After a scolding from the Internal Revenue Service (IRS), Delta Air Lines says it will process tax refunds for customers who were charged for a federal tax on airline tickets that lapsed when Congress failed to renew it.
Other airlines are still trying to figure out what to do about the unexpected windfall, which occurred after Congress failed to vote on extending the federal ticket tax, which amounts to about $61 on a $300 ticket.
Customers who purchased a ticket before July 23 paid a tax that is no longer in effect. The IRS said airlines should return the money to consumers.
"The IRS will continue to work with the airline industry to address issues relating to the collection and payment of the taxes involved,” the agency said in a July 28 statement. “Taxpayers do not need to take any action at this time. The IRS will provide further guidance on this issue in the near future.”
But, as always, there's a catch, the IRS warned. If you buy a ticket before the tax is reinstated but travel after it goes back into effect, what happens?
Answer: Nobody knows.
"The legislation could either impose tax on all travel occurring after its enactment or provide an exemption for passengers who purchased tickets during the period when the tax was not in effect," the IRS said in a statement on its Web site.
Quite a mess
Delta had originally said it would book $4 million to $5 million in additional daily revenue and had no plans to change its ticket prices, even though the tax was no longer in effect. Now the airline says it will issue refunds.
Alaska Air says it wants to make it easy for customers to get refunds but hasn't figured out how to process it through its ticketing system. Other airlines are still studying the issue.
Meanwhile, the unintended bonanza for passengers is putting a kink in airport operations. The Federal Avaiation Administration (FAA) has furloughed more than 4,000 employees in 35 states and halted numerous construction projects at airports around the country.
“I’m very disappointed that Congress adjourned without passing a clean extension of the FAA bill,” U.S. Transportation Secretary Ray LaHood said last week. “Because of their inaction, states and airports won’t be able to work on their construction projects, and too many people will have to go without a paycheck. This is no way to run the best aviation system in the world.”
The Republican-controlled House of Representatives declined to approve the reauthorization unless new rules were adopted to make it more difficult for FAA personnel to unionize.