U.S. Department 

of Transportation 

Federal Aviation 

Administration 

FEB 1 6 2010 

The Honorable Mike Gabbard 

Hawaii State Senate, 19'h District 

State Capitol 

Honolulu, Hawaii 96813 

Office of the Chief Counsel 

800 Independence Ave., S.W. 

Washington, D.C. 20591 

By Overnight and Electronic Mail 

Re: Proposed State Tax on Aviation Fuel 

Dear Senator Gabbard: 

Thank you for your January 8, 2010 letter, addressed to RobertS. Rivkin, General Counsel of the 

United States Department of Transportation, and myself, requesting an advisory opinion 

concerning a proposed state tax on petroleum products. This letter responds on behalf of both Mr. 

Rivkin and myself. You advise that the Hawaii Legislature is considering proposed amendment 

H.B. 1271, CD I, to Hawaii Revised Statute (HRS) § 243-3.5, which would increase and broaden 

the purposes of an existing tax. The proposed bill would increase the current tax, and make the 

proceeds available for energy and food security efforts as well as environmental response. 

Specifically, you request an opinion concerning whether the proposed legislation would violate 

49 U.S.C. § 47133, the statutory restriction on use of airport revenue. You ask that if we find the 

proposed bill does violate the revenue use provision, that we include our reasons for such a 

determination. 

The proposed bill would be part ofHRS, Chapter 243, entitled, "Fuel Tax Law." The bill would 

impose an additional tax on a barrel of"petroleum product." Although H.B. 1271, CD!, does not 

specifically use the term "aviation fuel," based upon the statutory structure ofHRS chapter 243, 

pertaining to fuel taxes, it is reasonable to interpret the term "petroleum products" to include such 

fuels (e.g., Avgas, Jet A-1, Jet B, etc.). "Petroleum product" as defined in HRS § 243-1 means 

"any liquid hydrocarbon at standard temperature and pressure that is the product of the 

fractionalization, distillation, or other refining or processing of crude oil." Section 243-1 further 

defines "aviation fuel" as being "all liquid substances of whatever chemical composition usable for 

the propulsion of airplanes." The definitions further describe "Liquid fuel" or "fuel" as being "all 

liquids ordinarily, practically, and commercially usable in internal combustion engines for the 

generation of power .... All aviation fuel that is sold for use in or used for airplanes is deemed to be 

'liquid fuel' or 'fuel' whether or not coming within the definition contained in the foregoing 

sentence." Moreover, the term "petroleum product" is defined in related provisions elsewhere in 

the HRS to include "aviation fuels." HRS § 486-50. 

For these reasons, we respectfully disagree with the inference made in the Hawaii Attorney 

General's letter dated August 24, 2009, that the absence of the specific term "aviation fuel" in the 

proposed legislation means "aviation fuel" is not included in "petroleum products." Were aviation 
fuel to be exempted, then the proposed amendment would be consistent with Hawaii's statutory 

airport grant obligations. 

The Anti-Head Tax Act, 49 U.S.C. § 40116, permits a state to levy and collect sales or use taxes 

on the sale of goods or services which could include aviation fuel. However, in accordance with 

49 U.S.C. §§ 47107(b) and 47133, 1 for those airports that have accepted Federal Aviation 

Administration (FAA) airport development grants or are the subject of federal assistance, state or 

local taxes on aviation fuel are considered to be "airport revenue" and using such tax revenue for 

non-airport purposes is prohibited. According to the FAA's Policy and Procedures Concerning 

the Use of Airport Revenue, 64 Fed Reg. 7696,7716 (Feb. 16, 1999), 

State or local taxes on aviation fuel (except taxes in effect on December 30, 1987) are 

considered to be airport revenue subject to the revenue-use requirement. However, revenues 

from state taxes on aviation fuel may be used to support state aviation programs or for noise 

mitigation purposes, on or off the airport. 

2 

Since the passage of the 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. The State of Hawaii owns and operates IS airports and is an obligated 

sponsor on a number of grants issued under the AAIA's Airport Improvement Program (AlP). On 

December 30, 1987, the Airport and Airway Safety and Capacity Expansion Act amended this 

revenue use requirement to include local taxes on aviation fuel, such that the provision then read, 

" ... all revenues generated by the airport, if it is a public airport, and any local taxes on aviation 

fuel (other than taxes in effect on December 30, 1987) will be expended ... " for airport purposes. 

This provision is currently codified at 49 U.S.C. §§ 47107(b)(l) and 47133(a). Congress also 

added that the revenue use requirement "does not prevent the use of a State tax on aviation fuel to 

support a State aviation program or the use of airport revenue on or off the airport for a noise 

mitigation purpose." 49 U.S.C. § 47107(b)(3). 

In short, while a tax on aviation fuel is permitted in accordance with§ 40116, the proceeds derived 

from such a tax are subject to the revenue use requirements of 49 U.S.C. §§ 47107(b)(l) and 

47133(a). Any action by the State Legislature to impose a tax on aviation fuel sold on an airport 

and to use the proceeds derived from the 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 (I) 

the capital or operating costs of the airport, the local airport system, or other local facilities owned 

or operated by the airport owner or operator and directly and substantially related to the air 

transportation of passengers or property, or (2) a state aviation program or for a noise mitigation 

purpose. Accordingly, enactment of the legislation to permit a use of the proceeds from the 

petroleum tax on aviation fuel other than that described in (1) and/or (2) above could subject the 

State, as airport sponsor, to an administrative action to enforce the revenue diversion prohibition. 

1 Sections 47107(b) and 47133 are essentially parallel provisions in Title 49. Section 47107(b) represents the 

original 1982 version of the revenue use statute, as amended and recodified. Title VIII of the FAA 

Reauthorization Act of 1996, § 804, codified the preexisting grant-assurance based revenue-use requirement 

as 49 U.S.C. § 47133, but expanded the application of the revenue-use restriction to any airport "that is the 

subject of Federal assistance." 
3 

This letter is based upon the information in your January 8 letter and its attachments, and provides 

only the present views of the FAA Counsel's Office, as joined by the DOT General Counsel, 

regarding relevant federal requirements. It neither precludes nor constrains the enforcement 

discretion of either the Office of the Secretary or the FAA, nor does it preclude any changes in our 

legal views. This letter also does not constitute a final order of the Administrator or bind the 

Office of the Secretary or the FAA to any particular resolution in the event that a complaint is filed 

concerning the issues addressed herein. 

I hope that this response will be helpful to you. If you have any questions, please do not hesitate to 

contact me at (202) 267-3222, or Daphne A. Fuller, Manager, Airports & Environmental Law 

Division, at (202) 267-3199. 

Sincerely, 

A_L~-­ Iames W ~;;:- ~--" 

Acting Chief Counsel 

cc: RobertS. Rivkin, Esq., General Counsel 

Leila Sullivan, Esq., by e-mail to: l.sullivan@capitol.hawaii.gov