A tax windfall for airlines

Phil Cameron's picture

A tax windfall for airlines

It's not like the Internal Revenue Service to forgive and forget, especially when it comes to uncollected taxes.

But that's what the federal tax collecting agency is doing about the two weeks when the Federal Aviation Administrationstopped collecting taxes on airline tickets.

The FAA could not collect taxes from June 23 to Aug. 8 because its funding authority expired and feuding lawmakers in Washington could not agree on a new budget for the agency. Congress finally adopted a temporary funding deal that took effect Aug. 8.

The FAA collects 7.5% tax on the base ticket prices, plus $3.70 per person, for domestic flights. It charges higher per-trip rates for international flights.

Passengers who booked tickets before June 23 and flew on or after June 23 were charged federal taxes even though the FAA stopped collecting taxes. In a statement, the IRS said those passengers are not entitled to a refund.

As for those taxes that were not collected during the two-week tax holiday, the IRS said it won't ask airlines to pay the taxes retroactively.

That's a big win for the airlines, because most carriers increased their airfares to match the drop in taxes, generating about $28.5 million per day in extra revenue, according to industry experts.

http://www.latimes.com/business/la-fi-travel-briefcase-20110815,0,65581.story

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