Transportation of Persons by Air
The tax on transportation of persons by air is made up of the:
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Percentage tax, and
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Domestic-segment tax.
Percentage tax.
A tax of 7.5% applies to amounts paid for taxable transportation of persons by air. Amounts paid for transportation
include charges for layover or waiting time and movement of aircraft in deadhead service.
Mileage awards.
The percentage tax may apply to an amount paid (in cash or in kind) to an air carrier (or any related person) for
the right to provide mileage awards for, or other reductions in the cost of, any transportation of persons by air. For example,
this applies to mileage awards purchased by credit card companies, telephone companies, restaurants, hotels, and other businesses.
Generally, the percentage tax does not apply to amounts paid for mileage awards where the mileage awards cannot, under
any circumstances, be redeemed for air transportation that is subject to the tax. Until regulations are issued, the following
rules apply to mileage awards.
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Amounts paid for mileage awards that cannot be redeemed for taxable transportation beginning and ending in the United States
are not subject to the tax. For this rule, mileage awards issued by a foreign air carrier are considered to be usable only
on that foreign air carrier and thus not redeemable for taxable transportation beginning and ending in the United States.
Therefore, amounts paid to a foreign air carrier for mileage awards are not subject to the tax.
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Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation
are not subject to the tax to the extent those miles will be awarded in connection with the purchase of taxable transportation.
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Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation
are subject to the tax to the extent those miles will not be awarded in connection with the purchase of taxable transportation.
Domestic-segment tax.
The domestic-segment tax is a flat dollar amount for each segment of taxable transportation for which an amount is
paid. However, see
Rural airports, later. A segment is a single takeoff and a single landing. The amount of the domestic-segment tax is in the Instructions for
Form 720.
Charter flights.
If an aircraft is chartered, the domestic-segment tax for each segment of taxable transportation is figured by multiplying
the tax by the number of passengers transported on the aircraft.
Rural airports.
The domestic-segment tax does not apply to a segment to or from a rural airport. An airport is a rural airport for
a calendar year if fewer than 100,000 commercial passengers departed from the airport by air during the second preceding calendar
year (the 100,000 passenger rule), and one of the following is true:
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The airport is not located within 75 miles of another airport from which 100,000 or more commercial passengers departed during
the second preceding calendar year,
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The airport was receiving essential air service subsidies as of August 5, 1997, or
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The airport is not connected by paved roads to another airport.
To apply the 100,000 passenger rule to any airport described in (3) above, only count commercial passengers departing
from the airport by air on flight segments of at least 100 miles.
An updated list of rural airports can be found on the Department of Transportation website at
http://ostpxweb.dot.gov/aviation/domav/ruralair.pdf.
Taxable transportation.
Taxable transportation is transportation by air that meets either of the following tests.
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It begins and ends either in the United States or at any place in Canada or Mexico not more than 225 miles from the nearest
point on the continental United States boundary (this is the 225-mile zone).
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It is directly or indirectly from one port or station in the United States to another port or station in the United States,
but only if it is not a part of uninterrupted international air transportation, discussed later.
Round trip.
A round trip is considered two separate trips. The first trip is from the point of departure to the destination. The
second trip is the return trip from that destination.
Uninterrupted international air transportation.
This means transportation entirely by air that does not begin and end in the United States or in the 225-mile zone
if there is not more than a 12-hour scheduled interval between arrival and departure at any station in the United States.
For a special rule that applies to military personnel, see
Exemptions, later.
Transportation between the continental U.S. and Alaska or Hawaii.
This transportation is partially exempt from the tax on transportation of persons by air. The tax does not apply to
the part of the trip between the point at which the route of transportation leaves or enters the continental United States
(or a port or station in the 225-mile zone) and the point at which it enters or leaves Hawaii or Alaska. Leaving or entering
occurs when the route of the transportation passes over either the United States border or a point 3 nautical miles (3.45
statute miles) from low tide on the coast line, or when it leaves a port or station in the 225-mile zone. Therefore, this
transportation is subject to the percentage tax on the part of the trip in U.S. airspace, the domestic-segment tax for each
domestic segment, and the tax on the use of international air travel facilities, discussed later.
Transportation within Alaska or Hawaii.
The tax on transportation of persons by air applies to the entire fare paid in the case of flights between any of
the Hawaiian Islands, and between any ports or stations in the Aleutian Islands or other ports or stations elsewhere in Alaska.
