Transportation Bill Passed Clarifying Excise Tax Exemptions For Air Tour Operators And Seaplanes

Last Friday the U.S. Senate passed the Highway Bill Conference Report (H.R. 3) which contains clarifications regarding the exemptions from the collection/payment of excise tax. Section 5223 adds an exemption from the payment of excise tax for “any air transportation by a seaplane with respect to any segment consisting of a takeoff from, and a landing on, water, but only if the places at which such takeoff and landing occur have not received and are not receiving financial assistance from the Airport and Airways Trust Fund.” Section 5224 is an amendment clarifying that “aircraft operated on a flight the sole purpose of which is sightseeing” are exempt from the the payment of excise tax. Currently air tour operators have been paying fuel tax, as opposed to excise tax, on their flights with the understanding that they were not subject to excise tax. This amendment will now codify their understanding. Both provisions are effective September 30, 2005.