Can an aviation-services company avoid charging sales tax on airport flowage fees and its own fuel surcharge that it passes through to customers?

Plain-English summary

Rifton Enterprises operates as a Fixed Base Operator at Stewart International Airport, providing fueling, maintenance, and ground handling to airlines and other aircraft operators. The state-owned airport charges Rifton a per-gallon "flowage fee" and a 5% "concession fee" as the cost of operating there, and Rifton separately lists these fees, plus its own "into plane" fuel surcharge, on customer invoices. Rifton asked whether these pass-through charges are taxable, given the airport's argument that its fees are collected on the state's behalf and are therefore tax-exempt.

The Department said the flowage fees, concession fees, and into-plane surcharge are all taxable. Under the sales tax regulations, a vendor's business expenses -- regardless of who imposes them or whether they're separately stated -- can't be subtracted from taxable receipts (citing Matter of Penfold v. State Tax Commn., where pass-through dumping fees for a refuse hauler stayed taxable). The fact that the airport is a state facility doesn't change this: the fees are still just a cost Rifton incurs in running its business, not a tax the airport is collecting on the state's behalf. Likewise, the into-plane surcharge is just part of the total price of the fuel sold, not a separate nontaxable service.

That doesn't mean everything Rifton does is taxed the same way, though. Maintenance services performed on commercial aircraft are exempt regardless of whether the aircraft belongs to an airline. And fuel sold to airlines, and kero-jet fuel sold to other commercial aircraft operators, can ultimately come out tax-free -- but only through a pay-then-refund mechanism: the purchaser pays sales tax up front and then applies to the Department for a refund. Fuel sold to non-commercial aircraft is fully taxable with no refund available.

What this means for you

Aviation service providers passing through third-party fees

You generally can't strip taxable status off airport fees, landing charges, or similar pass-through costs just by itemizing them separately on an invoice -- if they're a cost of doing business rather than an exempt service in their own right, they become part of your taxable receipts when charged to a non-exempt customer.

Airport-based fuel and maintenance operators

Remember the split: maintenance on commercial aircraft is exempt outright, but airline and commercial fuel sales require the buyer to pay tax first and then seek a refund from the Department -- it isn't point-of-sale exempt the way maintenance is.

Accountants and tax professionals

The ruling is a clean application of 20 NYCRR § 526.5(e) and Penfold to a pass-through-fee fact pattern outside the more commonly cited waste-hauling context, plus a useful walk-through of the fuel exemption's refund mechanics under §§ 1115(a)(9), 1115(j), and 1120(d).

Common questions

Q: Does separately itemizing a fee on an invoice make it tax-exempt?
A: Not by itself. If the fee is a cost you incur in providing your taxable service or product, it stays part of your taxable receipts even when separately stated, unless it independently qualifies for an exemption.

Q: Is fuel sold to airlines tax-free at the point of sale?
A: Not automatically. The airline (or other commercial aircraft operator, for kero-jet fuel) must pay sales tax at the time of sale and then apply to the Department for a refund using the applicable exemption form.

Q: Is maintenance on all aircraft tax-exempt?
A: No -- only maintenance performed on commercial aircraft (as defined in Tax Law § 1101(b)(17)) is exempt under § 1115(a)(21). Maintenance on non-commercial, private aircraft remains taxable.

Q: Can another aviation company rely on this ruling?
A: No. It binds the Department only as to Rifton Enterprises and the specific facts it described.

Citations and references

Statutes, regulations, and cases:

• Tax Law § 1101(b)(3) (receipt; no deduction for vendor expenses)
• Tax Law § 1101(b)(17) (commercial aircraft definition)
• Tax Law § 1105(a) (tax on retail sales)
• Tax Law § 1105(c)(3)(v) (commercial-aircraft maintenance exception)
• Tax Law §§ 1115(a)(9), 1115(a)(21), 1115(j) (fuel and commercial aircraft exemptions)
• Tax Law § 1120(d) (refund mechanism for exempt fuel purchases)
• 20 NYCRR § 526.5(e) (vendor expenses not deductible)
• Matter of Penfold v. State Tax Commn., 114 AD2d 696

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1998.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a98_56s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-98(56)S
Sales Tax
August 6, 1998

