Court OKs State Taxation of Aviation Fuel : Upholds Florida Levy on Purchases Within States by Foreign Airlines

The Supreme Court, rejecting pleas from 23 nations, ruled 8 to 1 on Wednesday that states may impose a tax on aviation fuel that foreign airlines purchase within state boundaries.

Upholding a Florida law, the court concluded that neither federal statutes nor the agreements that the United States has made with other countries prohibit states from imposing such taxes.

Only two other states--New York and Illinois--have enacted laws like Florida’s, according to briefs filed in the case. But the court’s ruling clears the way for other states with major airports to adopt similar legislation.

The Florida law imposes a tax on all aviation fuel sold in the state, regardless of the amount of business an airline does in the state or whether the fuel is used in or out of the state. The tax was expected to raise about $53 million annually in revenue.

Wardair Canada Inc., a Canadian airline operating charter flights into this country, filed suit challenging the law’s application to foreign airlines. More than 20 other airlines supported Wardair in the case, and 23 foreign nations sent protests to the State Department warning that if the Florida tax were upheld, U.S. airlines might well face retaliatory taxation in other countries.

The federal government, in turn, filed a “friend of the court” brief in the case, urging that the Florida law be overturned.

But the court, in an opinion by Justice William J. Brennan Jr., found that the Federal Aviation Act “expressly permits” states to impose such taxes and that numerous bilateral international agreements, while committing the United States to refrain from imposing national taxes on aviation fuel, do not explicitly bar state or local taxes.

“The facts presented by this case show that the federal government has affirmatively decided to permit the states to impose these sales taxes on aviation fuel,” Brennan said.

In dissent, Justice Harry A. Blackmun said that by leaving the states free to tax foreign aviation, the decision (Wardair vs. Florida, 84-902) will hinder the United States “in its efforts to attain reciprocal tax immunity with foreign governments.”