Taxes on non-refundable tickets

Old Jan 31, 2019, 1:29 am
  #16  
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Originally Posted by uastarflyer
So WN is just being magnanimous in automatically refunding taxes when a flightvis canceled or modified?
Huh? WN does nothing of the sort. From their fare information page, for Wanna Get Away fares:

Should a passenger fail to apply the nonrefundable ticket toward the purchase of future travel within the eligibility period, the entire amount of the fare, which includes without limitation, all fees, taxes, and charges, will be forfeited.
WN's policy is the same as UA's -- for nonrefundable tickets, you can apply the balance to a future travel upon payment of the fare difference and change fee. If there's extra left over, you can use it for further travel. The only difference between UA and WN is that WN's change fee is $0.
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Old Jan 31, 2019, 1:33 am
  #17  
 
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Interesting discussion for sure. The TSA fee had me thinking. Since 100% of tickets sold incur the fee, even miles tickets, but we know not 100% of tickets are actually flown, the TSA essentially gets a windfall anytime someone doesn't show or cancels thier flight.

Then again I also thought it was interesting how in the Govt shutdown they couldn't pay the TSA agents, but they sure as heck kept collecting the TSA fees for each ticket...
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Old Jan 31, 2019, 1:49 am
  #18  
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Originally Posted by writetorich
bump surprised there are not longer threads on this topic.
Why? Its a pretty clear case.
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Old Jan 31, 2019, 2:01 am
  #19  
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Originally Posted by jsloan
Huh? WN does nothing of the sort. From their fare information page, for Wanna Get Away fares:



WN's policy is the same as UA's -- for nonrefundable tickets, you can apply the balance to a future travel upon payment of the fare difference and change fee. If there's extra left over, you can use it for further travel. The only difference between UA and WN is that WN's change fee is $0.
I meant the TSA fee. WN provides the option at the point of cancel to refund or roll over

On award ticket cancellation the money comes back automatically
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Old Jan 31, 2019, 6:21 am
  #20  
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Originally Posted by jsloan
WN's policy is the same as UA's -- for nonrefundable tickets, you can apply the balance to a future travel upon payment of the fare difference and change fee. If there's extra left over, you can use it for further travel. The only difference between UA and WN is that WN's change fee is $0.
This is my take - since you have the entire amount to use on a new ticket, including previous government fees/taxes, the $ would be used down the line toward both the fare and taxes/fees for the new ticket. TSA fees included.

The only time this really would come into play is if the reservation and the credit expired. COC seems to still address this (its non-refundable), which is of course a policy, not a matter of the law from the perspective of the government. If someone really wanted to test it, I guess they could try filing a lawsuit. Whoever is interested in taking that on, good luck to you!

I also wonder if this this is why UA insists on change fee in new $ - to make it easier internally to separate all these fare/fee $ without having a credit wade into it. I realize its not a big deal, but could see why it would be easier for the dept. that handles it. Just a guess.

Originally Posted by scracer14
Interesting discussion for sure. The TSA fee had me thinking. Since 100% of tickets sold incur the fee, even miles tickets, but we know not 100% of tickets are actually flown, the TSA essentially gets a windfall anytime someone doesn't show or cancels thier flight.

Then again I also thought it was interesting how in the Govt shutdown they couldn't pay the TSA agents, but they sure as heck kept collecting the TSA fees for each ticket...
was wondering this too. Costs of TSA screening is supposed to be paid for by pax with the TSA fee, so was unclear how that worked exactly.

Obviously though, TSA is part of homeland security, which had no authorization for funding. Also wonder if the TSA fee is meant to cover the actual screening process (I.e, equipment, management of process, etc.), but the actual salaries are covered from he DHS/TSA authorizes budget.
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Old Jan 31, 2019, 8:09 am
  #21  
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Originally Posted by LondonElite


Why? Its a pretty clear case.

The taxes pretty clearly have to be refunded. There is no statute or law that says the government can tax on intent to travel. Every single tax requires an actual act to incur the tax - in this case the tax wouldn't be due unless the person actually consumed the travel. That would be like sales tax being collected when a purchase is returned.

I tend to think that the carriers and the government collude on this using various flimsy excuses and regulations to keep from refunding the money. I also think the carrier imposed fees would probably have to be refunded as well as the taxes (the FAA still has some influence and fees are different than actual airfare).

Until there is a court case on this I do not think it will be settled. This would take a class action suit though to obtain the refund. It is simply a case of too little return for anyone but a greedy lawyer to take up.
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Old Jan 31, 2019, 8:26 am
  #22  
 
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Originally Posted by FlyingBeanCounter
The taxes pretty clearly have to be refunded. There is no statute or law that says the government can tax on intent to travel. Every single tax requires an actual act to incur the tax - in this case the tax wouldn't be due unless the person actually consumed the travel. That would be like sales tax being collected when a purchase is returned.
This depends on what the "taxable event" is. You're operating under assumption that actually flying is the taxable event. However, the taxable event also could be paying the airline to make a seat available for you on flight X, in which case purchasing the ticket is the taxable event. Looked at differently, you can't return the purchase. So it is like buying the "no returns" discount rack clothing. You could walk out of the store and toss them in the trash, but you couldn't get a refund on the tax.