The tax applies even though parts of the flights may be over international waters or over Canada, if no point on the direct
line of transportation between the ports or stations is more than 225 miles from the United States (Hawaii or Alaska).
Package tours.
The air transportation taxes apply to “
complimentary” air transportation furnished solely to participants in package holiday tours. The amount paid for these package tours includes
a charge for air transportation even though it may be advertised as “
free.” This rule also applies to the tax on the use of international air travel facilities, discussed later.
Liability for tax.
The person paying for taxable transportation is liable for the tax and, ordinarily, the person receiving the payment
collects the tax, files the returns, and pays the tax over to the government. However, if payment is made outside the United
States for a prepaid order, exchange order, or similar order, the person furnishing the initial transportation provided for
under that order must collect the tax.
A travel agency that is an independent broker and sells tours on aircraft that it charters must collect the transportation
tax, file the returns, and pay the tax over to the government. However, a travel agency that sells tours as the agent of an
airline must collect the tax and remit it to the airline for the filing of returns and for the payment of the tax over to
the government. An independent third party that is not under the airline's supervision or control, but is acting on behalf
of, and receiving compensation from, a passenger, is not required to collect the tax and pay it to the government. For more
information on resellers of air transportation, see Revenue Ruling 2006-52. You can find Revenue Ruling 2006-52 on page 761
of Internal Revenue Bulletin 2006-43 at
www.irs.gov/pub/irs-irbs/irb06-43.pdf.
The fact that the aircraft does not use public or commercial airports in taking off and landing has no effect on the
tax. But see
Certain helicopter uses, later.
For taxable transportation that begins and ends in the United States, the tax applies regardless of whether the payment
is made in or outside the United States.
If the tax is not paid when payment for the transportation is made, the air carrier providing the initial segment
of the transportation that begins or ends in the United States becomes liable for the tax.
Exemptions.
The tax on transportation of persons by air does not apply in the following situations. See also
Special Rules on Transportation Taxes, later.
Military personnel on international trips.
When traveling in uniform at their own expense, United States military personnel on authorized leave are deemed to
be traveling in uninterrupted international air transportation (defined earlier) even if the scheduled interval between arrival
and departure at any station in the United States is actually more than 12 hours. However, such personnel must buy their tickets
within 12 hours after landing at the first domestic airport and accept the first available accommodation of the type called
for by their tickets. The trip must begin or end outside the United States and the 225-mile zone.
Certain helicopter uses.
The tax does not apply to air transportation by helicopter if the helicopter is used for any of the following purposes.
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Transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals,
oil, or gas.
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Planting, cultivating, cutting, transporting, or caring for trees (including logging operations).
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Providing emergency medical transportation.
However, during a use described in items (1) or (2), the tax applies if the helicopter takes off from, or lands at,
a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided
under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. For item (1), treat each flight
segment as a separate flight.
Fixed-wing aircraft uses.
The tax does not apply to air transportation by fixed-wing aircraft if the fixed-wing aircraft is used for any of
the following purposes.
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Planting, cultivating, cutting, transporting, or caring for trees (including logging operations).
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Providing emergency medical transportation. The aircraft must be equipped for and exclusively dedicated on that flight to
acute care emergency medical services.
However, during a use described in item (1), the tax applies if the fixed-wing aircraft takes off from, or lands at,
a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided
under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code.
Skydiving.
The tax does not apply to any air transportation exclusively for the purpose of skydiving.
Seaplanes.
The tax does not apply to any air transportation by seaplane for any segment consisting of a takeoff from, and a landing
on, water if the places where the takeoff and landing occur are not receiving financial assistance from the Airport and Airways
Trust Fund.
Bonus tickets.
The tax does not apply to free bonus tickets issued by an airline company to its customers who have satisfied all
requirements to qualify for the bonus tickets. However, the tax applies to amounts paid by customers for advance bonus tickets
when customers have traveled insufficient mileage to fully qualify for the free advance bonus tickets.
Transportation of Property by Air
A tax of 6.25% is imposed on amounts paid (whether in or outside the United States) for transportation of property by air.
The fact that the aircraft may not use public or commercial airports in taking off and landing has no effect on the tax. The
tax applies only to amounts paid to a person engaged in the business of transporting property by air for hire.
