The U.S government’s Internal Revenue Service (IRS) is auditing aircraft management firms and trying to impose the federal excise tax (FET) on fees charged by the firms to aircraft owners. According to industry sources, IRS agents are targeting major charter/management firms, although the firms allegedly being audited didn’t wish to speak to AIN about their experience with the IRS.
The FET, also known as the ticket tax, was designed by legislators to provide a taxing mechanism for people flying commercially on airline and charter aircraft. The tax is applied as a segment fee, usually 7.5 percent of the amount charged to the passenger for a flight. Perhaps because airlines have unbundled their services and now charge separately for the flight and untaxable baggage, meals and other services such as a few more inches of legroom, FET collections from airlines may have dropped. Couple that with the government’s ongoing budget shortfalls and it appears that IRS auditors are on the lookout for more ways to extract money from business jet operators.
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