IRS Cuts Excise Taxes Paid on the Purchase of Airline Tickets

If you've ever purchased an airline ticket online, you've probably been surprised at the hefty amount of taxes that get added on right before you commit to the sale.

One of those taxes was the Air Transportation Excise Tax, which would be collected by the airline and then turned over to the IRS. According to IRS Publication 510, the excise tax was 7.5 percent of the base ticket amount.

Also included in this tax was a "travel facilities tax" of $16.30 per passenger for all flights that either disembark from the US or return to the US from an international location.

As of July 22, the collection of this excise tax expired. Unless Congress reinstates the tax, taxpayers have been encouraged to seek a refund of the tax from any airline that has recently imposed federal tax on the ticket purchase.

If you purchased your ticket on or before July 22, but your travel dates are still in the future, you are entitled to a refund. Airlines can simply return the canceled tax back to your credit card, using the information they have on file.

If the airline does not or cannot issue you a refund, the IRS says it will assist you. According to the July 27 IRS press release, the IRS has procedures under development for a taxpayer to submit proof of the taxes paid and the travel dates.

For any ticket purchased after July 22, make sure that the airline does not charge you any of these fees or taxes.

It remains to be seen whether airlines will opt to reduce their ticket prices by the amount of the expired taxes, or keep their ticket prices afloat and pocket the difference.

The collection of federal and excise taxes yields millions a day. Unless the congressional stalemate resolves itself and the tax is re-imposed, many airlines have seen this as an opportunity to keep their prices steady, and hopefully offset some of their rising fuel costs.

The Atlanta Business News reported that "Delta general counsel Ben Hirst said Delta does not plan to change its stance. 'What the industry has done is simply to maintain prices at market-clearing levels,' Hirst said during an analyst and media conference call to discuss Delta's quarterly profit report."

Delta's official statement, found on their website: "Given the high cost of jet fuel, Delta has been competitive with other airlines that increased their base fares following the expiration of funding for the Federal Aviation Administration to adjust for the taxes no longer being collected."

Other major airlines, such as Southwest and AirTran, have followed suit. If one or two of the major airlines decide to reduce prices, then likely the others would follow their lead in order to avoid being undercut.

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