Air Transportation Excise Tax: Something You Should Know
The Air Transportation Excise Tax is a tax which the Legislature imposes whenever someone buys an airline ticket or utilises an air service. It is also applicable to ticket purchases both for the internal US flights as well as international travel and is used in the construction of traffic and airport systems. Such businesses need to learn about this tax properly, who files it and the correct procedure of filing with the IRS.
In this guide, we will explain in detail the essentials of the Air Transportation Excise Tax, the criteria for those who need to file it, the specific company categories in which this tax will be applicable, and the procedure for filing using Form 720 through our e-file system.
What Is the Air Transportation Excise Tax?
The Air Transportation Excise Tax is a tax imposed on the transportation services and it includes the following;
- Passenger tickets on both domestic and international airline flights.
- Transportation of air freight, which is the forwarding of goods via air.
- A fuel levied on aircraft.
The tax rates of the Air Transportation Excise Tax are determined by the type of the flight, i.e. domestic or international type flights.
- Domestic Flights: A percentage of the ticket price plus a flat per-flight segment tax.
- International flights: A tax levied on those passengers whose trip originates in the U.S. but ends outside the country.
Types of Air Transportation Excise Tax:
- Domestic Passenger Excise Tax: A taxation charged on the airfares for air travel within the continental U.S regions.
- International Passenger Departure Tax: Taxation on those passengers who leave the continental U.S for another country.
- Air Cargo Tax: Taxation on the cost of shipping products via air.
- Aviation Fuel Tax: A taxation level imposed on the use of aircraft fuels but not on specified exempt activities such as leisure flights.
Who Needs to File the Air Transportation Excise Tax?
Particular air transport service providers and airlines are required to lodge and send to the IRS such additional excise tax on air transports. As in the case with all forms of taxation, there are different companies who fall within this group including air transport operators as well as some companies benefiting from air transport.
Entities Required to File:
- Commercial Airlines: Airlines that engage in carrying passengers are required to collect excise tax on all domestic and international flights.
- Air Cargo Companies: Companies that undertake the transportation of goods by air are taxed based on the value of services rendered.
- Charter Flight Providers: Similarly charter operators are obliged to pay applicable excise tax.
- Fuel Suppliers: In this case companies that provide aviation fuel for taxable purposes are subject to the payment of aviation fuel tax.
Air Transportation Excise Tax Filing Categories
Different businesses involved in air transportation fall into distinct filing categories for excise tax purposes. This is important so that one knows which category their business is in for purposes of correct filing.
- Airlines of Domestic and International Flights Domestic airlines that fly passengers within the borders of America and outside America have an obligation to charge taxes for the airfares they sell and remit the same to the IRS. This category captures categories of large registered airlines, low cost airlines and region hawkers.
- Air Freight or other Cargo Companies Business organisations that render services connecting the injection of goods through air transport are liable for excise tax for the rendered services. This tax applies on the charges made for transportation of goods both within the states and outside the states.
- Charter Operators and Providers of Private Air Travel Charter flight services and private flights operators that engage in air transport are obligated to levy necessary excise taxes for the provided services which tax encompasses both passenger and cargo reshipment taxes.
- Suppliers of Aviation Fuel Components Ashozhi’s Fuel Units
All businesses offering aviation fuel for tax purposes to business airlines and private jets will pay the fuel excise tax. Exemptions may be subject to fuel used in untaxed flights or for armed forces.
Filing of Air Transport Levy through Form 720
To file an Air Transport Levy, there is a certain form that is filled and submitted called the Form 720 (Quarterly Federal Excise Tax Return). This form is the Quarterly Federal Excise Tax which is used in reporting many other excise taxes apart from air transported taxes.
- Form 720 to be filled sections concerning obligations on Air Transportation Excise Taxes: Part I: Write down the cost of tax under gross income by the number of passenger flight and air cargo services taxed excise.
- Schedule C: Tax for aviation fuel is reported in this section.
Filing Date of Form 720:
Form 720 is of a quarterly nature, thus filed after every 3 months and the following dates apply:
- First quarter: On or before the 30th April
- Second quarter: On or before 31st July
- Third quarter: On or before the 31st October
- Fourth quarter: On or before the 31st of January.
Steps for Filing Form 720:
- Taxable Services calculation: State the total of taxable air transportation services which include the value of all the passenger tickets issued net of taxes and the revenue from the cargo shipment.
- Complete Form 720: Fill the form in the part where you wish to fill in tax on all these services and hence these taxes.
- Submission and Payment: This accomplishment also involves the completion of form 720 and the payment of the tax obligation to the IRS by mail or electronically.
Other services associated with tax filing that we deal with is E-Form 720
Completing the Air Transportation Excise Tax can take time but we have an e-file service that makes it easier. By e-filing through us, you know that your filing will be done accurately and on time.
Advantages of E-Filing Form 720:
- E-File Processing Speed: The speedy process had to do the IRS submission of Returns through E- filing Discussion.
- Error Checking: There are several advantages for a filing party when using the electronic filing service: The system includes error checking where some common errors are ruled out so that the filing is not rejected.
- E-filing Security: Advanced measures like encryption have been put in place in order to protect sensitive tax information.
- E-filing Benefits: More so, Form 720 can be done with ease from any blazing fast internet connection.
How to E-file with Us:
- Registration: You are a few clicks away from starting your e-filing since you will register on our site.
- Provide Business Details: Enter your business and air transportation services and taxes.
- Submit and Confirm: Form 720 will be prepared and filed electronically and confirmation will be obtained from the IRS immediately.
I am fully aware these are legal obligations. Let me rephrase that.
As part of your tax systems, it is important to submit the Air Transportation Excise Tax and do it well within the time frame that it is required to avoid stress related to penalties or getting interest charged. And it goes without saying: that is why the deadlines imposed upon by the IRS should be followed without fail as missing deadlines could trigger fines and other unnecessary costs.
More Potential Types of Penalties:
- Penalty for Submission of Returns After Due Dates: 5% of the tax amount due per month for every month the tax return is filed late for a maximum of 25%.
- Failure to Pay Taxes Debt Penalty: 0.5% of the outstanding tax debt for each month that the taxpayer has not settled the overdue taxes.
- Accrued Interests: Will accrue on outstanding balance till payment is made.
The Air Transportation Excise Tax is applicable within the tax liabilities of businesses that engage in air transportation activities which forms the subject of this dissertation. In whichever case, be it an airline, an air cargo, a charter business or a fuel company, there is a need to know which documents are required and for what taxes to pay and how. Making it simple for yourself using Form 720 along with our e-filing service enables you to file the correct tax returns and avoid all accuracy while dealing with penalties that are rather expensive. Let us help you ease into e-filing today and do it with no hassles!