In this blog, we’ll explore Communication and Air Transportation Taxes, covering:
What is Communication and Air Transportation Tax?
An overview of what the tax covers, including local telephone services, teletypewriter exchange services, and air transportation of persons and property.
Who pays the Communication and Air Transportation Tax?
Explanation of the Taxpayer (who uses the services) and Tax Collector (who reports the tax to the IRS).
How much is the Communication and Air Transportation Tax?
Breakdown of the tax rates for communication services, air travel for persons and property, and international air travel.
Do We have any Exemptions?
A look at tax exemptions, including for long-distance services, military trips, and certain helicopter uses.
How to pay Communication and Air Transportation Tax Smartly?
Steps for filing taxes online using Simple720, including how to provide business details, select categories, and make secure payments.
The Communication and Air Transportation Tax, as outlined in IRS Sections 4261 and 4271, is a Federal Excise Tax imposed on specific services and transactions. This tax applies to the amounts paid for local telephone services, teletypewriter exchange services, and the transportation of people or property by air.
According to IRS guidelines and Form 720, the Federal Excise Tax on Communication and Air Transportation is categorized into four main areas:
IRS Number 22: This covers taxes on local telephone services and teletypewriter exchange services.
IRS Number 26: This relates to the tax imposed on the transportation of persons by air.
IRS Number 28: This category includes the tax on the transportation of property by air.
IRS Number 27: This tax applies to the use of international air travel facilities.
These taxes ensure that certain communication and transportation services are subject to federal excise regulations, contributing to government revenues collected under these provisions.
The Communication and Air Transportation Tax are paid by the individual who uses the air transportation services, referred to as the Taxpayer. The taxpayer pays this tax amount along with the transportation fee when purchasing the service. The entity that receives the tax payment, typically the airline or service provider, is known as the Tax Collector.
This is done through the Form 720, Quarterly Federal Excise Tax Return, regulated under IRS. The form must be filed regularly to ensure compliance with federal tax regulations.The Communication and Air Transportation Tax rates are specified by IRS regulations, with different rates applied to four distinct categories. Here’s a breakdown of the tax rates:
Communication Tax:
A 3% tax is imposed on the amounts paid for local telephone service and teletypewriter exchange service.
Transportation of Persons by Air Tax: This tax consists of two parts:
Percentage Tax: A 7.5% tax applies to the amounts paid for taxable transportation of persons by air. This includes charges for layover or waiting time and the movement of aircraft in deadhead service.
Domestic-Segment Tax: A flat dollar amount is charged for each segment of taxable transportation. A segment is defined as a single take off and a single landing.
International Air Travel Facility Tax:
A tax is imposed per person for international flights that either begin or end in the United States. This applies regardless of whether the flight is inside or outside the U.S.
A reduced tax applies for domestic segments that begin or end in Alaska or Hawaii, but only for departures.
Transportation of Property by Air Tax:
A 6.25% tax is imposed on amounts paid for the transportation of property by air. This tax applies only to transportation that begins and ends in the United States, including layover time and aircraft movement in deadhead service.
The tax does not apply to property transportation that begins or ends outside the United States.
These taxes are designed to ensure that both communication services and air transportation are taxed at different rates, depending on the type of service and the specifics of the journey.
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Yes, there are several exemptions from paying the Communication and Air Transportation Taxes. Below are the exemptions for each category:
1. Communication Tax Exemptions:
The following services are exempt from the communication tax:
Bundled services (services combined in a single package, such as telephone and internet services).
Long-distance services.
Prepaid telephone cards and prepaid cellular services.
Installation charges for telephone services.
Answering services.
Mobile radio telephone service.
Coin-operated telephones.
Telephone-operated security systems.
News services (e.g., news subscriptions or services).
2. Transportation of Persons by Air Tax Exemptions:
The tax on the transportation of persons by air does not apply in the following situations:
Military personnel on international trips.
Helicopter use for certain purposes, such as:
Transporting individuals, equipment, or supplies for the exploration, development, or removal of hard minerals, oil, or gas.
Planting, cultivating, cutting, transporting, or caring for trees (including logging operations).
Emergency medical transportation (e.g., air ambulance services).
3. International Air Travel Facility Tax Exemptions:
This tax is not applicable in the following cases:
When all transportation is already subject to the percentage tax (7.5% tax on air travel).
If the surtax on fuel used in a fractional ownership program aircraft is imposed.
4. Transportation of Property by Air Tax Exemptions:
The tax on the transportation of property by air does not apply in certain cases, including:
Crop dusting and firefighting services.
Payments for transportation of property by air in the course of exportation.
Certain helicopter and fixed-wing air ambulance uses.
These exemptions are designed to reduce the tax burden in specific circumstances, such as essential services (e.g., emergency medical transport) or specific industries (e.g., military, logging, crop dusting).
Create or Login to Your Account:
If you don't have an account, create a free account. If you already have one, simply log in.
Enter Your Business Information:
Provide your business details, including your business name, address, Employer Identification Number (EIN), and business type.
Select Form Type:
Choose “Form 720 (Quarterly Federal Excise Tax)” as the form type. Then, select the tax year and tax quarter for your filing.
Select the Correct Filing Category:
On the left side panel under Form 720, select the category as Communication and Air Transportation Taxes. All four IRS numbers (22, 26, 28, 27) related to these taxes will be available for you to choose from.
Provide the Required Information:
Based on the category you select; the portal will prompt you for the necessary inputs. For example:
If you select “Transportation of Persons by Air (26)”, you'll be asked to provide the date amounts were billed and the date of collection (this may be auto-filled by the portal). You will then enter the taxed amount.
Make the Payment:
You will have two payment options to complete your filing:
Electronic Funds Withdrawal (Direct Debit).
EFTPS (Electronic Federal Tax Payment System).
Complete the Filing:
After entering all the required details and making the payment, your filing will be completed within minutes. Once the IRS approves your filing, an acknowledgment notice will be sent to your mailing address.
Using an online portal like Simple720 allows for a faster, more accurate filing process and ensures that your Communication and Air Transportation Taxes are paid smartly and on time.
WRAP:
After reading this blog, you will have a clear understanding of Communication and Air Transportation Excise Taxes, including the rates, exemptions, and who is responsible for paying them. You also get to know about how to pay these taxes efficiently using Simple720, making the process easier and smarter.
File your Federal Excise with our Online Portal without downloading any software!