Tuesday, August 6, 2013

Tax Break for Skydiving

The Internal Revenue Code contains several excise taxes on air transportation:
Section 4261(a) imposes a 7.5% excise tax on the amount paid for "domestic" air travel (in the United States or the parts of Canada and Mexico within 225 miles of the US border).
Section 4261(b) imposes a $3 excise tax for each segment of domestic air travel. 
Section 4261(c) imposes a $12 excise tax on international air travel that begins or ends in the United States.
Section 4271 imposes a 6.25% excise tax on the amount paid for the air transportation of freight.

The $3 and $12 are adjusted for inflation, and closer to $4 and $17 now.

Fortunately for the skydiving industry, section 4261(h) provides that none of the above taxes apply to any air transportation exclusively for the purposes of skydiving.  It does not matter whether or not skydiving instructions are provided to any of the passengers, as long as some passengers are diving off the plane.  

The Skydiving Exception was enacted by Congress in the Taxpayer Relief Act of 1997Prior to 1997, the taxation of skydiving flights was mixed, depending on whether the passengers were considered to be paying for commercial travel or for education. 

The use of the term "exclusively" means that an airline like Spirit Airlines cannot bundle a few skydivers with its flights to save on the excise taxes.  But a budding entrepreneur might consider starting a skydiving-only airline to provide some lower-cost tax-free transportation.

Section 4261
(a) In general.  There is hereby imposed on the amount paid for taxable transportation of any person a tax equal to 7.5 percent of the amount so paid.
(b) Domestic segments of taxable transportation. (1) In general. There is hereby imposed on the amount paid for each domestic segment of taxable transportation by air a tax in the amount [of $3.00]
***
(h) Exemption for skydiving uses. No tax shall be imposed by this section or section 4271 on any air transportation exclusively for the purposes of skydiving.

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