Taxes

Chris Elliott blogged today about airline taxes, a particularly thorny issue. He tells the story of Susan Cornell, who tried to claim a refund on the $42 in taxes on her cancelled ticket. When Spirit, unsurprisingly, failed to respond, she wrote to government officials and told her story on the radio to a national audience.

Chris comments:

It has all the makings of a class-action lawsuit that would involve the entire airline industry, particularly if an audit showed that airlines kept all of the money paid in taxes and fees and passed none of it along to the government. But even if it did, passengers would be able to take up their case with governments and airports. I’d pay good money to see that trial.

In Europe, however, where on a low-fare carrier, the taxes are more than the fare, tax refund requests are common and the airlines have partially gotten around it by charging a refund administration fee. Here’s an excerpt from the Ryanair site(we love to hate them) on the subject.

“All Ryanair fares are fully changeable flight/dates/times/routes and names (up to 4 hours prior to original flight departure) however fares, fees or charges are non-refundable. Government taxes are the only portion of taxes, fees and charges which are refundable. Government tax refunds are subject to an administration fee of £16, which is half BA’s admin fee of £30 and significantly lower than BMI’s £25 or Easyjet‘s £17.50. If the refund amount due to the customer is less than the applicable refund administration charge then no refund will be made. Government tax refund requests must be made within one month from the booked travel date.”

They get you coming and going. We’re not sure if in the US, you can get away with that. But the DOT isn’t exactly stopping sneaky fees, as Spirit’s recent convenience fee shows. And they aren’t guaranteeing tax refunds either.

In July, the Middle Seat at the Wall Street Journal commented on this subject with a similiar story of a passenger who tried to claim taxes back on two tickets, one on United Airlines, the other on American. Despite Sprit’s response to this, likely due the PR, the article maintains that “U.S. airlines, for their part, say they aren’t keeping the taxes and fees; they have to forward them to government agencies even when customers don’t fly.”

To summarize the various taxes they break out…The IRS, which is responsible for the 7.5% excise charge and a $3.50 per flight-segment fee, says that federal rules state taxes attach at the time of payment, thus, when tickets are refunded, taxes are. Passenger Facility Charges, administered by the FAA, of up to $4.50 per airport and a maximum of $18 on a round-trip ticket, are, like the IRS charges, are imposed at time of sale, and refunds are only made when there is a change in an itinerary. Thus in both cases, if the fare isn’t refunded, the taxes are not to be either. The Dept. of Homeland Security states that the 9/11 security fee is refundable.  By law, the airlines must refund some international fees, such as fees charged on international travelers for customs and immigration services, but only if you ask. Yet airlines don’t pay landing fees on flights they cancel, the closest equivalent to the facility charges we all pay.

In the end, some attribute the failure to refund these fees to the airline, others to the government. The argument that they are taxes on the fare paid, and thus if the fare isn’t refunded, they are still to be paid to the government is valid, as is the argument that they are fees for usage, and if there is no usage, there are no taxes.

Even Chris himself admitted in a previous post that he wasn’t 100% sure of where the money is going. So, ultimately, what we need is the DOT to set clear and concrete policies on this subject and force disclosure of these policies by each airline, at the least on their website.