The tax applies only to transportation (including layover time and movement of aircraft in deadhead service) that begins and
ends in the United States. Thus, the tax does not apply to transportation of property by air that begins or ends outside the
United States.
Exemptions.
The tax on transportation of property by air does not apply in the following situations. See also
Special Rules on Transportation Taxes, later.
Cropdusting and firefighting service.
The tax does not apply to amounts paid for cropdusting or aerial firefighting service.
Exportation.
The tax does not apply to payments for transportation of property by air in the course of exportation (including to United
States possessions) by continuous movement, as evidenced by the execution of Form 1363, Export Exemption Certificate. See
Form 1363 for more information.
Certain helicopter and fixed-wing air ambulance uses.
The tax does not apply to amounts paid for the use of helicopters in construction to set heating and air conditioning
units on roofs of buildings, to dismantle tower cranes, and to aid in construction of power lines and ski lifts.
The tax also does not apply to air transportation by helicopter or fixed-wing aircraft for the purpose of providing
emergency medical services. The fixed-wing aircraft must be equipped for and exclusively dedicated on that flight to acute
care emergency medical services.
Skydiving.
The tax does not apply to any air transportation exclusively for the purpose of skydiving.
Excess baggage.
The tax does not apply to excess baggage accompanying a passenger on an aircraft operated on an established line.
Surtax on fuel used in a fractional ownership program aircraft.
The tax does not apply if the surtax on fuel used in a fractional ownership program aircraft (discussed earlier)
is imposed.
Alaska and Hawaii.
For transportation of property to and from Alaska and Hawaii, the tax in general does not apply to the portion of
the transportation that is entirely outside the continental United States (or the 225-mile zone if the aircraft departs from
or arrives at an airport in the 225-mile zone). But the tax applies to flights between ports or stations in Alaska and the
Aleutian Islands, as well as between ports or stations in Hawaii. The tax applies even though parts of the flights may be
over international waters or over Canada, if no point on a line drawn from where the route of transportation leaves the United
States (Alaska) to where it reenters the United States (Alaska) is more than 225 miles from the United States.
Liability for tax.
The person paying for taxable transportation is liable for the tax and, ordinarily, the person engaged in the business
of transporting property by air for hire receives the payment, collects the tax, files the returns, and pays the tax over
to the government.
If tax is not paid when a payment is made outside the United States, the person furnishing the last segment of taxable
transportation collects the tax from the person to whom the property is delivered in the United States.
Special Rules on Transportation Taxes
In certain circumstances, special rules apply to the taxes on transportation of persons and property by air.
Aircraft used by affiliated corporations.
The taxes do not apply to payments received by one member of an affiliated group of corporations from another member
for services furnished in connection with the use of an aircraft. However, the aircraft must be owned or leased by a member
of the affiliated group and cannot be available for hire by a nonmember of the affiliated group. Determine whether an aircraft
is available for hire by a nonmember of an affiliated group on a flight-by-flight basis.
For this rule, an affiliated group of corporations is any group of corporations connected with a common parent corporation
through 80% or more of stock ownership.
Small aircraft.
The taxes do not apply to transportation furnished by an aircraft having a maximum certificated takeoff weight of
6,000 pounds or less. However, the taxes do apply if the aircraft is operated on an established line. “
Operated on an established line” means the aircraft operates with some degree of regularity between definite points. However, it does not include any time
an aircraft is being operated on a flight that is solely for sightseeing.
Consider an aircraft to be operated on an established line if it is operated on a charter basis between two cities
also served by that carrier on a regularly scheduled basis.
Also, the taxes apply if the aircraft is jet-powered, regardless of its maximum certificated takeoff weight or whether
or not it is operated on an established line.
Mixed load of persons and property.
If a single amount is paid for air transportation of persons and property, the payment must be allocated between the
amount subject to the tax on transportation of persons and the amount subject to the tax on transportation of property. The
allocation must be reasonable and supported by adequate records.
Credits or refunds.
If tax is collected and paid over for air transportation that is not taxable air transportation, the collector may
claim a credit or refund if it has repaid the tax to the person from whom the tax was collected or obtained the consent of
that person to the allowance of the credit or refund. Alternatively, the person who paid the tax may claim a refund. For information
on how to file for credits or refunds, see the Instructions for Form 720 or Form 8849.