Friday, August 05, 2011

I.R.S.: Airfare Tax Reinstatement Is "Retroactive," and There Are No Refunds. Do Airlines Now Have a Big Tax Bill?

The media are reporting a statement from the I.R.S. on the reinstatement of the federal airfare taxes without asking the most obvious question. That is, the F.A.A. today retroactively has reinstated the taxes suspended with on July 23 when Congress failed to extend F.A.A. funding reauthorization.

So no refunds, the I.R.S. says.

Clear enough.

But wait a minute: Does a retroactive reinstatement mean that airlines now owe the I.R.S. for the taxes they failed to collect from passengers (at the same time, remember, most airlines promptly raised their base fares by roughly the same amount as the taxes would have been).

I'm continually shocked by how my colleagues in the media fail these days to ask obvious questions like this one, which I am asking: Are airlines now on the hook for the back taxes, which amounted to a total of about $25 million a day. (And no, the figure is not $30 million, as the media inexplicably began claiming after the first few days of the tax holiday).

I'll let you know when I get an answer. [UPDATE: Evidently the airlines won't be required to remit payment for "retroactive" taxes, whatever the hell that means. Seeking further clarity. To paraphrase Lou Grant: "Mary, I hate 'Evidently.' "]

Here is the entire I.R.S. statement today (italics are mine):

"Today’s Congressional action extending the Federal Aviation Administration authorization reinstates retroactively the airline ticket taxes for passengers who traveled during the lapse of the FAA's authorization. As a result of the bill Congress passed today, passengers who purchased tickets prior to July 23 and traveled between July 23 and the date of enactment of today’s legislation are not entitled to a refund of the airline ticket excise tax. Additionally, the IRS intends to provide relief for passengers and airlines with respect to ticket taxes that were not paid or collected because of the lapse.

The IRS intends to provide guidance to the airlines which will allow for an orderly restart of the collection of ticket taxes. Airlines will have from the time of enactment of the legislation through 12:01 a.m. on Monday, Aug. 8, to resume collection of the ticket taxes.

The IRS is currently reviewing other effects of the legislation and will issue future guidance."

3 comments:

Anonymous said...

Doesn't the Constitution protect from RETROACTIVE taxes? Wasn't this type of governmental fraud the whole point of the revolution (Boston tea party)?

James said...

This should have been highlighted:

Additionally, the IRS intends to provide relief for passengers and airlines with respect to ticket taxes that were not paid or collected because of the lapse.

"Provides relief" suggests there won't be an effort to require the payment of the taxes.

Anonymous said...

I purchased an international ticket during the two week lapse. My ticket cost exactly what it would have cost had I bought it three weeks earlier when the airline was paying the excise tax. Yet the latest legislation providing "relief" (ie no refunds to customers) seems to me to benefit only the airlines: they collected an amount from me that was some 10% above the "true" ticket price, but now they don't have to return that money to me OR pay it to the government. They just get to pocket it!
Am I understanding this correctly? If so, this is outrageous.