Originally Posted by scracer14
Interesting discussion for sure. The TSA fee had me thinking. Since 100% of tickets sold incur the fee, even miles tickets, but we know not 100% of tickets are actually flown, the TSA essentially gets a windfall anytime someone doesn't show or cancels thier flight.
It's not really a "windfall" if the fee contemplates some "users" won't use the service. If 95% of tickets are assumed used it's not different than raising the fee ~5% and refunding those who don't use TSA's "service" - it's just a question of who actually pays, but the net is the same.
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Old Jan 31, 2019, 8:27 am
  #23  
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Originally Posted by villox
Some airlines will. According to the contract of carriage, UA will not
  1. General Rule Except as provided in Rules 4 and 27 C), UA will not refund any portion of a Ticket that is purchased with a non-refundable fare, including the fare and any taxes, fees, or other charges included within the total price paid for the Ticket.
I brought UA to arbitration over this exact issue, and they settled in a heartbeat.
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Old Jan 31, 2019, 8:52 am
  #24  
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I have wondered about that...someone earlier said the UK APD is refundable if segments are not flown. It is sometimes a significant portion of the total paid. Is that really doable? Which ones of the below are refundable - only the APD?

U.K. Air Passenger Duty
U.K. Passenger Service Charge

Does UA charge a fee which negates the refund?
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Old Jan 31, 2019, 9:51 am
  #25  
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Originally Posted by drewguy
This depends on what the "taxable event" is. You're operating under assumption that actually flying is the taxable event. However, the taxable event also could be paying the airline to make a seat available for you on flight X, in which case purchasing the ticket is the taxable event. Looked at differently, you can't return the purchase. So it is like buying the "no returns" discount rack clothing. You could walk out of the store and toss them in the trash, but you couldn't get a refund on the tax.

Not exactly the same. In your example there was a transfer of tangible personal property. That is clearly taxable at a state and federal level for transaction taxes (which are the same type of taxes applied to airline tickets).

In the case of an unused ticket - nothing was transferred. No service was rendered and no actual taxable event occurred. The government (state or federal) cannot tax on intent - it must tax on actual events. The mere purchase of a ticket does not guarantee a seat on the plane nor does it guarantee actual completion of travel. There is ample case law around this point and it is well established that the government cannot tax on intent. If they could we would get smoked with "intent" taxes.


I would be interested in an case law that supports not refunding the taxes or fees - I don't see any but I have not researched intently. I rarely miss a flight so it means little to me.

Originally Posted by daisyatl
See page 29 of IRS Publication 510. The last paragraph before the discussion on Manufacturers Taxes.

https://www.irs.gov/pub/irs-pdf/p510.pdf

And United cannot collect but not remit.

Following along on this, the language seems to indicate the tax only occurs when travel is completed:

Taxable transportation. Taxable transportation is transportation by air that meets either of the following tests. It begins and ends either in the United States or at any place in Canada or Mexico not more than 225 miles from the nearest point on the continental United States boundary (this is the 225-mile zone). it's directly or indirectly from one port or station in the United States to another port or station in the United States, but only if it isn't a part of uninterrupted international air transportation, discussed later.

There is nothing in the IRS publication I can see where the tax is assessed regardless of actual ticket use.
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Last edited by WineCountryUA; Jan 31, 2019 at 1:00 pm Reason: merging consecutive posts by same member
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Old Jan 31, 2019, 10:21 am
  #26  
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Originally Posted by uastarflyer
I meant the TSA fee. WN provides the option at the point of cancel to refund or roll over

On award ticket cancellation the money comes back automatically
Award tickets are refundable. I'll have to take your word for it that WN has a separate policy for the TSA fee. It's not on their website, but I've also never cancelled a WN ticket. It seems to be within UA's power to provide a mechanism to refund the $5.60, and, in fact, the law seems clear that they should (49 CFR 1510.9(b)).

Originally Posted by drewguy
So it is like buying the "no returns" discount rack clothing. You could walk out of the store and toss them in the trash, but you couldn't get a refund on the tax.
Precisely.

Originally Posted by moondog
I brought UA to arbitration over this exact issue, and they settled in a heartbeat.
Your profile says you're based in Shanghai. Was this for an international or domestic (US) ticket? I'd foresee a much greater chance of success with an international ticket.

Originally Posted by FlyingBeanCounter
The taxes pretty clearly have to be refunded.
PFCs pretty clearly do not.
14 CFR 158.45(3)ii (Passenger Facility Charges):

Failure to travel on a nonrefundable or expired ticket is not a change in itinerary. If the ticket purchaser is not permitted any fare refund on the unused ticket, the ticket purchaser is not permitted a refund of any PFC associated with that ticket.
The US Transportation Tax (US) and Flight Segment Tax (ZP) are a little less clear. 26 USC 4261. It defines the taxable event as "the beginning of the domestic segment," but it doesn't really define "beginning," and the definition is buried in a section describing indexing the taxes for inflation. However, it also contains a provision that the segment tax doesn't change if the number of segments changes without a re-fare.

