For a brief time this summer, some airline ticket taxes expired and it seemed that passengers might be entitled to refunds.  Instead, Congress reinstated the taxes retroactively, which, according to the IRS, denies any refunds.  The IRS has posted guidance for passengers on its website.

Excise taxes

After July 22, 2011, funding authority for the Federal Aviation Administration (FAA) expired and airlines ceased collecting certain excise taxes on passenger travel and air freight. The excise taxes were:

  • 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.
  • The 6.25 percent tax on the amount paid for transporting property by air.

Initially, the IRS asked airlines to issue refunds to passengers who had purchased tickets before July 23, 2011 (when the tax was in effect) but who traveled after July 22, 2011 (when the tax was not in effect). Some airlines indicated that they would issue refunds to these passengers. Other airlines requested the IRS to take the lead and process refunds.

Retroactive reinstatement

On August 5, 2011, Congress reinstated the excise taxes retroactively to July 23, 2011. The IRS immediately advised passengers that they were not entitled to refunds because of the retroactive reinstatement of the excise taxes.

Some passengers may have purchased tickets after July 22, 2011 when the excise taxes were not being collected. Because the excise taxes were reinstated retroactively, these passengers technically owed the uncollected taxes. The IRS announced that if airlines had not collected the excise taxes, the IRS would treat them as waived. The IRS is expected to issue more guidance for these passengers and, possibly, for taxpayers who paid to ship freight by air.

If you have any questions about the air transportation taxes, please contact our office.