Internal Revenue Service (IRS) Guidance on Airline Ticket Taxes.

On July 23, the excise tax on airline tickets charged by the Federal Aviation Administration (FAA) expired. This meant that airlines lost the ability to charge consumers for this tax on the tickets that they sold. However, most airlines did not reduce their ticket prices to reflect this change. Instead, many airlines continued to charge consumers for these taxes by raising their tickets prices to offset the difference.

 

On Aug. 5, Congress extended the FAA authorization and retroactively reinstated the excise tax from July 23, which effectively treats the excise tax as if it never expired. Despite the reinstatement, many questions remained about those who bought tickets during the two-week period when the airlines were not collecting the tax. 

Last week the IRS issued guidance to help answer some of these questions in their “Retroactive Reinstatement of the Air Transportation Excise Taxes: Frequently Asked Questions” (http://www.irs.gov/newsroom/article/0,,id=242812,00.html?portlet=6). 

Here is a summary of the IRS’ guidance:

• During the roughly two-week lapse, airlines were not authorized to collect the taxes, but the retroactive reinstatement in the law put the taxes back in place as though they had never expired. The IRS is providing relief for airlines and taxpayers who purchased tickets during that two week lapse. This means the IRS will not be retroactively collecting the tax since it was not collected and paid during this two-week period.
• Airlines had until 12:01 a.m. on Monday, Aug. 8, to resume collection of the ticket taxes.
• If you purchased the tickets before July 23, when the lapse of the excise tax initially occurred, and traveled during the partial-shutdown of the FAA, you are not entitled to a refund because of the retroactive reinstatement of the law.
• If you purchased a ticket between July 23, 2001, and August 7, 2011 — regardless if you flew then or at a later date in time — the airlines were not authorized to collect the tax and so passengers did not pay the excise tax. While the tax was reinstated retroactively by Congress, the IRS has provided relief during this lapse for taxpayers and airlines and will not collect the excise tax covering that period.

Source: http://www.boston.com