A taxing question

By | July 10th, 2006

What happens to the taxes and fees on a nonrefundable airline ticket that isn’t used?

Here’s one possible answer: The airline keeps all of the money. In fact, some airline passengers and their attorneys have alleged that the nation’s carriers illegally pocket millions of dollars — and perhaps even more.

Here’s another: The money is passed along to the appropriate government agency or airport. Some of it is refundable, and some of it is not. That’s what the airlines (at least the airlines who would talk about this subject) claim.

There’s plenty at stake. An estimated $90 billion in airline tickets were sold by U.S. airlines in 2005, and about half were nonrefundable. Taxes comprised about 11 percent of each airline ticket. Assuming that 2 percent of nonrefundable tickets were not used, that means $100 million was in limbo last year.

The fate of that money has always been a favorite topic of conspiracy theorists, accorded the same high status as those hotel room keys that supposedly store credit card numbers. The taxes and fees on nonrefundable tickets are thought to be funneled into secret slush funds.

The list of taxes, surcharges and fees is long. They include a federal excise tax of 7.5 percent of the base fare, a passenger facility charge of up to $18, other federal fees of $3.20 per segment, a September 11th Security Fee of up to $10 per ticket, and, for international destinations, various U.S. government-imposed charges that could add up to $200 per roundtrip ticket.

I asked the airlines about the money. All insisted that it’s going to the right place, although some refused to answer specific questions about where that there is.

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Here is the gist of what they told me: Several carriers, including Northwest Airlines and United Airlines, will refund a portion of your fees upon request. (United, for example will refund customs, inspection fees, immigration and U.S. security fees.) Southwest Airlines and American Airlines don’t refund any taxes on nonrefundable tickets.

Alaska Airlines, Delta Air Lines and US Airways did not respond to my questions about refund policies.

What’s really going on? I don’t know. The money is going somewhere, that’s for sure. If we only knew where …

Maybe it is the unevenness of airline tax refund policies and the elusiveness of the airlines that continues to fuel the conspiracy theories.

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