I'm so obsessed with taxes that I should probably run for office. I won't bother. I might have to sign a pledge or something. But with the focus in Washington so firmly fixed on the debt ceiling, the airline tax debacle is likely to continue for days or weeks. Here's a Q&A to help fliers understand tickets and taxes.
What federal taxes do I pay when I purchase an airline ticket?
Who is paying these taxes now?
No one. As of midnight July 22, the FAA's authority to collect taxes lapsed. So if you purchased an airline ticket after that time, you should not have paid those taxes, although other facility fees may apply depending on the flight.
Sounds like a victory for the consumer. So what's the big deal?
Well, instead of you pocketing the potential 10 percent or more in tax savings, the airlines decided to raise fares to make up the difference. So fliers won't really see any cost reductions. It's not so much surprising as annoying.
How much are airlines making off the tax issue?
The airlines are not collecting taxes so technically they're making money from the higher fares. The taxes typically bring in about $25 million a day to the FAA, so airlines are likely raking in that money instead.
What if I bought a ticket prior to July 22?
Then you paid the taxes. However, if your flight actually takes place during the period in which the FAA's authority to collect the taxes has lapsed, you could be due a refund.
How would I go about getting a refund?
Most airlines are directing customers to the IRS. However, the agency said today that the airlines should be able to issue the refunds. The last time the tax authority lapsed was in 1996 and 1997. According to the American Society of Travel Agents, travelers seeking a tax refund during this period were required to submit an excise tax refund application, along with a copy of their ticket receipt, to the IRS.
What if I buy my ticket now during the tax holiday but by the time I fly, the taxes are reinstated?
That depends on how the new legislaton is written. It's possible there could be an exemption for those who bought the tax-free tickets.
Is Congress working on a budget plan to end this mess?
First of all, there's little evidence that Congress ever works. On anything. But they sure do talk. Several lawmakers have said that the airlines should pass along any savings to customers. Two Democratic senators have asked the airlines to not profit from the lapse in legislation and instead put the would-be taxes into an escrow account to be used by the Airport and Airway Trust Fund.