Air Transportation Taxes

Form 720 federal excise taxes are collected under section 4261 for air transportation of persons. The actual person who is liable for this tax is the person making payment for the air transportation. The party/person collecting the payment for providing the air transportation collects the tax with the charges and files the form 720 federal excise tax for air transportation.

Form 720 air transportation taxes are imposed on the following payments,

  • Transportation of persons by air,
  • Use of international air travel facilities.
  • Transportation of property by air.

The tax on persons transportation by air comprises the percentage tax and the domestic segment tax. The total of these percentage taxes and the domestic segment tax is the actual form 720 excise tax of 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

An excise tax of 7.5% applies to amounts paid for taxable transportation of persons by air. Amounts paid for transportation include charges for a 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 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 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 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

A segment stands for a single take-off and single landing. The domestic-segment tax is a flat dollar amount for each segment of taxable transportation for which an amount is paid.

E-file Form 720 Air Transportation Tax at TaxExcise.com!

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FAQs

How should I report no tax in the federal excise tax form 720 at TaxExcise.com?

You must enter zero in the appropriate line of your preferred category while e-filing form 720 excise taxes if you don't have to pay the federal excise taxes that you usually report to the IRS.

You need a proper Employer Identification Number (EIN) to e-file form 720 excise tax reports online through any IRS-approved service provider. If you don't have one, you should apply for one by directly visiting the IRS.

Air transportation tax is the federal excise tax on the transportation of persons or property by air. People availing of air transportation services must pay the tax amount with service charges to the air transportation service providers. Then, the service provider should report the form 720 excise taxes to the IRS every quarter.

Percentage tax is a part of form 720 air transportation tax which indicates the amounts paid for taxable transportation of persons by air

The domestic segment tax is the amount paid for each domestic segment of taxable transportation of persons by air. A segment stands for a single take-off and single landing.