Originally Posted by FlyingBeanCounter
I tend to think that the carriers and the government collude on this using various flimsy excuses and regulations to keep from refunding the money.
Why? Only one party gets to keep the money; what does the other party get from this collusion?

Originally Posted by FlyingBeanCounter
I also think the carrier imposed fees would probably have to be refunded as well as the taxes (the FAA still has some influence and fees are different than actual airfare).
What carrier-imposed fees are you talking about? The DOT does require that airlines refund optional service fees -- so E+ fees, for example, have to be refundable (and are).

Originally Posted by FlyingBeanCounter
This would take a class action suit though to obtain the refund. It is simply a case of too little return for anyone but a greedy lawyer to take up.
If there's enough money at stake for airlines and the government to collude over, surely you can find a "greedy lawyer" willing to take the case...
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Old Jan 31, 2019, 10:40 am
  #27  
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Originally Posted by jsloan
A

PFCs pretty clearly do not.
14 CFR 158.45(3)ii (Passenger Facility Charges):



The US Transportation Tax (US) and Flight Segment Tax (ZP) are a little less clear. 26 USC 4261. It defines the taxable event as "the beginning of the domestic segment," but it doesn't really define "beginning," and the definition is buried in a section describing indexing the taxes for inflation. However, it also contains a provision that the segment tax doesn't change if the number of segments changes without a re-fare.

Closer, but still not authoritative. The real issue would be the statue. Just because the FAA says they get to keep it does not mean the statute does. There are also those pesky things like the constitution and the amendments. government confiscation of wealth from any source generally requires a taxable event. The real question would be - does purchasing a ticket constitute a taxable event if the trip is not taken? I have no idea. Would be a fun court case though wouldn't it? Can you imagine the airlines if they were forced to refund the taxes from all unused tickets? and the FAA and other regulatory agencies would also have a lot of fun.

Title 26 section 4261 would be found to be refundable IMHO. The idea that there is a beginning means that the journey began. Not that one was planning. Of course others may see it differently.

I suppose if there was a class out there and someone willing to sue one could find a greedy lawyer. Like I said before, this is almost all theoretical. I have neither the time nor the inclination to chase this down.
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Old Jan 31, 2019, 10:48 am
  #28  
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Originally Posted by FlyingBeanCounter
The real question would be - does purchasing a ticket constitute a taxable event if the trip is not taken? I have no idea.
The general consensus of the travel industry seems to be "yes." For example, if I no-show for a hotel reservation, I get charged the first night's rate, including tax. It seems that the taxable event is the creation of a reservation. I'd be happy to be wrong, though.

I will say this: if UA is keeping the taxes, rather than remitting them to the government, then your theory is clearly correct and they should be refunded to the passenger, since UA is only acting as an agent in collecting them in the first place.
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Old Jan 31, 2019, 11:19 am
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Originally Posted by jsloan
The general consensus of the travel industry seems to be "yes." For example, if I no-show for a hotel reservation, I get charged the first night's rate, including tax. It seems that the taxable event is the creation of a reservation. I'd be happy to be wrong, though.

I will say this: if UA is keeping the taxes, rather than remitting them to the government, then your theory is clearly correct and they should be refunded to the passenger, since UA is only acting as an agent in collecting them in the first place.

I bet this gets explored more with the mayfair decision. With more entities looking for more taxes the establishment of a taxable event will become critical.

Isn't there a flyertalker out there who wants to sue and settle this for us once and for all?
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Old Feb 1, 2019, 10:09 pm
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WN Award Travel TSA Refunds

Originally Posted by uastarflyer
On award ticket cancellation the money comes back automatically
Actually that isn't true either (unless things have recently changed). From my demand letter "The treatment of refunds for Award Trips paid for in part by Southwest gift cards differs significantly from that of Award Trips paid for in part by debit/credit cards. In the latter case, consumers are offered a choice to keep the funds trapped in the PNR or refund as cash back to their debit/credit card." If you pay with gift cards, there is no option to refund and the funds are trapped.

Originally Posted by emcampbe
The only time this really would come into play is if the reservation and the credit expired. COC seems to still address this (its non-refundable), which is of course a policy, not a matter of the law from the perspective of the government. If someone really wanted to test it, I guess they could try filing a lawsuit. Whoever is interested in taking that on, good luck to you!
Ding ding ding ding! I approached the situation by invoking state law but I suppose someone could argue that the taxes are due to refunded under federal law. WN paid out my actual damages in cash so I did not end up suing them.

As others said, this could be big if anyone wants to take the case. A new paradigm for airline ticketing policies! Perhaps we'll all be thanking @writetorich for bumping this thread!
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