I edited some more in on the taxes to my previous post before seeing your reply.
Originally Posted by
jsloan
The customer ultimately pays the tax either way; no argument. But, it seems to me that UA could simply take its regular fares and decide that $50 was transportation and the rest was an ancillary purchase of an upgrade, and save all of its passengers 7.5% / raise their pretax income by 7.5%. I'm not suggesting that what they're doing is illegal; rather, I'm amazed that Congress hasn't closed that loophole (presumably taxing baggage and change fees at the same time).
And, sure, the IRS gets some of the money as corporate tax, but they're getting less than they would if these purchases were taxed at the 7.5% excise tax rate. Example: $100 upgrade fee, no excise tax, 30% corporate tax rate: $100 * 30% = $30 in tax revenue. $100 upgrade fee, inclusive of a 7.5% excise tax, 30% corporate tax rate: $93.02 base price * 30% = $27.91 + $6.98 excise tax (7.5% of $93.02) = $34.89.
I mean like anything else, I'm sure lobbying plays a large part in it not getting looked at further, but also the airlines playing nice within the rules they've been given and not trying to game the system to give the government a reason to need to look closer at it/change the tax code. Yeah I'm sure if airlines started exploiting it left and right and filing $0/dirt cheap fares and then finding ways to bundle the remainder as ancillary would definitely get it looked at because the IRS is going to wonder why their tax revenues just plummeted. I guess they could theoretically do a buy your no seat business fare for $0, and then pay a $2000 ancillary fee to actually confirm the seat? (Ignoring the fact that will then run into all sorts of issues surrounding DOT requirements for confirmed reservations).
But not only that, who does it
actually hurt by revising the tax code to account for ancillary purchases. Absolute best case, the airlines have been pocketing the 7.5% and that money will just go to the government instead of the airline paying a lesser amount of taxes on it. Worst case they haven't been considering it at all, and pass the entire amount on to the passenger, since it is a passenger imposed tax. And even if they don't pass anything along (unlikely IMO), you can sure as hell bet the messaging from the airlines to their passengers surrounding such a change is that the government is now imposing a 7.5% fee on your checked bags, seat fees, upgrades, other ancillary purchases etc. What politician wants to take that on, when consumers (especially now) are already getting frustrated about the cost of air travel.
Originally Posted by
jsloan
Or ON or RN. That's why I said, you can't know for sure ahead of time.
Thanks to the unofficial PNR viewer which showed the PNR comments (
United unofficial PNR viewer) we actually know the paid buy-up offers go into a revenue booking code. Only plus points/MUA's go into RN. And ON is outright mileage award booking.
Example PCU from that thread:
Originally Posted by
Kacee
It even shows the buy-up offer:
PCUOFFER/09MAY/1/SFO/PHX/2657/11MAY/P/149/USD