Aviation Tax - Audit Technique Guide (ATG)

MSSP
Market Segment Specialization Program
Aviation Tax
The taxpayer names and addresses shown in this publication are
hypothetical. They were chosen at random from a list of names of
American colleges and universities as shown in Webster’s
Dictionary or from a list of names of counties in the United States
as listed in the United States Government Printing Office Style
Manual.
This material was designed specifically for training purposes only.
Under no circumstances should the contents be used or cited as
authority for setting or sustaining a technical position.
Department of the Treasury
Internal Revenue Service
Training 3123-004 (2-99)
TPDS No. 83026EThis page intentionally left blank.
1Aviation Tax
Market Segment Specialization Program Guide
C h a p t e r 1 : I n t r o d u c t i o n t o t h e A v i a t i o n Ma r k e t S e g m e n t ........................ 1 - 1
Background..............................................................1-1
O u ts id e S ta k e h old e r s....................................................... 1 - 2
T r a d e A s s oc ia tion s ..................................................... 1 - 2
F e d e r a l A g e n c ie s 1 - 2
F A A C e r tific a te s ( L ic e n s e s ).................................................. 1 - 2
A ir T r a n s p or ta tion E x c is e I s s u e S p e c ia lis t P r og r a m ................................ 1 - 3
Chapter 2: Return Filing and Deposit Requirements
A n d Bli n d C r e d i t s ........................................................ 2 - 1
Filing Requirements2-1
F u e l T a x e s ......................................................... 2 - 1
A ir T r a n s p or ta tion T a x e s .............................................. 2 - 1
M u ltip le T a x e s...................................................... 2 - 1
D e p os it R e q u ir e m e n ts 2 - 1
E le c tr on ic D e p os it R e q u ir e m e n ts ........................................... 2 - 1
E le c tr on ic F e d e r a l T a x P a y m e n t S y s te m...................................... 2 - 1
F e d e r a l T a x D e p os it C ou p on s ............................................. 2 - 2
W h e n T o M a k e D e p os its ................................................. 2 - 2
9 - D a y R u le ........................................................... 2 - 2
A lte r n a tiv e M e th od ( I R S N os . 2 2 , 2 6 , 2 7 , a n d 2 8 ) .............................. 2 - 2
1 4 - D a y R u le ( I R S N os . 1 4 , 6 0 , 6 2 , 7 3 , 7 4 , 5 9 , 7 5 , a n d 7 6 ) ....................... 2 - 3
D e la y e d D e p os its....................................................... 2 - 3
A m ou n t T o D e p os it ..................................................... 2 - 3
S a fe H a r b or R u le s ...................................................... 2 - 4
R e q u ir e m e n ts T o B e M e t................................................ 2 - 4
The Look-Back Quarter Liability Safe Harbor Rule .............................2-4
Exceptions............................................................2-5
The Current Liability Safe Harbor Rule ......................................2-5
B lin d C r e d its ............................................................. 2 - 5
C h a p t e r 3 : F u e l T a x e s..................................................... 3 - 1
Introduction3-1
A v ia tion F u e ls O th e r T h a n G a s olin e............................................ 3 - 1
Background...........................................................3-1
Definitions3-2
I m p os ition of T a x ...................................................... 3 - 3
T a x R a te s ............................................................ 3 - 3
Exemptions3-4
E x a m in a tion T e c h n iq u e s ................................................. 3 - 7
iiiA v ia tion G a s olin e ......................................................... 3 - 8
I m p os ition of T a x ...................................................... 3 - 9
T a x R a te s ............................................................ 3 - 9
Exemptions ...........................................................3-9
C r e d its a n d R e fu n d s..................................................... 3 - 9
E x a m in a tion T e c h n iq u e s ................................................ 3 - 1 0
F u e l U s e d i n C om m e r c ia l A v ia tion............................................ 3 - 1 0
F loor S toc k s T a x 3 - 1 1
C h a p t e r 4 : C o le c t e d T a x e s................................................. 4 - 1
Introduction .............................................................4-1
C olle c te d v s . N on c olle c te d T a x e s ............................................. 4 - 1
A d m in is tr a tiv e P r oc e d u r e s f or C ole c te d T a x e s ................................... 4 - 2
References............................................................4-2
Procedures4-2
T r u s t F u n d R e c ov e r y P e n a lty 4 - 2
C h a p t e r 5 : T r a n s p o r t a t i o n o f P e r s o n s b y A i r .................................. 5 - 1
Introduction .............................................................5-1
R a te of T a x .............................................................. 5 - 1
D om e s tic T r a n s p or ta tion ................................................. 5 - 1
D om e s tic S e g m e n t...................................................... 5 - 2
D e fin ition of D om e s tic S e g m e n t .......................................... 5 - 2
C h a n g e s i n S e g m e n ts .................................................... 5 - 2
R a te on I n te r n a tion a l T r a v e l............................................... 5 - 3
Definitions...............................................................5-5
Payments Subject to Tax -- Treas. Reg. Section 49.4261-7 ..........................5-6
O th e r P a y m e n ts S u b je c t to T a x 5 - 6
Payments Not Subject to Tax -- Treas. Reg. Section 49.4261-8 .......................5-7
O th e r P a y m e n ts N ot S u b je c t to T a x............................................ 5 - 7
Exemptions..............................................................5-7
Chapter 6: Commercial Airlines/Scheduled Flights ...................6-1
Introduction .............................................................6-1
S ou r c e s of I n for m a tion ..................................................... 6 - 1
E x a m in a tion T e c h n iq u e s .................................................... 6 - 2
P os s ib le I s s u e s............................................................ 6 - 3
Citations ................................................................6-3
ivC h a p t e r 7 : A i r C h a r t e r.................................................... 7 - 1
Introduction .............................................................7-1
Leases..................................................................7-1
W e t v s . D r y L e a s e ......................................................... 7 - 2
S ou r c e s of I n for m a tion ..................................................... 7 - 2
E x a m in a tion T e c h n iq u e s 7 - 3
S m a l A ir c r a ft on N on e s ta b lis h e d L in e s ......................................... 7 - 3
Helicopters ..............................................................7-3
E m e r g e n c y M e d ic a l F lig h ts .................................................. 7 - 4
C h a p t e r 8 : C o r p o r a t e F li g h t D e p a r t m e n t s..................................... 8 - 1
Introduction .............................................................8-1
Affiliated Groups ..........................................................8-1
D e fin ition s of C om m e r c ia l A v ia tion............................................ 8 - 1
I n te r c h a n g e A g r e e m e n ts .................................................... 8 - 2
T im e - S h a r in g A g r e e m e n ts ................................................... 8 - 2
D e m on s tr a tion F lig h ts ...................................................... 8 - 3
E le c te d O fic ia ls a n d C a n d id a te s .............................................. 8 - 3
C or p or a te O fic e r s a n d E m p loy e e s............................................. 8 - 4
A ir c r a ft f or th e E x c lu s iv e U s e of S h a r e h old e r s.................................... 8 - 4
J oin t O w n e r s h ip........................................................... 8 - 5
F r a c tion a l O w n e r s h ip....................................................... 8 - 5
M a n a g e m e n t C om p a n ie s .................................................... 8 - 5
S ou r c e s of I n for m a tion ..................................................... 8 - 6
E x a m in a tion T e c h n iq u e s 8 - 6
C h a p t e r 9 : T o u r O p e r a t o r s a n d T r a v e l A g e n c i e s ............................... 9 - 1
Introduction .............................................................9-1
A r e a s of C on s id e r a tion 9 - 1
Background..............................................................9-1
R e la tion s h ip B e tw e e n th e E n titie s .......................................