Air Transportation Tax
The air transportation of
persons taxes under section 4261 are collected taxes. The person liable for the
tax, the taxpayer, is the person making the payment for the taxable transportation.
The person receiving the payment, the collector, is the person that collects the
tax and files the Form 720 excise tax
return.
Taxes are imposed on amounts paid for:
Transportation of persons by air,
- Use of international air travel facilities,
and
- Transportation of property by air.
- Transportation of Persons by Air
The tax on transportation of persons by air is made up of the:
- Percentage tax, and
- Domestic-segment tax.
The taxes on transportation
of persons by air are the percentage tax and the domestic segment tax. Add the percentage
tax and the domestic segment tax to get the total tax on transportation of persons
by air. The percentage and domestic segment taxes do not apply on a flight if the
surtax on fuel used in a fractional ownership program aircraft is imposed.
Percentage tax
A tax of 7.5% applies to amounts paid for taxable transportation of persons by air.
Amounts paid for transportation include charges for layover or waiting time and
movement of aircraft in deadhead service.
Mileage awards
The percentage tax may apply to an amount paid (in cash or in kind) to an air carrier
(or any related person) for the right to provide mileage awards for, or other reductions
in the cost of, any transportation of persons by air. For example, this applies
to mileage awards purchased by credit card companies, telephone companies, restaurants,
hotels, and other businesses.
Generally, the percentage tax does not apply to amounts paid for mileage awards
where the mileage awards cannot, under any circumstances, be redeemed for air transportation
that is subject to the tax. Until regulations are issued, the following rules apply
to mileage awards.
- Amounts paid for mileage awards that cannot
be redeemed for taxable transportation beginning and ending in the United States
are not subject to the tax. For this rule, mileage awards issued by a foreign air
carrier are considered to be usable only on that foreign air carrier and thus not
redeemable for taxable transportation beginning and ending in the United States.
Therefore, amounts paid to a foreign air carrier for mileage awards are not subject
to the tax.
- Amounts paid by an air carrier to a domestic
air carrier for mileage awards that can be redeemed for taxable transportation are
not subject to the tax to the extent those miles will be awarded in connection with
the purchase of taxable transportation.
- Amounts paid by an air carrier to a domestic
air carrier for mileage awards that can be redeemed for taxable transportation are
subject to the tax to the extent those miles will not be awarded in connection with
the purchase of taxable transportation.
Domestic-segment tax
The domestic-segment tax is a flat dollar amount for each segment of taxable transportation
for which an amount is paid. However, see Rural airports, later. A segment is a
single takeoff and a single landing. The amount of the domestic-segment tax is in
the Instructions for Form 720.
To know more about the Air Transportation Tax check out here