Government says airlines “not required” to refund taxes on nonrefundable tickets

Kirk Miller knew his nonrefundable US Airways tickets was lost when he canceled his flight, but like many air travelers, he wondered about the taxes. Could he get those back?

“It is my understanding that although the fare is not refundable, the taxes included in the price of an airline ticket are refundable,” he says. “Airlines act as tax collectors, but they are supposed to hold the taxes in escrow until you actually travel, when they pay the government(s).”

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Not exactly, it turns out. A US Airways representative told him the taxes were also nonrefundable. He sent a brief, polite email to the airline, and was again rebuffed.

I’ve raised this question in the past, too. Some airlines apparently keep the money. Others return it.

I suggested he ask the Transportation Department about the taxes. So he did.

Here’s the eye-opening response:

This is in response to your inquiry about the refundability of taxes on non-refundable airline tickets.

Tickets for domestic air transportation are subject to an air transportation excise tax of 7.5% of the air fare plus $3.70 per flight segment. By law, this tax applies to the sale of air transportation, not to the transportation itself. Airlines remit this tax to the government shortly after the ticket is issued. If the passenger changes his or her schedule and forfeits the air fare on a non-refundable ticket, the airline still owes this tax to the government.

Under the law, if an airline refunds the air fare, it is free to, but not required to, refund the tax. If the airline refunds the air fare but does not refund the tax, the traveler can claim the a refund of the tax from the IRS by filing form 8849 with that agency. If the airline does not refund the fare, then as indicated in the previous paragraph the tax on that fare is payable to the government.

The U.S. Department of Transportation does not regulate any of the various government fees that appear on airline tickets. The U.S. air transportation excise tax on airline tickets is administered by the Internal Revenue Service, Office of the Chief Counsel, Excise Tax Branch (202-622-3130).

Similarly, the other taxes and government fees on airline tickets are each administered by the agency that oversees the fee in question. For example, an “XF” fee is a Passenger Facility Charge of up to $4.50 per participating airport, which is used for airport improvements; this fee is administered by the Federal Aviation Administration.

On international tickets, an “XY” charge is an immigration inspection fee, and a “YC” charge is a customs inspection fee. Both of those fees are administered by the office of Immigration and Customs Enforcement of the Department of Homeland Security. There is also an agricultural inspection fee on tickets for international transportation; this fee is administered by the U.S. Department of Agriculture.

We do not have information on the policies of those agencies concerning the refundability of their fees on non-refundable tickets.

That’s fascinating.

According to the government, taxes are being remitted shortly after the sale and may be refunded if the airline wants to.

I wonder what would happen if a site like Yapta decided to build an automated system that applied for a refund from airlines that had a policy to offer taxes back? How much money could air travelers save — particularly when taxes can sometimes account for nearly half the airfare?

(Photo: indi Ca/Flickr Creative Commons)

7 thoughts on “Government says airlines “not required” to refund taxes on nonrefundable tickets

  1. American Airlines is a company treats numerous employees
    just as rotten as it does its customers — deceitful and dishonest! Its a
    company that needs to get rid of its management and treat employees fairly
    instead of deceiving them. They instruct their employees not to offer
    information about baggage fees, etc unless specifically asked that question. Why
    do you think they made so much money in profit? When asked specifically the
    management denies this, but it was recently all over the news how the airlines
    hid fees and made a huge profit. They’re liars! Do you think the employees just
    all gained up and decided not to inform passengers about fees unless asked?
    Their employees are unhappy because many of them are treated like garbage and
    the newer employees are ripped off big time to pay for the older employees
    pensions and high pay and benefits plus the managements huge vacations and pay.
    They’re liars and cheats trying hard to hang onto their big bucks while screwing
    the underlings! Where else can you make $30/hr answering a phone without so much
    as a high school education? That’s why you’re getting screwed! And that’s not
    counting the huge vacations and benefits packages. Plus the executives want
    their big bucks too. The newer employees don’t get all extravagance. They’re
    lied to and screwed over everytime they turned around, just like the customers!
    And the government employees have their airfare paid for with big discounts
    while soldiers pay regular mostly higher fares. That’s American Airlines for
    you! Rotten to the core! Let’s make sure they’re forgiven their fines for
    violations though! It doesn’t surprise me that company would screw over
    customers on the taxes because that’s what they do best: Screw their
    customers! Let these crooks pay for their own security on their planes! Why
    should the taxpayers have to pay for the TSA? These people are scammers!

  2. LOL….the ticket is non-refundable but taxes are iilegal charged if not used…you didnt use any services so you dont pay taxes

  3. yes…working IN Greece 14 years, all airlines refunded unused taxes…..thats why dont book through the websites…use your friendly travel agent 🙂

  4. So  the  government  get  paid  twice  when  a  passenger  does not  fly  (naturally,  the  seat  won’t  be  vacant  if  someone  cancels,  the  airline  sells  the  seat  twice…)

    Good  business  for the  airline  and  good  business for the government.  Pretty  evident that  they  are  not  interested  in changing  this.  Why  should  they….    its  extra  money.

  5. Mike,
    With all due respect, the comparison to a “concert /movie ticket does not hold water.  If you don’t go to a concert/movie, you can sell or give away your ticket.  Air tickets are non-tranferable and airlines are also known to over-sell seats.  They hardly incur a loss for a “no-show”

  6. i have a question, can a airline not refund taxes on a ticket that was on hold for 24 hrs. i had cancelled a tkt on spirit airline before my 24 hrs, but i was not refunded the taxes, this does not seem right at all. can some one tell me why.  

  7. Form 8849 is the “Certain Fuel Mixtures and the Alternative Fuel Credit”. I don’t think this is the form you’d use to claim a refund on the taxes from the IRS.

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