Gearing Up - May 2012

The slow economy has hit state and local governments hard in recent years, and it’s no surprise that many have acted to address their budget woes by targeting business sectors with new tax initiatives. In the past couple of years, several states have begun imposing new sales-and-use or amusement taxes, collectively known as “transaction taxes,” on skydiving business owners. Several DZs were forced to pay back taxes and interest totaling thousands of dollars, which in some cases threatened the DZs’ continued viability and in all cases increased the cost of skydiving. When DZs began asking for assistance, USPA—helped by several DZOs and their tax attorneys—carefully researched the applicability of state and local taxes to aviation businesses.

Our research concluded that a 1973 act of Congress—the Anti-Head Tax Act (AHTA) 49 U.S.C. § 40116—and subsequent federal court rulings mean that federal law preempts state and local governments from imposing transaction taxes on the flight activities of aviation businesses. To build a clear and cogent legal argument that state tax assessors would understand, USPA’s board approved an allocation from the Airport Access Defense Fund to have our legal counsel draft a comprehensive memorandum on the tax issue. Citing several precedent-setting court cases that conclude that states and localities may not tax air commerce and establishing that skydiving flights are clearly air commerce as defined by the act, the memorandum makes a clear and compelling legal argument that state and local transaction taxes on skydiving businesses are in conflict with federal law.

With the law clearly on our side, USPA is now taking steps to have the U.S. Department of Transportation declare unequivocally that state and local
governments cannot and shall not impose such taxes on skydiving businesses or any other aviation-related businesses. Following on the heels of a Florida drop zone operator who had previously requested DOT intervention in his DZ’s state tax issue, USPA’s counsel has contacted the DOT to urge its intervention in the form of a broad-based legal interpretation that would put a stop to the imposition of skydiving transaction taxes in all 50 states. We expect to hear from the DOT in the near future.

Meanwhile, USPA has provided the memorandum to Group Member DZs for their use when approached by state departments of revenue that are attempting to collect transaction taxes. If the DOT does intervene and issues a federal interpretation, we’ll arrange to provide that to DZs, as well.

Some members occasionally question the need for USPA to have a Group Member Program in which DZs affiliate with USPA. But the fact is that most anti-skydiving actions are aimed at DZs, not individual skydivers. This tax issue is the latest example of how USPA can help DZs in a way that has a good outcome for individual skydivers, since increased taxes would inevitably increase the cost of jumps. Over the years, USPA has tackled many issues that would have increased either the cost or the regulatory burden of drop zones. Without USPA support for DZs, skydiving would unquestionably face more restrictions and higher costs.

Without USPA support for DZs, skydiving would unquestionably face more restrictions.

Blue skies,

Ed Scott | D-13532 | USPA Executive Director