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U.S. Departme"t of Transportatiqn Federal Aviation Administration 

### DEC 23 Z009 Ronald S. Depue, Esq. 

# .. . . 

### ! . SHAMBERG, WOLF, McDERMOTT 

### & DEPUE 308 North Locust Street, Suite 501 P.O.Box460 Grand Island, NE 68802-0460 Re: Proposed State Sales Tax on Aircraft Fuel Dear Mr. Depue: 800 Independence Ave., S.W. Washington, D.C. 20591

Thls letter is in response to your Nove,mber 17 request by electronic mail, onbehalfofthe Hall County Airport Authority, operator ofthe Central Nebraska Regional Airport in Grand Island, for an advisory opinion from the Federal Aviation Administration (FAA) concerning a proposed state tax on aviation fuel. You advise that Nebraska 

### has a statewide general sales tax upon retail sales ofproducts and service, buttbat since at least 1992, the sale ofaircraft fuel has been exempt from the sales tax by state statute. You further advise that the Nebraska Legislature is proposing to repeal the current state sales 

### tax exemption on aircraft fuel and makethe aircraft fuel tax proceeds

. payable to the state general fund. you the:refore request .an opinion concerning whether the

proposed sales taxupon aircraft

### fuef~ould \iiqlate;49U.S.C. 

### § 40116 (the Anti-Head Tax Act), 49 U.S.C. 

### § 47107, or other federal statutes, rules; or regulations. Title 49 U.S.C. §40116, the AntirHead Tax Act, permits a state to levy and collect sales or use taxes on the sale ofgoods or services which could include aviation fuel. However, in accordance with49 U.S.C. 

### §§ 47107(b) and47l33, for those airports that have accepted FAA airport development grants or are the subject offederal assistance, state or local taxes on aviation fuel are consideredto be "airport. revenue" _and i:rsing such tax revenue for non-airport purposes is prohibited. According to the FAA's Policy andProcedures Concerning the Use of Airport Revenue, 64 Fed: Reg. 7696,7716 (Feb. 16, 1999), State or local taxes on aviation})td**~exc~p\taxes** "in effect on December 30, 1987). are

. considered to be**airportreveriu~ciffibjeqt** tothh revenue-use requirement. However, revenues

from state taxes on aviation fuefmaybe 

### lisi:d to support state aviation programs or for noise mitigation purposes, on or offthe aitj)ort · · Since the passage ofthe Airport and Airway Improvement Act (AAIA) on September 3, 1982, Congress has required that all revenue accruing to grant-obligated airports be used for the airport's capital or operating costs. 

### OnDecember30, 19p,"tJ;le Airport and Airway Safety and Capacity ExpansionAct amended this revenue

### u.~i";**j'eq~jreme.iit** to include local taxes on aviation fuel, such that the provision then read, "
...

### allr9'vim~es,**genepit~d** bythe airport, ifitis a public airport, and

. . . . ' .
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### ,, . ! ·•**·~** .. • I, ·,; ':; .'{ . any local taxes on aviation fuel (other thantaxes in effect on December 30, 1987) will be expended

..."for airport purposes. Thisprovision is currently codified at 49 U.S.C. §§ 47107(b)(I) and 47133(a)
..Congress also added thatthe revenue use requirement "does not prevent the use ofa· State tax on aviationfuel to support a State aviation-program or the use ofairport revenue on or off the airportfor a noise mitigation purpose". 49 U.S.C. § 47107(b)(3). In short, therefore, while a sales tax on aviation fuel is permitted in accordance with § 40116, the proceeds derived from such a tax ·are subject to the revenue use requirements of49 U.S.C. §§ 47107(b)(l) and47133(a).

. ,•,; ·, .\ '. ·1 ·(•. ' ,I (1 : Any action by the State Legislature

## .i8**irnpo~,e** a sales tax on aviation fuel sold on an airport and to use theproceeds derived fromthe tax to support non-aviation activities would be inconsistent with federal law. Monies from such a tax would have to be spent to support either (1) the capital or operating costs ofthe airport, the local airport system, or other local f<tcilities owned or operated by the airport owner or operator and directly and substantiallyrelated to the air transportation of passengers or property, or 

### (2) a state aviation program or for 

# a noise mitigationpurpose. Accordingly, enactment ofthe legis)a.t,io11**to:·P~rinit** general use ofthe proceeds from the aviation fuel tax couldjeopardize continued fed;;ial funding

# ofairport and noise abatement projects at federally-assisted airports throughoutThe 

# Stat; ofNebraska. This letteris based upon the accuracy ofthe representations provided to the FAA inyour November 17 commuoication. This letter provides onlythe present views ofthe 

### FAA Counsel'

## i Office regarding relevant federal requirements. 

### Itdoes notpreclude or constrain theFAA's

. enforcemeot discretion orpreclude any changes in our legal views. This letter also does notbind

. the FAA to any particular resolution in the eventthat a complaint is filed regarding the issues

addressed herein: Ifyouhave any questions, please do not hesitate to contact either Jonathan Cross (202-267-7173) orElizabethNewman (202-267-7713) :ofmy staff.; '
. :.... 'j II Sincerely,

# D~4- 4- Rl((" Daphoe A. Fuller Assistant ChiefCounsel for Airports aud Environmental Law . ;·>· i'·
. . .

.:/.' If. 

# :>':·).1**'·.~it'**

r;.':; r'! 

### '\ii·**~-;'t'** .: .... 1 . • cc: Charles Erhard, Manager, Aiiporl Compliance

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