Executive Travel : Taxing Problems for Airline Ticket Refunds

Did you really think getting a 10% tax refund on your airline ticket would be easy?

The federal airline ticket excise tax expired Jan. 1, and airlines have handled the ensuing complications in various ways. Some kept fares the same, anticipating that Congress would eventually restore the tax. They are pocketing the difference in the meantime. Others announced lower fares with some fanfare in early January, but air fares change so often these days it is hard to say whether there have been genuine reductions.

A particular complication faces the millions who bought tickets in 1995 for travel after the beginning of this year. These travelers are entitled to get the tax back, because they paid it when they bought their tickets but traveled after it expired. But it isn’t always easy.

If you flew on United or American and paid with a credit card, the refund should show up on your monthly statement. But if you paid with a check or cash or flew on another airline, getting the money back can get tricky.

If you flew Continental, Northwest, USAir or TWA, you must call the Internal Revenue Service directly and request a Federal Excise Tax Refund Form or Form 8849. The form does not say anything about air travel, but passengers should turn it over and write an explanation in Section 9, where it says “Other.” An original receipt also needs to be provided.

Airlines such as Delta and Southwest are taking a middle route--helping passengers fill out the forms but letting the IRS process them.

Gerald Sager, who flew Continental with his wife between Newark, N.J., and West Palm Beach, Fla., in early January, filed a class-action lawsuit against Continental when he had trouble getting a refund of about $34.

“I don’t think they’re treating us fairly in comparison to other airlines,” said Sager, a financial consultant in New York. “I’ve been getting the runaround from Continental.”

After being told he’d be sent a form, he said he got a letter from the airline telling him to contact the IRS.

Continental declined comment, saying it had to consult with its lawyers.

For businesses, claims are even bigger.

Patricia Gagnon at Boston-based Aquarius Travel, says one corporate client is owed more than $25,000 in tax refunds.

The tax expired at the end of last year because Congress was too busy with the budget to renew it.

One airline, ValuJet based in Atlanta, continued charging the tax through January because it thought Congress would reinstate it retroactively. That never happened.

Although the low-cost airline will reimburse passengers who paid in December for travel in January, it hasn’t developed a policy to make refunds to passengers who purchased tickets in January, spokeswoman Katie Denourie said. It stopped charging the tax Feb. 1.

But American and United decided to make automatic refunds and then seek the money from the IRS. Many who used American have already received refunds on their credit card statements.

People who paid another way have to fill out a form and send it to American for a refund, spokesman Tim Smith said.

United spokesman Joe Hopkins said millions of affected passengers would see a credit card refund within the next few months, after the company programs its computers for the chore.

But USAir, Continental, Northwest and TWA customers are told to phone the IRS ([800] TAX-FORMS) and request the refund themselves.

“We’ve just felt that since the government has the money, it’s best that the passengers deal directly with the party that has the money,” USAir spokesman Rick Weintraub said.

Although the IRS refund form is relatively easy to obtain, the IRS says it prefers passengers first try their airlines, in part because it may be unclear exactly how to fill out the form.

“If the airline does not want to provide a refund or credit, the individual can file a claim form,” IRS spokesman Wilson Fadely said. Few passengers have filed for a refund, he said.

Several people think the procedure is complicated enough to warrant a class-action lawsuit. USAir and Northwest have been named already in separate suits filed in New York, and Sager’s action makes Continental the next target.

“The IRS refund form is not tailored to this,” said G. Oliver Koppell, an attorney bringing the suits. “It’s easy for the airlines to get it back [from the IRS] . . . and a number of airlines are making refunds without being asked.”