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### State of California **July, 2015** Randy Fiertz, Director

– Airport Compliance and Management Analy sis, conducted a brief tour of the FAA’s Western Pacific Region during July , 2015. The following questions concerning state and local sales taxes on aviation fuel were directed to Mr. Fiertz. **Question #1** Are “fees” the same as taxes? Inother words, if California voters have voted to implement a “fee” on aviation fuel that is used for a specific non

- aviation purpose, does that fall under the fuel tax requir ements? **FAA Response to Question #1** Generally , “fees” are not considered a “tax”. The U.S. Government Accountability Office’s (GAO) ruling in the decision of the California E

- Waste Recycling Fee, File B

- 320998, May 4, 2011, (accessed at http://www.gao.gov/decisions/appro/320998.pdf ) provides guidance for the determination of a fee versus a tax. A fee is designed to defray the costs of a regulatory

activity (or government service), while a tax is designed to raise general revenue. A true fee must be proportionate to the necessary costs of the service provided, whereas a tax may not be. Your example of California implementing a voter approved fee on aviation fuel does not appear to reflect an y proportionate tie to the cost of a service. Accordingl y, we would need to evaluate the actual law imposing such a fee on the sale of aviation fuel to an end user to determine whether the fee would more properly be classified as a sales tax on the consump tion of a product. The federal statutory

requirements, as clarified in the Revenue Use Policy Amendment , subject state taxes on aviation fuel to the revenue use requirements required under 49 U.S.C. 47133. Under federal law, airport operators that have accepted federal assistance generall y may use airport revenues onl y for airport

- related purposes. Lo cal taxes (except those taxes in effect on December 30, 1987) on aviation fuel are subject to airport revenue use requirements. State taxes (except those taxes in effect on December 30, 1987) on aviation fuel (imposed by either an airport sponsor or a non

- sponsor) are subject to use either for a state aviation program or for airport

- related purposes. **Question #2** Why does the state need to follow a policy requirement as opposed to a regulation? **FAA Response to Question #2**  The aviation fuel tax provision is a statutory requirement. The Policy and Procedures Concerning the Use of Airport Revenue; Proceeds from Taxes on Aviation Fuel (Docket No. FAA
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- 0 988) (Policy Amendment) is published under the authority described in Subtitle VII, part B, chapter 471, section 47122, and the Federal Aviation Administration Authorization Act of 1994, § 112(a), Public Law 103

- 305, 49 U.S.C. 47107(l)(1) (Aug. 23, 1994).8/6/2015

2 **Question #3** How did FAA “jump” from a tax on aviation fuel to a general sales tax that also applies to aviation fuel? **FAA Response Question #3**  The FAA explained the reasoning for considering a general sales tax as a tax on aviation fuel in the Policy

Amendment in the response to Comment 3. (See 79 Fed. Reg. 66825

- 6) The FAA’s rationale for clarifying that general sales taxes also collected on av iation fuels constitute “taxes on aviation fuel” is based on the plain reading of the statute recodified in 49 U.S.C. 47107(b). Additionally , determining that the statute did not include general taxes would permit States to tax aviation fuel as “general” taxes without limit, and would be inconsistent with the purposes of the revenue use statutes. (79 Fed. Reg. 66826) **Question #4** What about state costs at airports such as providing firefighting services? CA needs to figure that out as an offset. **FAA Re sponse**  **Question #4** The costs of providing firefighting services at the airport are considered an allowable operating cost of the airport. Accordingl y, the proceeds from aviation fuel taxes may be used for airport firefighting services. Please see the “St ate of Georgia Aviation Fuel Tax Questions” posted at Docket No. FAA

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- 0988 for the requirements for general fund offsets. (http://www.regulations.gov/#!documentDetail;D=FAA

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- 0988
- 0016 ) For a discussion of other ty pes of capital expenditures that might be a permissible use of aviation fuel taxes, please refer to the “State of Michigan Questions and Answers 2015 03 23” posted at Docket No. FAA

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- 0988. (http://www.regulations.gov/#!documentDetail;D=FAA

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- 0988
- 0043 ) **Question #5** Can Action Plan s be submitted before knowing what can be offset? **FAA Response Question #5**  Yes. FAA has issued two documents (“State of Georgia Aviation Fuel Tax Questions” and “State of Michigan Questions and Answers 2015 03 23”) that provide guidance on the offsettin g of funds. This should assist in determining what offsets can be used b y California in ample time to develop an Action Plan to meet the December 7, 2015 due date. The Action Plan should explain the steps the State will need to take to become compliant wi th the revenue use requirements for aviation fuel taxes. Additionally , the FAA issued guidance, “Final Aviation Fuel Tax Grandfathering Action Plans Final 2015 07 10,” which outlines several scenarios to assist airport sponsors and non

- sponsors to determ ine an appropriate course of action and/or development of an action plan for aviation fuel taxes that may or may not qualify

for grandfathered status.