A Recent Article written by Randy
Oct 24, 2000 | 12:03 pm
#1
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A Recent Article written by Randy
Frequent-Flier Miles…........and Taxes!
Frequent-flier miles are so widespread today that they can almost seem like another form of money. Frequent-flier mile awards have even become an issue in some divorce and estate cases. The federal government has considered taxing frequent-flier miles.
After careful thought and research, the IRS studied the matter and decided the expense of monitoring and enforcing a tax on frequent-flier miles would be too much of an expense for the government. They also took into consideration the fact that imposing a tax on frequent-flier miles would be very unpopular with the millions of travelers (voters) who use their miles every year.
Congress has found one way around taxing the mileage holders directly and openly, and has inflicted a hidden tax on frequent-flier mileage. The tax is imposed on “industry partners” like hotel chains and car rental companies that offer miles to their customers.
When customers cash in their miles for airline tickets, the companies owe tax on the value of the transaction. There is no surtax if the miles are redeemed for hotel rooms, rental cars and so on. The clear purpose of the law is to tax air travel. Some frequent-flier partners, hotels for example, are eating the tax while others are passing it on to consumers.
The moral of the story is, taxes are paid on frequent-flier miles awards, but you may don’t see it up front.
Randy Petersen of InsideFlyer, published this article for Bottom Line Books.
Frequent-flier miles are so widespread today that they can almost seem like another form of money. Frequent-flier mile awards have even become an issue in some divorce and estate cases. The federal government has considered taxing frequent-flier miles.
After careful thought and research, the IRS studied the matter and decided the expense of monitoring and enforcing a tax on frequent-flier miles would be too much of an expense for the government. They also took into consideration the fact that imposing a tax on frequent-flier miles would be very unpopular with the millions of travelers (voters) who use their miles every year.
Congress has found one way around taxing the mileage holders directly and openly, and has inflicted a hidden tax on frequent-flier mileage. The tax is imposed on “industry partners” like hotel chains and car rental companies that offer miles to their customers.
When customers cash in their miles for airline tickets, the companies owe tax on the value of the transaction. There is no surtax if the miles are redeemed for hotel rooms, rental cars and so on. The clear purpose of the law is to tax air travel. Some frequent-flier partners, hotels for example, are eating the tax while others are passing it on to consumers.
The moral of the story is, taxes are paid on frequent-flier miles awards, but you may don’t see it up front.
Randy Petersen of InsideFlyer, published this article for Bottom Line Books.
Oct 24, 2000 | 5:54 pm
#2
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Originally posted by Russ21Atl:
Frequent-Flier Miles…........and Taxes!
<snip>
When customers cash in their miles for airline tickets, the companies owe tax on the value of the transaction. There is no surtax if the miles are redeemed for hotel rooms, rental cars and so on. The clear purpose of the law is to tax air travel. Some frequent-flier partners, hotels for example, are eating the tax while others are passing it on to consumers.
(Emphasis added by Counsellor)
Frequent-Flier Miles…........and Taxes!
<snip>
When customers cash in their miles for airline tickets, the companies owe tax on the value of the transaction. There is no surtax if the miles are redeemed for hotel rooms, rental cars and so on. The clear purpose of the law is to tax air travel. Some frequent-flier partners, hotels for example, are eating the tax while others are passing it on to consumers.
(Emphasis added by Counsellor)
[This message has been edited by Counsellor (edited 10-24-2000).]
Oct 24, 2000 | 6:13 pm
#3
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In my reading of the act the tax is due when the miles are purchased from the seller, not when they are cashed in.
I posted the text in an earlier discussion on this topic.
TW
I posted the text in an earlier discussion on this topic.
TW
Oct 24, 2000 | 8:25 pm
#5
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Alamo charges you at the time of rental for the tax too.
I think most partners are starting to do it.
I think most partners are starting to do it.
Oct 25, 2000 | 5:59 am
#6
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UA board had thread last week or so about using "free" UA certs for "free" days rental. Car companies appear to charge taxes of fairly high nature on the 2 or 3 "FREE" weekend days, based on the rare to NORMAL rental would cost!
http://www.flyertalk.com/forum/Forum50/HTML/003137.html
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~ Glen ~
http://www.flyertalk.com/forum/Forum50/HTML/003137.html
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~ Glen ~