Congress has adjourned for the month, after failing to resolve the differences between the House and Senate versions of the funding extension of the Federal Aviation Administration. As a result, Congress forced a shutdown of the agency that began on July 23rd and will continue until September 7th when Congress returns. Even then, there is no guarantee on when a deal will be reached and the FAA is reopened. Normal air traffic operations will continue in the interim.
Important to travel buyers and Travel Management Companies is the issue of refunds on suspended taxes. Specifically, who is responsible for refunding the money, who is eligible for refunds, and what is the process for obtaining them.
Who is responsible for refunds?
The IRS, which addresses the issue on its website, is looking to the airlines to handle refunds. A handful of airlines have refused, directing consumers to the IRS.
Read the IRS statement on expiration of airline tickets and other aviation-related taxes here.
“The airlines and travel-service providers already have the information about passenger ticket purchases and travel, and in many cases have payment card information that may facilitate streamlined refunds,” according to the IRS.
But the precedent, the airline industry insists, was set by the courts the last time Congress neglected to reauthorize taxes in 1996 and again in 1997, putting the responsibility on the shoulders of the IRS.
“Your action to advise travelers to seek refunds from the airlines or travel agencies … is, therefore, puzzling,” Nicholas Calio, chief executive of the Air Transport Association (ATA), said in a letter to the IRS. He also noted that the IRS has “processes and procedures in place to administer refunds on a large scale,” something that the carriers and travel agencies cannot accommodate.
What refunds are available, and what are the eligibility requirements?
If the ticket was purchased on or before July 22 for airline travel during the shutdown, which began July 23, then a refund is due. The airlines should not have collected any federal taxes on tickets after July 23.
For consumers, it could mean as much as $60 for each $300 ticket.
The taxes in question, federal air transportation excise taxes, which includes the 7.5% tax on the base ticket price; a $3.70 domestic segment tax for each takeoff and landing; an 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 flights that begin or end in Alaska or Hawaii; and the 6.25% tax on the amount paid for transporting property by air. Federal taxes on a ticket that cost about $300 total a little more than $60.
Taxes for Homeland Security, state and city fees as well as airport facility charges are still in place.
How do I get a refund?
Delta, Alaska Airlines and today U.S. Airways announced they would refund the taxes for passengers, though they are waiting on guidance from the IRS on how to process the refunds.
Read the article announcing the decision http://english.capital.gr/News.asp?id=1252569
As stated above, ATA has requested the IRS handle the refunds.
What to do now?
Compile a list of tickets, including proof the ticket was bought (receipts), that meet the tax refund eligibility. If the tickets were issued by Delta, Alaska, or U.S. Airways you should be ready to start the refund process, as soon as the process is announced.
You can also visit the IRS site to find a Form 8849, Claim for Refund of Excise Taxes. Be prepared, it’s a lengthy form that addresses all excise taxes, not just air-transportation fees.
GBTA will continue to monitor and post updates on future developments.
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