North Carolina: Airlines Seek Exemption from Jet Fuel Sales Tax
- Sales Tax News
- Feb 9, 2015 | Gail Cole
Update, 10.29.2015: Effective January 1, 2016, aviation gasoline and jet fuel sold to interstate air businesses for use in commercial aircraft are exempt from sales tax through December 31, 2019.
Should North Carolina exempt airlines from paying the sales tax on jet fuel? Airlines for America (A4A), a coalition of airlines that includes Alaska Airlines, American Airlines, Delta, JetBlue Airways, and US Airways, thinks it should.
Fuel prices are low now and airline profits are high, so it may seem a funny time to push for a tax exemption. However, the request anticipates the 2016 expiration of the cap on North Carolina’s sales tax on jet fuel. Unless the cap is extended, says A4A, North Carolina will have the fifth highest jet fuel tax in the country in 2016. Neighboring South Carolina does not tax jet fuel.
Republican State Senator Jeff Tarte doesn’t know if the exemption should be granted. However, he said, “I do know that US Airways is absolutely critical not only to the Charlotte region but to North Carolina” (News Observer).
Jet fuel sales taxes are capped at $2.5 million. To date, US Airways—which merged with American Airlines in December 2013—has been the only airline to benefit from that; it “received a $9.2 million refund for fuel taxes paid in 2013.” The state anticipates losing as much as $10 million in sales tax revenue in 2015.
American’s second-busiest hub is in Charlotte. Aviation analyst Bob Mann doesn’t think American would pull out of Charlotte if the cap isn’t renewed or the sales tax exemption for jet fuel granted. However, he acknowledged that an airline will “fight for every advantage it can get.” $9 million is worth a pretty good fight.
To not extend some sort of olive branch to the airline industry could, according to A4A, “lead to less revenue to the government, reduced tourism and less economic growth.” State Representative Charles Jeter (R) thinks it’s worth making a special exception for the airline that is responsible for “93 percent of the flights out of the largest economic engine in the state.”
A union that represents more than 30,000 airport and airline workers takes issue with aviation fuel tax breaks. It has targeted North Carolina specifically: “While many North Carolina taxpayers are still struggling to make ends meet, American Airlines reported record profits. The special treatment of American Airlines means that North Carolina is giving the airline an unfair advantage over its competitors.”
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photo credit: American Airlines Boeing 737-823; N954AN@LAX;21.04.2007/466nz via photopin (license)