U.S. Appeals Court Holds Fractional-Share Jet Company Not Liable for Excise Tax on Fixed Management Fees

The U.S. Court of Appeals for the Sixth Circuit held that a fractional-share jet company was not liable under I.R.C. §4261 for failing to collect federal air transportation excise taxes on fixed monthly management and overhead fees, reversing the district court’s judgment. Taxpayer, a fractional-share jet company, offered clients ownership interests in aircraft and jet club memberships, charging fixed monthly management fees for overhead costs like insurance, maintenance, and administrative services, plus separate usage fees for actual flights. The IRS initially required the industry to collect excise taxes only on usage fees under IRC 4261, but changed its position in ...