Request By:
Billy G. Wellman
Major General KyNG
The Adjutant General
Department of Military Affairs
Boone Center
Frankfort, Kentucky 40601
Opinion
Opinion By: Steven L. Beshear, Attorney General; By Alex W. Rose, Assistant Attorney General
In your letter to the Attorney General, you ask whether a federal excise tax on the transportation of persons by air may be imposed on the Commonwealth.
The tax you refer to is found at 26 U.S.C. § 4261. That section imposes an 8% tax on transportation by air. For states, an exemption from this tax previously existed at 26 U.S.C. § 4292. That section was repealed in 1976.
The question of the exemption of a state or local government from this tax was discussed by the federal courts in City of New York v. U.S., 394 F.Supp. 641 (S.D. New York, 1975), aff'd. 538 F.2d 308 (1976), cert. den. 429 U.S. 825 (1976) and in State of California v. U.S., 441 F.Supp. 21 (E.D. Cal., 1977). Both cases held that neither a city nor a state was exempt from the tax imposed by § 4261. The courts addressed the issues of intergovernmental immunity and commerce power of Congress and rejected both as a basis for exemption. The courts held that the tax was nondiscriminatory and did not unduly interfere with governmental functions. In the California case, the court specifically rejected a financial burden argument.
Similar arguments were made regarding the aircraft registration tax of 26 U.S.C. § 4491 before the U.S. Supreme Court in Commonwealth of Massachusetts v. U.S., 435 U.S. 444 (1978). The Supreme Court upheld the taxability of the state for this particular tax.
Based on the above federal cases, it is our opinion that the Commonwealth of Kentucky is not exempt from the payment of the 8% tax imposed by the provisions of 26 U.S.C. § 4261.