The Federal Aviation Administration’s (FAA) authority to collect ticket tax and other aviation-related taxes expired on Friday, July 22, 2011. Any ticket issued before July 23, 2011, containing these taxes for travel beginning 12:01 am July 23, 2011, may be, according to the Internal Revenue Service (IRS), eligible for a tax refund. What is not yet known is the exact refund period, because every day that the FAA goes unfunded, another day is added to the period that is eligible for a refund.
The taxes eligible for a refund are:
• The 7.5 percent tax on the base ticket price;
• The domestic segment tax of $3.70 per person per segment (a single takeoff and single landing);
• The international travel facilities tax of $16.30 per person for flights that begin or end in the U.S., or $8.20 per person for a flight that begins or ends in Alaska or Hawaii; and
• The 6.25 percent tax on the amount paid for transporting property by air.
It is important to note that the excise taxes you paid on these tickets were remitted by the airline to the IRS as required by the U.S. tax code. The airlines are not holding these funds and have announced that they have no plans to process these refunds. Instead, the airlines have identified the IRS has the proper place to seek a refund, which is where consumers obtained refunds when this same event occurred in the late ‘90s.
The IRS announced on July 27 that refund “guidance” will be forthcoming. For now, the IRS is working out the many nuances of processing refunds that ultimately may amount to $250 million or more.
Ultimately you will likely need to provide a copy of your ticket as proof of travel. We understand that the name on the ticket may not always represent the buyer of the ticket. As a result, the refund procedures for corporate and bulk buyers may be different from the refund procedures for individual buyers. The association I belong to, the American Society of Travel Agents (ASTA), is working on our behalf to make sure that your interests are represented as the IRS develops its procedures.
We must warn you that the IRS has indicated that the Congress could retroactively impose these taxes on tickets issued after 12:01 am July 23, 2011 when the tax was not in effect. ASTA believes it is unlikely that Congress will try to force airlines to turn over the “tax” on tickets purchased during the no-tax period. There are significant Constitutional barriers to such action. And the challenges of retroactively applying the taxes to tickets individually are immense.
For now, there is nothing for you to do. If you have tickets that are eligible for a refund, you will eventually need a copy of your e-ticket receipt. If you have a copy, that’s great. If not, we can help you obtain a copy of any ticket you purchased from us. If you’re a large corporate buyer, we suggest waiting until the IRS releases its refund procedures, which may differ for bulk buyers, and until the full “exempt period” is known.
For more information, visit the IRS’s webpage.