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO.S980320A

On March 20, 1998, the Department of Taxation and Finance received a
Petition for Advisory Opinion from Rifton Enterprises, Inc., 10 Hellbrook Lane,
Ulster Park, NY 12487.
The issues raised by Petitioner, Rifton Enterprises, Inc., are:
(1) Whether airport imposed “flowage fees” and “concession fees”
Petitioner is charged as a cost of doing business at the airport and in
turn passes on to its customers are includable in receipts subject to
sales tax.
(2) Whether “into plane” fees Petitioner charges for fueling services
provided at the airport are subject to sales tax.
Petitioner submitted the following facts as the basis for this Advisory
Opinion.
Petitioner is an aviation service company operating from Stewart
International Airport. Petitioner has a Fixed Base Operator concession from
Stewart International Airport to support private and commercial aviation. In
addition to an air chartering service, Petitioner provides services to other air
carriers. Specifically, Petitioner provides fueling services, maintenance and
ground handling services to both airlines and non-airline transportation
companies located at Stewart International Airport.
Stewart International Airport is a New York State owned facility, operated
by the New York State Department of Transportation. The airport levies a $0.06
per gallon flowage fee and a 5% concession fee on Petitioner’s services as a
condition of permitting Petitioner to perform its services at the airport.
Petitioner separately itemizes these fees on its invoices to customers.
Petitioner has not been collecting sales tax on services provided to
carriers that meet the definition of an airline under Section 528.10(b) of the
Sales and Use Tax Regulations. For the non-airline customers, Petitioner has
included the flowage fees and the concession fees in the total invoice amount
subject to New York State and local sales tax. The airport has claimed that
because it is operating under a contract with the State of New York, the fees are
collected on behalf of the State and are exempt from sales tax under Section
1116(a)(1) of the Tax Law.
Additionally, Petitioner charges its own surcharge on fueling services
performed at the airport facility. These fees, referred to as “into plane” fees,
are included in the full selling price charged to customers.

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Applicable Law and Regulations
Section 1101(b)(3) of the Tax Law defines receipt as “[t]he amount of the
sale price of any property and the charge for any service taxable under this
article . . . without deduction for expenses. . . .”
Section 1101(b)(17) of the Tax Law defines commercial aircraft as
[a]ircraft used primarily (i) to transport persons or property, for hire, (ii)
by the purchaser of the aircraft primarily to transport such person’s tangible
personal property in the conduct of such person’s business, or (iii) for both
such purposes.
Section 1105(a) of the Tax Law imposes a tax on the “receipts from every
retail sale of tangible personal property . . . .”
Section 1105(c) of the Tax Law imposes sales tax on the receipts from the
following service:
(3) Installing tangible personal property . . . or
maintaining, servicing or repairing tangible personal property . .
. not held for sale in the regular course of business, whether or
not the services are performed directly or by means of coin-operated
equipment or by any other means, and whether or not any tangible
personal property is transferred in conjunction therewith, except:
*

*

*

(v) such services rendered with respect to commercial
aircraft, machinery or equipment and property used by or purchased
for the use of such aircraft as such aircraft, machinery or
equipment, and property are specified in paragraph twenty-one of
subdivision (a) of section eleven hundred fifteen of this article.
. . .
Section 1115 of the Tax Law provides, in part:
(a) Receipts from the following shall be exempt from the tax on
retail sales imposed under subdivision (a) of section eleven hundred
five and the compensating use tax imposed under section eleven
hundred ten:
*

*

*

(9) Fuel sold to an air line for use in its airplanes.
*

*

*

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August 6, 1998

(21) Commercial aircraft primarily engaged in intrastate, interstate
or foreign commerce, machinery or equipment to be installed on such
aircraft and property used by or purchased for the use of such
aircraft for maintenance and repairs and flight simulators purchased
by commercial airlines.
*

