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IRS Announces No Retroactive Ticket Tax on Airline Fliers

August 19th

airline taxThe IRS has this week announced its decision not to pursue the collection of retroactive unpaid taxes for airline tickets purchased during the recent shutdown of the Federal Aviation Administration (FAA).

Friday President Obama signed legislation that ended the partial shutdown of the FAA, ending the temporary lapse in the government’s taxing authority. The taxes have been reinstated retroactively as of July 23, the day after they expired

During the lapse most airlines simply raised prices to cover the amount normally charged in tax and did not charge the normal levy. Since the airlines were not authorized to collect the tax, the IRS concluded it would be too difficult for them to attempt to collect them now. The decision passed by the IRS means that the airlines will be able to keep the revenue generated by raising fares during the lapse.

Orderly Restart to Collection of Ticket Taxes Planned

In order to coordinate a systematic restart to the collection of the ticket taxes, the IRS intends to provide clear guidance for airlines. This should aid in the management of a smooth transition back to the collection of taxes.

Unfortunately for many travellers, the IRS has now officially stated that no refunds will be available to those individuals who purchased their airline tickets during the shutdown. This is chiefly because the law has dated the taxes retroactively to July 23.

It was, in fact, Congress who requested that the IRS not retroactively collect the taxes. Instead, they asked, through a letter filed August 4, that the agency “extend relief for passengers and airlines” and aid the industry in managing a return to tax collection within a three-day window.


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