Is Kansas sales tax on hot air balloon rides preempted by the federal Anti-Head Tax Act?

Plain-English summary

A hot air balloon ride operator asked whether Kansas sales tax on balloon rides is preempted by federal law. The operator supplied a U.S. Department of Transportation general-counsel advisory opinion explaining that the federal Anti-Head Tax Act (AHTA) bars state and local taxes on people traveling in air commerce.

The Department agreed — with a catch that turns on whether the balloon actually flies:

• Untethered, piloted balloon rides that "travel" by air downwind from the launch point, carrying passengers in air commerce, are not subject to Kansas sales tax. The federal Anti-Head Tax Act (49 U.S.C. Section 40116) preempts any state tax on an individual traveling in air commerce or on the gross receipts from that transportation.
• Tethered balloon rides (the balloon stays anchored) are treated as an amusement, not air travel. They are not preempted and are subject to Kansas sales tax on admissions to amusement/entertainment/recreation under K.S.A. 2009 Supp. 79-3603(e).

In short, the free-flying ride is protected federal air commerce; the anchored "ride" is a taxable amusement.

What this means for you

Balloon and air-experience operators

If your ride is untethered and actually carries passengers aloft in air commerce, Kansas sales tax on the fare is federally preempted. If the balloon is tethered (an anchored up-and-down experience), that's a taxable amusement, and you must collect Kansas sales tax under K.S.A. 79-3603(e).

Operators of other "ride" or attraction experiences

The dividing line here is federal air-commerce preemption. Attractions that don't involve travel in air commerce — including tethered balloons — remain taxable Kansas amusements.

Common questions

Q: Does Kansas charge sales tax on hot air balloon rides?
A: Not on untethered, piloted rides that carry passengers in air commerce — those are preempted by the federal Anti-Head Tax Act. Tethered rides are taxable amusements.

Q: Why are untethered rides exempt?
A: The Anti-Head Tax Act (49 U.S.C. Section 40116) prohibits states from taxing individuals traveling in air commerce or the gross receipts from that transportation.

Q: Why is a tethered ride taxable?
A: A tethered balloon stays anchored and is treated as an amusement rather than air travel, so it is not preempted and is subject to Kansas sales tax on admissions under K.S.A. 79-3603(e).

Q: Can another operator rely on this ruling?
A: No. A Kansas private letter ruling binds the Department only as to the requesting taxpayer's facts and cannot be cited as precedent by others.

Citations and references

• K.S.A. 2009 Supp. 79-3603(e) — imposes Kansas sales tax on gross receipts from admissions to any place providing amusement, entertainment, or recreation; the basis for taxing tethered balloon rides.
• 49 U.S.C. Section 40116 (Anti-Head Tax Act) — the federal statute prohibiting state or local taxes on individuals traveling in air commerce and on the gross receipts from that transportation; preempts Kansas sales tax on untethered, piloted balloon rides. (The Department's letter refers to it in one place as "29 U.S.C. Section 40116," but the Anti-Head Tax Act is codified at 49 U.S.C. Section 40116.)

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2010-003

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

June 30, 2010

XXXX
XXXX
XXXX

Re: Sales Tax Treatment of Untethered Hot Air Balloon Rides

Dear Mr.XXXX:

You provided this office with an advisory opinion letter dated January 29, 2010 authored by Ronald Jackson, General Counsel for the United States Department of Transportation, in which he provides general guidance that the Anti-head Tax Act (AHTA), 29 U.S.C. Section 40116, would preempt a local government from imposing a gross receipts tax on hot air balloon rides, where the hot air balloon is piloted and untethered and “travels” by air for some distance downwind from the launching point, the hot air balloon operator thereby carrying passengers in air commerce. You have requested a private letter ruling as to whether Kansas sales tax on hot air balloon rides would be preempted by the AHTA.

Kansas imposes sales tax on “the gross receipts from the sale of admissions to any place providing amusement, entertainment or recreation services . . .” K.S.A. 2009 Supp. 79-3603(e). The AHTA prohibits a state or political subdivision from levying or collect a “tax, fee, head charge or other charge on –an individual traveling in air commerce; . . . or the gross receipts derived from that air commerce or transportation.” 49 U.S.C. Section 40116(b)(1), (4).

Based on the guidance mentioned above from the U.S. Department of Transportation, it is determined that the Anti-head Tax Act (AHTA), 29 U.S.C. Section 40116, would preempt the State of Kansas from imposing its sales tax on hot air balloon rides, where the hot air balloon is piloted and untethered and “travels” by air for some distance downwind from the launching point, the hot air balloon operator thereby carrying passengers in air commerce. A tethered hot air balloon ride would be considered an amusement, such tax would not be preempted by the AHTA, and the charges for a tethered hot air balloon ride would be subject to Kansas sales tax, pursuant to K.S.A. 2009 Supp. 79-3603(e).

This is a private letter ruling pursuant to K.A.R. 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This ruling will be revoked in the future by the operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or published revenue ruling, that materially effects this private letter ruling.

Sincerely,

Richard L. Cram

Date Composed: 06/30/2010 Date Modified: 06/30/2010

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