The refundability of government-imposed taxes and fees on unused nonrefundable tickets varies depending on the tax or fee.

The Transportation Security Administration's (TSA) September 11th Security Fee, which funds passenger aviation security services, is the only government-imposed fee or tax that is clearly refundable on unused nonrefundable tickets that expire or lose their value, according to TSA. 49 C.F.R. § 1510.9(b). Letter from Randall Fiertz, Transportation Security Administration, Acting Director of Revenue, to James Hultquist, Air Transport Association, Managing Director, Taxes. November 21, 2002, Docket No. TSA-02-11120-59. TSA imposes $2.50 per enplanement not to exceed $5 one-way or $10 roundtrip for aviation security inspection services. 49 C.F.R. §§ 1510.9(b), 1510.5. However, according to airline officials, the security fee is rarely refunded because its refundability is not well known by consumers, and a refund is only provided if a passenger requests a refund from the airline. If a collecting airline refunds the TSA fee to a passenger, the airline, through Treasury, submits this "credit" along with the fees it has collected at the end of the month in which the fees were collected, as required by statute. 49 U.S.C. § 44940(e)(3). The airline cannot retain any part of the fee to cover its costs; however, pursuant to statute, the airline is allowed to retain the interest earned from the trust account where fees are held. 49 U.S.C. § 44940(e)(6).

The Internal Revenue Service states that the aviation excise taxes—the 7.5 percent ticket tax, passenger segment tax, and international arrival/departure tax that fund Federal Aviation Administration activities—are not refundable on unused nonrefundable tickets; however, to the extent that a portion of the ticketed fare is refunded, the collected tax attributable to that portion of the fare may be refunded to the passenger. Rev. Rul. 89-109 (1989) 1989-2, CB 232, as applicable to the 7.5 percent excise tax. IRS officials stated that the reasoning in this revenue ruling is also applicable to the passenger segment tax, and the international arrival/departure tax. Thus, if airline policy allows a passenger to apply part of the fare for an unused nonrefundable ticket as a credit for future travel on the airline, the passenger receives a credit for the proportionate share of the taxes applied to the next ticket (less a change fee) and thus does not have to pay the taxes a second time. If, however, a passenger does not use the credit, the passenger may not receive a refund of the taxes. For example, according to the U.S. Department Of Transportation (DOT), some airlines offer a credit for the price of the ticket, including taxes and fees, minus a reservation change or cancellation fee and the difference in fares. Normally, passengers have to notify the airline prior to flight departure to qualify for a credit which is valid for 1 year for travel on the airline. However, these airlines would not provide a refund in cash of the ticket price. Because the excise tax is imposed on amounts paid for air transportation and not connected to the transportation itself, taxes paid on unused purchased tickets remain in the Airport and Airway Trust Fund.

In regards to other government-imposed fees, according to Customs and Border Protection (CBP), which administers the Customs Air Passenger Inspection Fee and the Immigration Air Passenger Inspection Fee, applicable statutes and regulations authorize the refund of these fees on unused nonrefundable tickets. In the past, as CBP officials noted, the agency has allowed for such refunds and CBP indicated that they would not consider the refund of its fees to be improper insofar as fees can be refunded if inspection services are not provided. However, CBP has not issued policy or guidance that clarifies this practice or whether airlines can or must refund fees if requested by consumers. Additionally, CBP told us that when airlines do refund fees to passengers, it accounts for those with CBP as a "credit" on a subsequent submission of collected fees.

In contrast, with respect to the Animal and Plant Health Inspection User Fee, U.S. Department of Agriculture officials said that airlines may have refunded consumers this fee on occasion but do not know the circumstances of this and acknowledge that their controlling statute is silent on this issue.

In regards to all of these fees, airline officials told us that they have received few, if any, requests for fee refunds. An official of a trade association that represents travel agencies told us that there is confusion about whether government-imposed taxes and fees are refundable. As a result, this official said, many travel agents state that they do not try to recoup taxes and fees on unused nonrefundable tickets for their customers.

Although applicable TSA guidance requires the refund of the September 11th Security Fee on unused nonrefundable tickets that expire or lose their value, at the passenger’s request, consumers are generally unaware that they may be eligible for a refund. According to TSA, regulations require airlines to refund the fee to consumers when a change in their itinerary occurs, but this occurs automatically. 49 C.F.R. § 1510.9(b). We asked airline officials to describe the process by which they refund TSA fees to consumers and asked if consumers have requested refunds. Some airlines replied that they have not been requested by consumers to refund the fee and others were not aware that consumers were entitled to a refund but if requested they would issue one. We asked TSA officials why no policy has been developed to notify consumers of their rights. TSA responded that current refund policy sufficiently ensures that refunds will be provided upon request by the airline and TSA has not received complaints regarding an airline failing to comply with TSA regulation and guidance regarding refunds.

Similarly, while CBP allows airlines to refund the customs and immigration inspection fees on unused nonrefundable tickets, because the agency has not communicated this to airlines or the public, consumers are unaware that they fees can be requested. We believe that given that consumers are not notified of a potential refund, they may be unlikely to realize their entitlement to such and, thus, would be unlikely to request a refund.

DOT has the authority under 49 U.S.C. § 41712 to prohibit unfair or deceptive practices or unfair methods of competition and DOT believes ensuring that consumers are not mislead regarding their rights to refunds is within the scope of this authority. However, DOT staff point out that it has received few, if any, complaints about refundable government fees.