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Originally published July 28, 2011 at 9:10 AM | Page modified July 28, 2011 at 9:01 PM

Airline tax holiday continues with refunds due to some

The IRS says people who bought airline tickets on or after July 23, and are traveling now, are entitled to a refund on federal taxes, but how easy it will be to get the money back is up in the air.

Seattle Times travel writer

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The IRS says people who bought airline tickets on or before July 22 for travel beginning July 23 or after, are entitled to a refund on federal taxes. But how easy it will be to get the money back is up in the air.

The refunds are due because Congress allowed the taxes to expire after a budget showdown last weekend effectively shut down the Federal Aviation Administration (FAA).

Until things are resolved, airlines can't collect the taxes on tickets sold after July 23, and the government isn't authorized to collect the taxes on tickets sold before that time if people who bought those tickets travel during the shutdown period.

The IRS is asking airlines to handle the refunds, but they aren't required to, and most are directing customers to the IRS, which says it is still working on a refund procedure.

"Because the IRS has no information about passenger ticket purchases or travel dates, travelers who are unable to obtain a refund from the airline will be required to submit proof of taxes paid and travel dates to the IRS under procedures that are under development," the agency said in a question-and-answer posting at www.irs.gov.

Several types of federal taxes, including a 7.5 percent excise tax on tickets, expired, but others are still being collected, including fees for passenger security and local airport construction projects.

American, Frontier, JetBlue, Virgin America, United, Continental, Southwest and others directed customers to the IRS.

Seattle-based Alaska Airlines/Horizon Air on its website said it wants to help with the tax refund for customers, and is working on a way to do so. In the meantime, spokeswoman Marianne Lindsey said the airlines are directing people to the IRS.

Most airlines raised fares by the amount of the uncollected taxes and pocketed the difference, a move that has drawn ire from government officials. The FAA estimated its losses at $30 million a day, most of which is now going to the airlines that have raised fares.

Delta Air Lines said it's getting an extra $4 million to $5 million a day.

"They're collecting this money and it's going to their bottom line and I think that is not right," U.S. Transportation Secretary Ray LaHood said at a White House news briefing in Washington, according to Bloomberg News. "It's not fair for them to do that, and I made that known to them."

Some Democratic senators, including Sen. Maria Cantwell, D-Wash., asked 12 of the largest airlines Thursday to report how much money they're making from increased airfares during the tax holiday, The Associated Press reported.

Alaska/Horizon is one of the few airlines that have passed the tax savings onto customers — estimated at $25-$50 per round-trip.

Bookings have been up. Lindsey said the policy of passing on the savings will continue "as long as this goes on."

Virgin America, which competes with Alaska on some routes, is also passing along the tax savings on flights out of Seattle and Mexico.

Also having an effect on overall prices are fall fare sales and increased competition among the airlines as more people are out looking for deals.

"Some fares have actually gone down beyond the (tax) discount," said Virgin's Abby Lunardini.

Carol Pucci: cpucci@seattletimes.com

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