Jul 152010

Airlines are required to pay a 7.5% tax to
the federal government on the value of tickets they sell.  But
because the airlines essentially did not charge additional fees back
when the taxing legislation was first written, there is no provision for
them to pay any taxes to the government on the extra fees they charge us
when they change a ticket, add a checked bag fee, overweight bag fee,
seat reservation fee, early boarding fee, unaccompanied minor fee, etc

Last year the airlines charged over $7.8
billion in fees.  This year it looks to be more like $9 billion. 
So, due to the loophole, the airlines don't have to pay a single penny
of air ticket tax on almost $10 billion of what is almost entirely
straight profit.

No wonder the airlines like charging us
fees!  The Government Accountability Office is now saying that
legislation should be extended to make the airlines liable for taxes on
these fees, because in truth the airlines are now choosing to add fees
onto base ticket prices rather than simply increase the base ticket

Now let's just hope that if/when this
happens, the airlines don't simply pass the tax liability straight on to

  3 Responses to “Airlines Exploit Loophole and Avoid Paying $700 million in Taxes”

  1. > Now let’s just hope that if/when this happens, the airlines don’t simply pass the tax liability straight on to us…..
    Duh. Where else does money come from? It has to come from the passengers – we’re the ones paying the fares. It’s not like they have other sources for revenue other than pax.

  2. My point is that the airlines are currently charging, eg, $25 to check a suitcase. If they now have to pass 7.5% of that on to the government (ie $1.88) will they keep the fee at $25 and now ‘only’ make a net $23.12 profit, or will they increase their fee to $26.88?
    Being as how 99% of most of these fees are pure and simple profit they could certainly keep the fee at the same level. But will they do that? We’ll have to wait and see.

  3. Puhleeez. You are being overly optomistic by even considering they will not charge the tax. 7.5% of 9 billion?

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