*

*

(j) The exemptions provided in this section shall not apply to the
tax required to be prepaid pursuant to the provisions of section
eleven hundred two of this article nor to the taxes imposed by
sections eleven hundred five and eleven hundred ten of this article
with respect to receipts from sales and uses of motor fuel or diesel
motor fuel, except that the exemption provided in paragraph nine of
subdivision (a) of this section shall apply to the tax required to
be prepaid pursuant to the provisions of section eleven hundred two
of this article and to the taxes imposed by sections eleven hundred
five and eleven hundred ten of this article with respect to sales
and uses of kero-jet fuel.
Section 1120(d) of the Tax Law provides:
Purchase of motor fuel or diesel motor fuel at retail by an exempt
organization. A refund or credit equal to the amount of tax imposed
pursuant to section eleven hundred five of this article and any like
tax imposed pursuant to the authority of article twenty-nine of this
chapter upon the sale of motor fuel or diesel motor fuel and paid by
a purchaser shall be allowed such purchaser if the purchase, use or
consumption of such fuel would have otherwise been exempt pursuant
to section eleven hundred fifteen or eleven hundred sixteen of this
article but for the provisions of subdivision (j) of section eleven
hundred fifteen or paragraph five of subdivision (b) of section
eleven hundred sixteen of this article.
Section 526.5(e) of the Sales and Use Tax Regulations provides:
All expenses, including telephone and telegraph and other service
charges, incurred by a vendor in making a sale, regardless of their
taxable status and regardless of whether they are billed to a
customer are not deductible from receipts. (Emphasis added)
Example 1:

A photographer contracts with a customer to
furnish photographs at $50 each in addition to
expenses.

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The customer is billed as follows
Photographs(2)
Model fees
Meals
Travel
Props(Flowers)
Total due
Receipt subject to tax is $200

$100
60
10
25
5
$200

Opinion
Petitioner is engaged in the business of providing aviation services to
both airlines and non-airline transportation companies located at Stewart
International Airport.
Stewart International Airport, as the contracted
representative of the New York State Department of Transportation, charges
Petitioner flowage fees based on the amount of fuel Petitioner sells and
concession fees based on a flat rate of 5% of the receipts Petitioner receives
for performing its services. In billing its customers, Petitioner itemizes the
charges for its services and these fees levied by the airport, and collects sales
tax on the entire receipts from its non-airline customers.
With regard to issue “1,” in Matter of Penfold v. State Tax Commn., 114
AD2d 696, the court held that dumping charges passed on by an operator of a
refuse removal service to its customers were includable in the operator’s taxable
receipts even though dumping charges per se are nontaxable, since the dumping
fees were expenses incurred in the business of selling the refuse removal
services and were, therefore, subject to sales tax.
In Petitioner’s case,
Petitioner’s receipts include charges for the sale of any tangible personal
property or services taxable under Articles 28 and 29 of the Tax Law, and include
all expenses incurred by it in making such sales, regardless of the taxable
status of the expense items. The airport flowage and concession fees constitute
expenses incurred by Petitioner in conducting its aviation service business,
regardless of the fact that they are imposed by the contracted representative of
the New York State Department of Transportation. Accordingly, these charges
passed on by Petitioner to its customers are includable as taxable receipts under
Section 1101(b)(3) of the Tax Law (see Section 526.5(e) of the Sales and Use Tax
Regulations; Matter of Penfold v. State Tax Commn., supra). It should be noted
that maintenance services are not subject to sales tax when performed on
commercial aircraft as specified in Section 1115(a)(21) of the Tax Law, whether
or not the commercial aircraft are used by airlines.
Likewise, concerning issue “2,” the “into plane” surcharge is not
identifiable as an independent sale by Petitioner but is deemed to be part of the
total cost of the fuel sold. Therefore, the amounts attributable to “into plane”
fees are includable as taxable receipts under Section 1101(b)(3) of the Tax Law.
All airline or commercial aircraft purchasers of aviation gasoline must pay
the sales tax on the fuel and may then apply to the Tax Department for a refund
of the tax paid. See Sections 1115(j) and 1120(d) of the Tax Law. Commercial
aircraft operators, other than airlines, must pay sales tax on purchases of kero­
jet fuel also and may then apply for a refund. Sales of kero-jet fuel to

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airlines for use in their aircraft, including the amounts attributable to “into
plane” fees, are exempt from sales and use taxes (upon receipt of Form FT-1020,
Exemption Certificate for Certain Taxes Imposed on Diesel Motor Fuel and
Propane). See Sections 1115(a)(9) and 1115(j) of the Tax Law. All sales of fuel
to noncommercial aircraft operators are subject to sales tax without refund.

DATED: August 6, 1998

NOTE:

/s/
John W. Bartlett
Deputy Director
Technical Services Bureau
The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.