and travel, and in many cases have payment card information that may facilitate streamlined refunds, the IRS has asked the airlines to provide refunds to eligible passengers when requested.

However, passengers who are unable to obtain a refund from the airline may obtain a refund by submitting a claim to the IRS. Because the IRS has no information about passenger ticket purchases or travel dates, travellers who are unable to obtain a refund from the airline will be required to submit proof of taxes paid and travel dates to the IRS under procedures that are under development. The IRS will provide additional guidance at a later date.

The IRS has confirmed that it continues to monitor pending legislation related to this issue. It will continue to work with the airline industry to address issues relating to the collection and payment of the taxes involved. Taxpayers do not need to take any action at this time, as the IRS has said that it will provide further guidance on this issue in the near future.

While airlines are temporarily absolved from charging tax on passenger tickets, this may, or may not, result in lower fares, as air operators appear to be increasing their prices to reap additional income in the intervening period.

TAGS: compliance | tax | tax compliance | law | aviation | excise duty | travel and tourism | legislation | United States

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