Serving in Aviation Industry (United States)
Federal Excise Tax (FET)
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NBAA (National Business Aviation Association) guide covers “Federal excise taxes” (FET) imposed on air transportation and fuel is intended to provide business aircraft owners, flight departments and charter operators.
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All business aircraft operators, private and commercial, pay FET on the transportation of persons or property by air.
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FET can be a percentage tax on the amounts paid for air transportation, a fuel tax, or a combination of both.
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Companies have to get themselves complied with all FET compliances in terms of tax deposit and returns.
Our Planes Vs. Hired Planes
The companies are structured in such a way that they have their own planes and as well the rented planes for generating the business.
Input tax on taxes paid of fuel
Companies claim input on taxes paid on fuel.
Revenue Recognition- Dyanmics and subsequent changes
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In Aviation, revenue are often recognised when the airlines close the flight, meaning that the flight is completely booked.
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Companies receive advance payments from the customers basis the flight bookings irrespective of customer is actually travelling at specified date.
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In case there are changes to the bookings, necessary changes are done to recognise the revenue.
Maintenance reserve and Payment to flight owners
Airline companies maintain the reserve as “Maintenance Reserve” for the flights owned by them. The reason companies do this exercise to maintain the working capital.