2.07 Federal Laws

In addition to the constitution, there are a number of federal laws which limit the ability of the states to tax certain activities. One example is the federal law which limits the ability of the states to impose an income tax on any company whose only business activities in that state consist of solicitation of orders for interstate sales. In the case of aircraft, the most important such law is the Anti Head Tax Act.1

The Anti Head Tax Act

In 1970, the federal government assumed primary responsibility for development of airports and airways. As part of this Act, the federal government imposed a series of taxes, including a fuel tax, a transportation tax and a head tax. In 1973, the federal government acted to prevent the states from imposing duplicate taxes by enacting the Anti Head Tax Act. This Act essentially prohibits the states from imposing a sales tax, gross receipts tax, or a head tax on air transportation.2 The major exception to this rule is the provision which allows the imposition of a "passenger facility fee".

Taxation of Overflights

In addition, the federal law limits the ability of the states to impose other kinds of taxes on overflights. The law allows a state to impose a tax "on or related to a flight of a commercial aircraft or an activity or service on the aircraft only if the aircraft takes off or lands in the state or political subdivision as part of the flight".3

Limitations on Property Tax

The federal law also prohibits the states from taxing air carrier transportation property at a higher value or rate than other property in the same assessment jurisdiction.4 However, the limitation does not apply to an "in lieu" tax which is completely used for airport and aeronautical purposes.5

  1. 49 USC 40116.
  2. 49 USC 40116(b).
  3. 49 USC 40116(c).
  4. 49 USC 40116(d).
  5. 49 USC 40116(d).