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### aTronsponotion "-deralAvkJIIon Admlnlstrutlon 

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The Honorable Christopher

### s. Bond United states Senator Office of Constituent services 312 Monroe Street Jefferson City,**Missou~i** 65101 Dear Senator Bond: 100lndepot"<ienceAve••s.w

. Wuhingtan,O.C,20581

Thankyou for your correspondence ·ofJanuary 16, 1992, seeking clarification of the limitations on the imposition of a ·use tax on·aviation fuel at federally-funded airports. After reviewing the material you provided, I believe that the collection of this use tax at federally-funded airports under a recently enacted Missouri law would be in conflict with grant assurances provided by those airports and could jeopardize the airports' continuing eligibility for·future.Federal grants•

.The ·Missouri Use Tax

As described in senator Dennis Smitn•s letter, Missouri has enacted a new use tax on aviation fuel. The tax is scheduled to take effect on July 1, 1992. The tax would be imposed at the state level, but the tax revenue would be placed in a Local Use Tax Fund. The revenue would be distributed out of that fund to local governments in proportion to those governments' share of locally imposed sales tax revenue. There are no limitations on the use of this tax revenue by the local government.
' Based on this description, itappears that the usetax is a state tax, even though the tax revenue will be distributed to l.ocal governments. Federal Legal Requirements for Aviation FUel Taxes The imposition of state use taxes on aviation fuel at federally-tunded airports is governed by Section 1113 of the Federal Aviation Act of 1958, as amended (FAAct), 49 u.s.c. App. § 1513, and by section 511 of theAirport and Airway Improvement Act of 1982 (AAIAct), as amended, 49 u.s.c. App. 2210.

# ( Section 1113 of the FAAct expresslypermits States to impose a use tax on aviation fUel. 4i

## u.s.c. App. I**1513(~)**•.**~As,** wardair Canada. Inc. y, florida pepart;ent ofReyenue, 477 U.S, 1, 106 S.ct, 236i (1U6)I Booky Mountain Airwaya. Inc, y, Pitkin county, 674 f, Supp. 212 (D. CO 1987): InBeMonior, 69 B.R, 588 (Bankr. N.D. Ohio 1986). section 1113 generallyprohibitsthe imposition**~y** state and local governmenta ofhead taxes and othertaxes on air transportation and aircommerce. Section**1113(~)** states exceptions to the general prohibition, including the following: Except as provided for in aubsecti_on (d) of this section, nothing inthis section shall prohibit a state (or political subdivision thereof ••.•)fromthe levy orcollectionof taxes otherthan those enumerated in subsection (a)l of this section, including ·, , • sales oruse taxes on the sale of goods or services , , • Even though Section lll3(b) permits stateuse taxes on aviation fuel, section 511 of the AAIAct limitsthe uses a statemay prescribe for taxes collected at federally-assisted airports receiving airport grant funds. Section Sll(a) sets forth requirements that must be met by recipients (sponsors) of Federal Airport**Improvemen~** Program grants beforeprojects contained inproject grant applications may be approved by the Secretary of Transportation. Astate taxplan thatwould make it impossible for a sponsor-to meet the enumerated requirements could jeopardize continued Federal fUnding of airport and noise abatement projects at the sponsor's airports. Section 5ll(a)(12), 49 

## o.s.c. i .22lil(a)(12), specifically addresses the use of revenue·generated at the airport. As originally enacted in 1982, Section S11(a)(l2) read as follows:

•••**~11** revenues generatedby the airport, if it is a public airport, will be expended for the capital or operating costs Of the airport, the local airport system, or other local facilities which are owned or operated by the owner or operator ofthe airport • • • Following the adoption of Section 5ll(a)(l2), some controversy arose concerningwhethercertain taxes on aviation fuel would be coveredby the restrictive language. To avoid future confusion over taxes on aviation fuel,, Congress amended Section 5ll(a)(l2) and added Section 5ll(d), 49 u.s.c. App. i 2210(d), in the Airport and Airway Safety and Capacity Expansion Act of 1987 (Pub·. L. No. 100-223). As amended, Section 511(a)(l2) now provides that:

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• • • all revenues generated by the airPort, if it is a public airport, and any local taxes on aviation fuel (otherthan taxes in effect on December 30, 1987) will be expended for the capital or operatinqcosts of.the airport, the local airport system, or other local facilities that are owned or operatedbythe owner or operator of the airport and directly and substantially related tothe actual air transportation ofpassengers orproperty • • • section Sll(d) in turn states: Nothing in subsection (a)(l2) of this section shall preclude the use of state taxes on aviation fuel to supporta State aviation program orpreclude the use of airport revenue .on or offthe airport for noise mitigation purposes. 3

For Section Sll(d) to have any meaning, state aviation fuel taxes must be considered airport revenue subjectto the limitation of Section Sll(a)(l2). section Sll(d) expands the types of uses that state aviation fuel tax revenue may be put to include state "aviation programs" and "noisemitigation [measures] on or off the airport." l:f that revenue were not already l;imitedby Section 51l(a)(12}, Congress would not have needed to give express permissionto use the tax revenue for additional purposes. Moreover, the listing of these two purposes would not have prevented the use ofthis tax revenue for other purposes. It follows that Congress, having expressly permitted two specificuses of aviation fuel taxes, necessarily excluded other non-airport-relatedpurposes. Application of Federal Requirements to Missouri Tax The Missouri aviation fuel use tax appears to be a use tax on the sale of goods expressly peraitted by section 1113(b) ofthe FAAct. As a state tax on aviation fuel, it would be subject to Section 51l(a)(12) and 511(d) ofthe AAIAct when imposed at a federally-funded airport. Accordingly, unless thetax revenue collected at the airport were used to fund the airport and airport related activities of the airport sponsor, a state aviation program, or a noise mitigationproject, this tax plan couldjeopardize the grant compliance**~;tatus** of federally-funded airports in the State ofMissouri. The risk of noncompliance could be eliminated bydirecting the tax revenue generated atMissouri's federally-funded airports away from the Local Use Tax Fund and by restricting the use of that revenue to the purposes permitted intheAAIA.

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( Thank you again fo.r you correspondence. Ifyou have any further questions, please letus know, Acopy ofthis letter isbaing forwarded directly to Senator Dennis smith. Sincerely,

Enclosure Transmitted Correspondence

cc: Washington Office Dennis smith Missouri Senate 4