Appeals Panel Grills US on Application of Air Transportation Tax

A panel of Sixth Circuit judges Thursday questioned the validity of federal excise taxes the IRS assessed a fractional aircraft ownership program operator, voicing skepticism about the IRS’s test for when the tax applies.

During oral arguments, the US Court of Appeals for the Sixth Circuit probed the government on whether Flight Options LLC is subject to a 7.5% tax established under IRC Section 4261, which is imposed on fees, fuel surcharges, and other costs associated with air travel. Airlines collect this tax—which is often called the “ticket tax"—and then remit that money to the IRS on behalf of ...