​​​Note: This tax release supersedes private letter ruling W0124006 dated March 22, 2001, published on pages 25 and 26 of Wisconsin Tax Bulletin 125 (July 2001).

Statutes: Section 77.52(2)(a)2.a., Wis. Stats. (2007-08), as amended by 2009 Wis. Act 28.

Wisconsin Administrative Code: Section Tax 11.84(2)(c), Wis. Adm. Code (May 2010 Register).

Federal Law: Anti-Head Tax Act, 49 U.S.C. § 40116.

Applicable Wisconsin Statutes:

Section 77.52(2)(a)2.a., Wis. Stats. (2007-08), as amended by 2009 Wis. Act 28, imposes Wisconsin sales and use taxes, in part, on:

"...the sale of admissions to amusement, athletic, entertainment or recreational events or places...and the furnishing, for dues, fees or other considerations, the privilege of access to clubs or the privilege of having access to or the use of amusement, entertainment, athletic or recreational devices or facilities..."

Applicable Wisconsin Administrative Code:

Section Tax 11.84(2)(c), Wis. Adm. Code (May 2010 Register), provides:

"The sales price from charges for the following are taxable:

1. Aerial photographs and maps.

2. Sightseeing flights.

3. Carrying a skydiver.

4. Towing a banner that is not provided by the person towing it, towing a hang glider pilot or towing a glider."

Applicable Federal Law:

The federal Anti-Head Tax Act, 49 U.S.C. § 40116, provides, in part:

"...(b) Prohibitions.- Except as provided in subsection (c) of this section and section 40117 of this title, a State, a political subdivision of a State...may not levy or collect a tax, fee, head charge, or other charge on-

(1) an individual traveling in air commerce;

(2) the transportation of an individual traveling in air commerce;

(3) the sale of air transportation; or

(4) the gross receipts from that air commerce or transportation.

(c) Aircraft Taking Off or Landing in State.- A State or political subdivision of a State may levy or collect a tax on or related to a flight of a commercial aircraft or an activity or service on the aircraft only if the aircraft takes off or lands in the State or political subdivision as part of the flight. ..."

The following definitions from 49 U.S.C. § 40102(a) are relevant:

"(3) 'air commerce' means foreign air commerce, interstate air commerce, the transportation of mail by aircraft, the operation of aircraft within the limits of a Federal airway, or the operation of aircraft that directly affects, or may endanger safety in, foreign or interstate air commerce."

"(6) 'aircraft' means any contrivance invented, used, or designed to navigate, or fly in, the air."

"(20) 'Federal airway' means a part of the navigable airspace that the Administrator designates as a Federal airway."

Sales and Use Tax Treatment

Wisconsin sales and use tax does not apply to admissions charged for un-tethered hot air balloon rides, sightseeing flights, using an aircraft to tow a hang glider, and carrying a sky diver to an in-air jump point.

The admission charged for a tethered or moored hot air balloon ride is subject to sales or use tax.

Note: The department revised its longstanding position set forth in sec. Tax 11.84(2)(c), Wis. Adm. Code (May 2010 Register), as the result of a recent advisory opinion by the U.S. Department of Transportation General Counsel.

Analysis:

Un-tethered hot air balloon rides, sightseeing flights, using an aircraft to tow a hang glider, and airplanes carrying a skydiver to a jump point in the air all involve the operation of aircraft in "air commerce," because these activities directly affect, or may endanger the safety in, interstate commerce. Further, these events may operate within the limits of a Federal airway, and thus meet the definition of "air commerce" on this basis.

The statutory definition of "air commerce" is broad enough to include intrastate flights that may endanger the safety in interstate commerce.

Because un-tethered hot air balloon rides, sightseeing flights, using an aircraft to tow a hang glider, and carrying a sky diver to an in-air jump point all meet the definition of "air commerce," the State of Wisconsin and political subdivisions within the state are prohibited under the federal Anti-Head Tax Act from imposing state, county, and stadium sales and use taxes on the admissions charged for these activities.

Subsection (c) of 49 U.S.C. § 40116 does not provide an exception to the sales tax prohibition for aircraft that take off or land in the State. That section merely establishes the state geographical nexus as a minimum requirement that must be met for a state to impose a permitted tax relating to an aircraft activity, but does not itself grant permission to a State to impose any tax relating to an aircraft activity that is otherwise prohibited by subsection (b).

Because a tethered or moored hot air balloon does not travel in interstate commerce, the State of Wisconsin and political subdivisions within the state are not prohibited under the federal Anti-Head Tax Act from imposing state, county, and stadium sales and use taxes on the admissions charged for these activities.

Filing Claims for Refund:

Persons who have paid sales tax on admissions sold to their customers for un-tethered hot air balloon rides, sightseeing flights, using an aircraft to tow a hang glider, and carrying a sky diver to an in-air jump point may file amended sales and use tax returns to claim a refund of this tax for any period open to adjustment under the statute of limitations (generally four years).

Caution: If a seller receives a refund of sales tax and interest for sales tax that the seller collected from its customer, the seller must return the tax and interest to the customer or to the Wisconsin Department of Revenue.

A buyer may, under certain circumstances, file a claim for refund directly with the Wisconsin Department of Revenue for sales tax paid to a seller.

Additional information about how to file a claim for refund, including time limitations for filing claims and the circumstances under which a buyer may file a claim for refund, is provided in Publication 216, Filing Claims for Refund of Sales or Use Tax.

December 14, 2010