Georgia governor champions sales tax exemption for jet fuel
- Sales Tax News
- Feb 14, 2018 | Gail Cole
Georgia Governor Nathan Deal is backing a sales tax exemption for jet fuel. “By removing the sales tax on jet fuel,” he announced on February 6, “we can level the playing field for our airports and airlines to compete.” He anticipates the exemption will “encourage airlines to fly additional direct flights from Georgia to destinations around the globe.”
Georgia is one of few states to apply retail sales tax to jet fuel, which is interesting given that Hartsfield-Jackson Atlanta International Airport is the busiest airport in the world. It’s also the headquarters and hub of Delta Air Lines, which occupies more than 80 percent of the airport’s capacity.
The measure, House Bill 821, seeks to exempt jet fuel under certain conditions and to a certain degree from state sales and use tax, county special purpose local option sales tax (SPLOST), and the sales tax for educational purposes (ESPLOST). Joint county and municipal sales and use tax (LOST) would still apply.
Specifically, “the sale or use of jet fuel that is pumped into an aircraft in this state and the use of jet fuel that is pumped into an aircraft in another state” would be exempt. In addition, “the sale of jet fuel in this state that is not pumped into an aircraft in this state” would be exempt from 1 percent of the 4 percent state sales tax, SPLOST, and ESPLOST.
Other airlines would also benefit from the proposed exemption, since fuel is the second highest input for airlines. Sean Williams, vice president for state and local government affairs at Airlines for America, says the exemption could draw more flights to Atlanta. He notes that North Carolina “saw a 4 percent increase in flights in the first year after removing its sales tax.”
Georgia should be familiar with the effects of a sales tax exemption for jet fuel. After Delta filed for Chapter 11 bankruptcy in 2005, the state exempted a qualifying airline (Delta) at a qualifying airport (Hartsfield-Jackson) from 1 percent of the state sales tax on jet fuel. It extended the temporary exemption three times until 2012, when it made it permanent. However, the exemption was then repealed effective July 1, 2015.
There have been at least two attempts to partially restore the sales tax exemption for fuel since then, though both failed to gain traction. In 2016, HB 898 sought to exempt from any state or local sales and use tax aviation fuel purchased by a qualifying airline at a qualifying airport. Tax would be collected on 20 percent of the fuel purchased, as that was deemed to be consumed in the state. Fuel consumed outside of the state would be exempt.
A less generous measure was proposed in 2017. HB 145 sought to partially exempt jet fuel from state sales and use tax (local sales and use tax would still apply). Qualifying airlines at qualifying airports would not have to pay state sales tax on 55 percent of the jet fuel purchased to travel out of state. State tax would be collected on the remaining 45 percent.
Perhaps the third time will be the charm with HB 821, which conforms to federal tax regulations in addition to exempting jet fuel from sales tax.
Changes in product taxability, such as has occurred with jet fuel in Georgia, complicate sales and use tax compliance for businesses selling affected goods. Tax automation software helps simplify it.