Are airlines lying about taxes?

How far will an airline go to make an extra buck? Fudge a few numbers on their taxes, maybe?

That’s the question Kenneth Babineaux recently raised — with a little help for the airline industry. And to be honest, I’m not sure if I have a definitive answer, except to say, “Watch this space.”

This space, meaning airlines and taxes.

Before getting to Babineaux’s problem, let me put this into a little context: After the Transportation Department began requiring airlines to quote a fare that includes all mandatory taxes and fees in December, and with Tax Day approaching on April 15, the airline industry decided to take a stand on taxes.

Nicholas Calio, president of the airline trade association A4A, complained that passengers now pay 20 percent of a typical domestic round-trip ticket price to the government, and called for tax reforms.

Airlines aren’t really concerned that you have to pay these taxes; it’s that their fares look more expensive as a result of this regulation. Those higher prices are costing them business, because air travelers are highly price sensitive. A $1 difference is enough to push air travelers to one airline at the cost of a competitor.

You can only imagine what happen if airfares dropped 20 percent overnight, or even 10 percent.

Anyway, back to Babineaux’s question. He’s flying on Virgin America in May, and after booking a ticket from Dallas to San Francisco recently, he says he noticed something “disturbing.”

“International taxes and customs fees appeared on my itinerary,” he says. “I have written two letters to the president and spoke to a supervisor.”

Babineaux’s letter to the airline’s president wasn’t answered, but a supervisor blamed the international fees on a system problem, but insisted the fare was correct.

“Bottom line,” he says, “I do not trust their words and wanted an outside opinion.”

Before I go on, I have to make a confession: I’m not the guy to ask about taxes. I’m kinda bad with numbers, and I’m terrible at doing my own taxes. After being audited by the IRS a few years ago, I hired a professional, and I refer all tax questions to him.

But this isn’t really a tax story. Babineaux seems to be suggesting that these mandatory fees are either part of the fare, or that Virgin America is charging a tax that it shouldn’t, and pocketing it as profit.

I asked Virgin America if it could offer a more complete answer. In an email to Babineaux, the airline thanked him for “reaching out” to me.

“We apologize for the confusion, the taxes were charged correctly but there is currently an issue with the way they display on the web,” a representative added.

Currently an issue?

In fact, Virgin’s technology problems are pretty well-known. Here’s a story from last November. Since then, I’ve been sending a fairly steady stream of complaints to my Virgin contact, who I had hardly spoken with in years, except to tell her how much I admire her airline.

But Babineaux wasn’t happy with that answer. He replied to Virgin, sending it screen shots of his purchase, which show international taxes being charged on a domestic flight.

“So sorry for these issues,” a Virgin representative responded. “But this is a labeling issue, I promise.”

The passenger remains incredulous. “I have no confidence in Virgin America now, and I have not even flown them yet,” he says.

After reviewing the back-and-forth between Virgin and Babineaux, I have a few thoughts. First, I don’t think Virgin is hiding anything or overcharging passengers for taxes. I’ve done a lot of stories about airline lies, and this doesn’t have the telltale signs of a lie. This really does look like a system problem.

Airlines are much smarter when it comes to deceiving their customers. If Virgin were trying to pull a fast one using international taxes, this would be the work of a rank amateur, and the government would quickly catch on to it.

So there’s my outside opinion: nothing fishy going on here, probably.

The bigger issue that Babineaux’s questions raise is, what are airlines going to do about these taxes? Now that they must include government fees in the price of their ticket, they’re shifting to a strategy of lowering those taxes. But what if they’re unsuccessful?

Would an airline charge a tax that wasn’t due and pocket it, hoping no one will notice? I’m sure some of the folks in charge of identifying new revenue streams have thought about it, but dismissed it as too risky. (Never mind the fact that it’s also a crime.)

That isn’t to say airlines are completely above board, when it comes to paying taxes. For example, do you ever wonder what happens to the taxes paid on nonrefundable tickets that are unused? Aren’t you entitled to getting that money back? Yet most airlines won’t refund those fees. They don’t have to pay them to the government, either. So where do they go?

Babineaux may not realize it, but he’s on to something. And now that the airline industry is making a fuss about its taxes too, it’s only a matter of time before someone digs around and exposes the industry’s real tax cheats.

RSS
Facebook
Twitter
Visit Us
LinkedIn

Underwritten by

This site is underwritten by Sodexo North America

Sodexo North America Sodexo North America is part of a global, Fortune 500 company with a presence in 80 countries. Sodexo is a leading provider of integrated food, facilities management and other services that enhance organizational performance, contribute to local communities and improve quality of life for millions of customers in corporate, education, healthcare, senior living, sports and leisure, government and other environments daily. Learn more at Sodexoinsights.com.

This site is underwritten by Travelex Insurance Services

Travelex Insurance Services is a leading travel insurance provider in the United States with over 55 years combined industry expertise of helping people dream, explore and travel with confidence. We offer comprehensive travel insurance plans with optional upgrades allowing travelers to customize the plans to fit their needs. Compare plans, get a quote and buy online at Travelexinsurance.com.

This site is underwritten by AirHelp

AirHelp is the world’s leading flight delays compensation company, helping passengers apply for compensation following a delayed or canceled flight or when boarding has been denied. It is AirHelp’s mission to fight for passenger rights by holding airlines accountable for flights disruptions that are out of passengers’ control. AirHelp has already helped 5 million people, taking the stress out of applying for compensation and making it as hassle-free as possible for travelers around the world.

This site is underwritten by Allianz Travel Insurance

The Allianz Travel Insurance company has built its reputation on partnering with agents all around the world to provide comprehensive travel insurance for their clients. Contact Allianz Travel Insurance for a comprehensive list of coverage.

