You can file this Bloomberg.com story under airline bailout:
Airline baggage fees are not taxable, the Internal Revenue Service said, a victory for carriers trying to protect a growing revenue stream.
The agency, in a letter this month to an airline, pointed to the IRS code specifying that “charges for transportation of baggage” were not taxable. The letter was posted on the IRS. Web site and did not disclose the carrier that requested the [private letter] ruling.
The decision is “a positive thing for the airlines,” said Jay Sorensen, president of IdeaWorks, an airline consulting firm in Shorewood, Wis. “It will allow the airlines over the long term to realize all the revenue. They won’t have to share with the government.”
Carriers have been increasingly turning to sources other than tickets for revenue as government figures show fares stagnated at 1998 levels last year. Mr. Sorensen estimated in a recent report that the five largest airlines will collect $1.76 billion to check first and second bags, a $117 million increase over last year.
Read the entire Private Letter Ruling and remember the qualifying sentence that is contained in all Private Letter Rulings:
The Ruling is directed only to the person requesting it. Section 6110(k)(3) of the Code provides that it may not be used or cited as precedent.
Here’s the applicable tax code section (emphasis added):
§ 4272. Definition of taxable transportation, etc.
1 response so far ↓
1 IRS: tax everyone, but don’t threaten airlines’ profits | Tax Rascal // Feb 1, 2010 at 4:10 pm
[...] (Here’s the code being referenced, btw.) [...]
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