JOHN C. SCHROER 

COMMISSIONER 

March 17, 2016 

Byron Huffman 

Federal Aviation Administration 

Director, O(fice of Airport Compliance 

And Management Analysis 

800 Independence Avenue, SW 

Washington, DC 20591 

Dear Mr. Huffman: 

(6

5) 7

1

4959 

BILL HASLAM 

GOVERNOR 

In reference to our phone conversation earlier today; the attached is the information we mailed 

last December in reference to the FAA Policy and Procedures Concerning the Use of Airport 

Revenue; Proceeds from Taxes on Aviation Fuel. W'e are sorry that this information did not 

reach you at that time. Nothing. has .changed regarding mir compliance status from that date to this. ·: ·· · · :. · 

Sincerely, 

William 

~~~ 

B. Orellana, Director 

Cc: file 

Attachment (1) 

WBO/bojmlb 
JOHN C. SCHROER 

COMMISSIONER 

" 

December 8, 2015 

Federal Aviation Administration 

Attention: Director Office of Airport Compliance 

And Management Analysis 

800 Independence Avenue, SW 

Washington, DC 20591 

Dear Sirs: 

BILL HASLAM 

GOVERNOR 

Reference the FAA Policy and Procedures Conce~ning the Use of Airport Revenue; Proceeds 

from Taxes on Aviation Fuel. The Tennessee Department of Transportation is in 

compliance with the subject FAA policy.· lfhe'attached document outlines the specifics of 

our aviation fuel related taxes and their use for aviation and airport related programs and 

improvements. . ~" · 

Sincerely, 

William B. Orellana, Director 

Cc: file 

Attachment (1) 

WBO/bofmlb 
69789, November 21, 2013), {79 FR 5318, January 3

, 

)

p

to FAA's Policy and Procedures Concerning the Use of Airport Revenue published in the Federal 

Register at 64 FR 7696 on February 16, 1999 ("Revenue Use Policy"), The action confirmed FAA's 

long-standing policy on Federal requirements for the use of proceeds from taxes on aviation 

fuel. Under Federal law, airport operators that have accepted Federal assistance may use 

airport revenues only for airport-related purposes. State and local taxes on aviation fuel are 

subject to the FAA airport revenue use requirements. The statutory revenue use requirements 

apply to certain State and local government taxes on aviation fuel, as well as to revenues 

received directly by an airport operator. The amendment to the Revenue Use Policy formally 

adopted FAA's interpretation of the Federal requirements for use of revenue derived from taxes 

on aviation fuel. 

As a requirement of the policy amendment, an airport sponsor or state government submitting 

an application under the Airport Improvement Program must provide assurance that revenues 

from State and local government taxes on aviation fuel will be used for aviation/airport-related 

purposes. These purposes include airport capital and operating costs, and State aviation 

programs. The policy amendment applies prospectively to use of proceeds from both new taxes 

and to existing taxes that do not qualify for grandfathering from revenue use requirements. 

Taxes on the sale of aviation fuels that are grandfather are defined as those enacted and in use 

on or prior to December 30, 1987. For existing taxes that do not qualify for grandfathering, the 

FAA will allow up to three years to transition to full compliance but not later than December 8, 

2017. 

Tennessee's Compliance Perspective 

The Tennessee Department of Transportation (TOOT} (Department) has interest in complying 

with the policy amendment as it directly receives federal funding for aviation system planning 

purposes and also is a Federal Block Grant State. The Block Grant Program contracts the FAA's 

responsibility for the Airport Improvement Program (AlP) for general aviation airports directly to 

the Department, charging it with compliance efforts related to federal requirements. The 

Department, through its Aeronautics Division, distributes federal funds to airports and enforces 

federal requirements as required by contract obligations. The policy amendment has significant 

implications for the Department to ensure the State's Airports maintain eligibility to receive the 

maximum federal funding but also are in compliance with the policy amendment as required by 

contract. 

The Department has coordinated with the Tennessee Department of Revenue. Information 

provided below by the Department of Revenue contains a listing of all State taxes on aviation 

fuels and the date they were enacted to determine applicability for inclusion in this action plan. 

Generally the following types of taxes can be levied on aviation fuels in Tennessee: 
Special privilege tax/motor fuels tax. Established 1978 $0.01/gallon 

Enacted by 1978 Tenn. Pub. Ch. No. 761 § 106 and codified at Tenn. Code Ann. 

§67-3-904 (1983}. Subsequently re-codified at Tenn. Code Ann. § 67-3-203. 

(Not subject to FAA Aviation Fuel Tax Revenue Policy; enacted prior to 1987} 

Tennessee Business Tax on gross receipts; 1971 

classification and activity 

Codified at Tenn. Code Ann. § 67-4-701 et seq 

Rate varies by seller 

Export tax. One twentieth of $.01/gallon 

Enacted by 1978 Tenn. Pub. Ch. No. 761 § 110-113 and codified at Tenn. Code 

Ann. § 67-3-910 (1983), now codified at Tenn. Code Ann. § 67-3-205 

(Not subject to FAA Aviation Fuel Tax Revenue Policy; enacted in 1978} 

Additional Fee 

Environmental Assurance Fee $0.004/gallon 

Codified at Tenn. Code Ann. § 67-3-204. 

As mentioned above, the FAA Policy Clarification for Aviation Fuel Tax Revenues provides taxes 

may be grand fathered if enacted prior to December 30, 1987. Aviation fuel has been subject to 

sales tax since the adoption ofthe general sales tax in 1947. In 1986 a specific state sales tax 

rate on aviation fuel of 4.5% was adopted as noted above. In 1986, the Transportation Equity 

Fund (TEF} was created by Tenn. Pub. Ch. NO 931 §2 and codified at Tenn. Code Ann. §67-6-

103(b}(Supp. 1987). Under this action, the 4.5% State sales tax on aviation fuels is dedicated to 

State aviation and airports programs. While the tax could technically be "grandfathered" it 

provides the cornerstone for the Tennessee Aeronautics programs that support aviation and 

airport improvement activities across the State 

The Tennessee Business Tax mentioned above is not deemed applicable to the revenue use 

issue at hand. It is not a tax on the sale, use, purchase or storage of aviation fuel, but is a tax on 

the privilege of doing business in Tennessee measured by the business's gross receipts. 

The Environmental Assurance Fee cited above is a fee rather than a tax. This fee goes to the 

Underground Storage Tank fund to regulate and maintain storage tanks, some of which are 

located at airports. Tennessee does not consider it applicable to the Federal guidance on the 

application of aviation fuel taxes.