Thu, Jan 05, 2006
Effective January 1,
2006, the Defense Energy Support Center (DESC) will be modifying
contracts with FBOs to address recent tax changes. Prior to Jan. 1,
U.S. and foreign military aircraft, as well as State and local
government aircraft, had been categorized as noncommercial aviation
fuel sales. DESC had advised FBOs to charge military and government
operators $.219 FET.
Recent IRS guidance (Notice 2005-80) confirms that only the FBO
is entitled to refunds of noncommercial aviation fuel sales. The
most recent DESC interpretation of the IRS guidance explains that
FBOs may only charge the Leaking Underground Storage Tank (LUST)
tax of $.001/gallon when delivering fuel into U.S. or foreign
military and State and local government aircraft. Therefore, the
FBO should apply for ultimate vendor status, and apply for the
federal excise tax (FET) refund of $.243/gallon for these aircraft.
The FBO will be guaranteed the $.001/gallon LUST tax by DESC
contracts.
Federal civilian agency
aircraft should be charged $.218/gallon. The FBO will be guaranteed
the $.001/gallon LUST tax by DESC contracts, and may apply for a
$.025 refund as a sale to noncommercial aviation.
FBOs selling fuel to these types of aircraft must use
Certificate of Ultimate Purchaser of Kerosene for Use in Foreign
Trade or Use (Other than By State or Local Government) in
Noncommercial Aviation for military and federal civilian agency
aviation. Certificate of Farming Use or State Use must be used for
refund filing for National Guard and state and local government
aircraft. The certificates are effective from Jan. 1, 2006, to
December 31, 2006. The DESC will provide vendors with the
required certificates, or you may click the link below.
The DESC empathized with the aviation industry regarding the
additional burden of these tax changes. It also recognized the
persistent actions from industry groups, including NATA, to seek
relief from Congress. NATA continues to seek guidance from the IRS
and assistance with this burdensome refund process from
Congress.
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