This site is underwritten by Chubb

Chubb is the world’s largest publicly traded property and casualty insurance company, and recognized as the premier provider of insurance for successful individuals and families in the U.S. and selected international markets, offering coverage for high-value automobile, homeowners, recreational marine/aviation, valuables and umbrella liability coverage. As an underwriting company, Chubb assesses, assumes and manages risk with insight and discipline, and combines the precision of craftsmanship with decades of experience to conceive, craft and deliver the best insurance coverage and services to individuals, families and business of all size.

This site is underwritten by Enterprise

A family-owned, world-class portfolio of brands. A global network that spans across more than 85 countries. Some 97,000 dedicated team members sharing common values. And more than 1.9 million vehicles taking our customers wherever they need to go.

This site is underwritten by Fareportal

Fareportal’s portfolio of brands, which include  CheapOair and  OneTravel, are dedicated to helping customers enjoy their trip. Whether you want to call, click, or use one of our travel apps, one thing is clear: We make it easy to take it easy.

This site is underwritten by Insuremyrentalcar.com

An independent provider of low cost CDW/LDW insurance for use with rental cars. Up to $100,000 cover with no deductible. Policies available on a per day, per trip or per year basis. Also works with overseas rentals. Try  Insuremyrentalcar.comnow.

This site is underwritten by InsureMyTrip

It’s simple. InsureMyTrip finds you the right travel insurance plan, every time. InsureMyTrip is the authority on travel insurance. Rated A+ for travel insurance by the Better Business Bureau. All travelers that purchase a policy through  InsureMyTrip have access to Anytime Advocates® for claims assistance.

This site is underwritten by Mediacom Communications

The nation’s fifth-largest cable operator, serving the smaller cities and towns in the Midwest and Southern regions of the United States. We are a high-performance broadband, entertainment, and communications company that brings the power of modern technology and quality customer experience to life inside the connected home by combining ultra-fast gigabit speeds with personalized local and over-the-top entertainment choices that fit your lifestyle. Details at  Mediacomcable.com.

This site is underwritten by SCOTTeVEST

An innovative apparel brand for people who want easy access to everything they need. For those who live for every second, SCOTTeVEST lets you maximize your life. Ditch the carry-on bag and pick up a  SCOTTeVEST.

This site is underwritten by Virtuoso

The leading global network for luxury and experiential travel. This invitation-only organization comprises over 1,000 travel agency locations with 17,500 advisors in over 45 countries, and holds preferred relationships with 1,700 of the world’s finest travel companies. Virtuoso advisors collaborate with their clients to create personalized itineraries featuring exclusive perks, while also providing advice, access, advocacy, and accountability. For more information, visit  Virtuoso.com.

This site is underwritten by VisitorsCoverage

As a company that is constantly striving to simplify travel insurance, VisitorsCoverage, is on a mission to help travelers make the better decisions about purchasing travel insurance, quickly. VisitorsCoverage has helped millions of travelers globally to buy the suitable travel insurance and explore the world with confidence. Get insurance for your next trip at  VisitorsCoverage. Lowest Price Guaranteed.

This site is underwritten by MedjetAssist

Medjet is the premier global air-medical transport, travel security and crisis response membership program for travelers. With a MedjetAssist membership, if you become hospitalized more than 150 miles from home, we will get you from that unfamiliar hospital all the way home to the hospital you trust. All you ever pay is your membership fee. MedjetHorizon members add 24/7 personal security and crisis response benefits. Elliott.org readers enjoy discounted rates. Travel safer with  MedjetAssist.

This site is underwritten by Southwest Airlines

The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit. We are committed to provide our Employees a stable work environment with equal opportunity for learning and personal growth.

This site is underwritten by Sungard Availability Services

Leveraging more than 35 years of experience, Sungard AS designs, builds and runs critical IT services that help businesses manage complex IT, adapt quickly and build resiliency and availability. A leading provider of critical production and recovery services, Sungard AS partners with customers across the globe, delivering resilient IT systems, infrastructure and recovery services tailored to achieving desired business outcomes.

This site is underwritten by TravelInsurance.com

TravelInsurance.com makes it fast and easy to compare and buy travel insurance online from top rated providers. Our unbiased comparison engine allows travelers to read reviews, compare pricing and benefits and buy the right policy with a price guarantee, every time. Compare and buy travel insurance now at  TravelInsurance.com.

This site is underwritten by Squaremouth

Squaremouth helps travelers easily and instantly compare travel insurance policies from all major providers. Only companies that meet the strict requirements of Squaremouth’s Zero Complaint Guarantee are available on the website. Compare policies on  Squaremouth.com to save over 70 percent on your next purchase.

This site is underwritten by Travel Leaders Group

Travel Leaders Group is transforming travel through its progressive approach toward each unique travel experience. Travel Leaders Group assists millions of travelers through its leisure, business and network travel operations under a variety of diversified divisions and brands including All Aboard Travel, Andrew Harper Travel, Colletts Travel, Corporate Travel Services, CruCon Cruise Outlet, Cruise Specialists, Nexion, Protravel International, SinglesCruise.com, Travel Leaders Corporate, Travel Leaders Network and Tzell Travel Group, and its merger with ALTOUR. With more than 7,000 agency locations and 52,000 travel advisors, Travel Leaders Group ranks as one of the industry’s largest retail travel agency companies.

This site is underwritten by Travelers United

If you’ve been mistreated by the airlines, Travelers United is your voice in Washington. Join the #1 travel advocacy organization working with Congress to improve and protect travelers. Plus, get $400 of annual benefits you can use for travel for only $29/year. Add your voice to ours. Make travel better.  Join today.