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As outlined in IRS Form720, air transportation excise taxes are divided into three categories, each with distinct tax rates and rules. These categories are listed under the Communications and Air Transportation Taxes section. The relevant IRS sections for each category are:

IRS Section 4261 - Transportation of Persons by Air (IRS Number 26)

This tax is levied on the air transportation of persons and covers both commercial and private charter flights. The airline or the carrier collects the tax from the passenger as a component of the ticket price.

IRS Section 4271 - Transportation of Property by Air (IRS Number 28)

This tax applies to the transportation of property (cargo) by air. Businesses that ship goods or materials by air must account for and pay this tax, based on the cost of transportation services.

IRS Section 4261(e) - Use of International Air Travel Facilities (IRS Number 27)

This tax applies to passengers using international air travel facilities. It is generally levied on international flights that depart or arrive in the U.S. and is charged per ticket.

The tax rates for these categories are specified in IRS Form 720 and are as follows:

IRS Number 26 (Transportation of Persons by Air): 7.5% of the amount paid for the transportation of persons by air.

IRS Number 28 (Transportation of Property by Air): 6.25% of the amount paid for the transportation of property by air.

The responsibility for paying the air transportation excise tax generally falls on the passenger, shipper, or entity utilizing the transportation services. More specifically:

IRS Number 26 (Transportation of Persons by Air): The tax is paid by the passenger but is collected by the airline or transportation provider as part of the ticket price.

IRS Number 28 (Transportation of Property by Air): Businesses involved in shipping goods are responsible for paying this tax.

Exemptions to the air transportation excise taxes are outlined in IRS Section 4261(g) and other related IRS notices. These exemptions include:

• Air transportation services provided by the U.S. government, foreign governments, or certain non-profit organizations.

• Certain flights for educational, research, or humanitarian purposes may be exempt.

• Air transportation for military or diplomatic purposes is generally exempt under IRS Section 4261(g).

• International flights departing or arriving in the U.S. may be exempt for specific groups, such as foreign diplomats or international air carriers under IRS Section 4261.

• Businesses and individuals should review IRS guidelines to determine whether they qualify for exemptions.

Air transportation excise taxes are reported using IRS Form 720. The taxes can be filed using two primary methods:

Manual Filing:

A taxpayer can manually complete Form 720 and mail it to the IRS. This means the tax filer has to fill in the parts on the form relating to air transportation excise taxes and then send the form to the IRS by mail. But the IRS requires aviation businesses to file their form 720 taxes online.

Online Filing via QuickFile720 (IRS-Authorized Portal):

Business entities as well as individuals can easily submit their Form 720 via the internet by using QuickFile720 which is a platform authorized by the IRS. Preparing a tax return using 

Quickfile720 is much faster since it facilitates the feature of submitting tax returns online. A large number of taxpayers opt for this method as it guarantees quicker processing, simpler record, keeping, and a more streamlined tax reporting process.

Conclusion

Air Transportation Excise Taxes have a significant impact on maintaining and regulating the infrastructure of the United States air transportation system. With a clear comprehension of the three categories of taxes, the respective rates, the requirement of reporting through IRS Form 720, both businesses and individuals can be sure of staying in compliance. One should be careful about the exceptions and strictly adhere to the guidelines of the IRS to keep away from the risk of penalties.