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NetJets Sues IRS Over Ticket Tax Assessments

by Leroy Baker, Tax-News.com, New York

22 November 2011


Four subsidiaries in the NetJets group - NetJets Large Aircraft, NetJets International, NetJets Aviation and Executive Jet Management – have introduced an action in the Ohio Southern District Court, Columbus Office, to retrieve almost USD643m in back taxes from the Internal Revenue Service (IRS).

It is reported that those subsidiaries of NetJets, which has its corporate headquarters in Columbus, and is, itself, part of Warren Buffett's Berkshire Hathaway, are suing the United States government over past airline passenger ticket taxes, plus penalties and interest, which, it is alleged, should not have been imposed on the owners of private aircraft.

Ticket tax is imposed on airline passengers for each commercial flight taken. However, NetJets asserts that it did not levy the tax on its clients as the latter are not ‘passengers’, mainly because they are usually leasing or owners of shares in the aeroplanes that are used. The regular fees NetJets’ clients pay are commensurate with the cost of maintaining and operating the privately-owned aircraft.

It is also contended that the IRS should not be trying to collect the taxes from the NetJets companies, which act as agents rather than the providers of flights, and that the tax authority had given little or no notice, or any proper guidance, of its intention to subject the companies to taxation.

The IRS is not reported to have made any comment on the case, as is usual for pending litigation in which it is involved.

TAGS: court | tax | law | aviation | fees | Internal Revenue Service (IRS) | enforcement | tax authority | United States | penalties

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