NATA and NBAA are asking the Internal Revenue Service (IRS) to clarify federal excise tax (FET) collection responsibilities of charter brokers and operators, saying current regulations remain unclear and are causing confusion.

The IRS recently issued its long-awaited final rule that addressed when the air transportation tax applied in situations involving aircraft management fees. During that rulemaking, NATA and NBAA also had raised questions regarding the FET collection responsibilities of charters and brokers. However, the IRS, noting the broad implications of the issue, suggested a separate rulemaking.

The associations stressed their willingness to work with the IRS on the issue, calling it critical for their members. “There is currently little guidance to determine whether charter brokers are responsible for collecting FET,” they told the IRS in a joint letter.

In addition, they expressed concerns about the requirement for the air carrier providing the initial leg of a trip to remain responsible for paying the tax if it is not collected otherwise. “This obligation on the air carrier's part to pay the tax if the party responsible for collecting it fails creates confusion and unfair liability exposure for the air carrier in instances where a broker is collecting payment from the passenger.”

As a clarification, the associations suggested that if an air carrier documents that it informed the charter broker of the obligation to collect the FET, then the operator would not be liable for uncollected tax. In addition, they said the operator should have access to information from the IRS on whether the FET was paid by the broker or another party.

“We have developed a strong working relationship with the IRS and are eager to work on regulations or guidance to provide much-needed clarity on tax collection and remission roles when brokers are receiving payment for the transportation from passengers,” said Jacque Rosser, NATA's senior advisor for regulatory affairs.

NBAA and NATA asked for a meeting to discuss possibilities for either a rulemaking or guidance. “We appreciate how the IRS engaged with industry on the most recent FET rulemaking and look forward to working collaboratively on issues related to liability and collection of the tax,” said Scott O’Brien, NBAA's senior director of government affairs.